The finance sector is among those at the frontline in marking a new era of digital transformation. The digital transformation of the financial sector has become a rising trend that opened the door for individuals and businesses to access and manage their finances in new and often more convenient ways.
Currently, most banks and financial institutions are using financial technology (fintech) and have transitioned to a digitalized finance landscape that helps provide financial services, including paying bills, insurance, and investments, with a tap on the consumers’ devices.
Fintech is paving the way to a more convenient, accessible, and more efficient financial ecosystem. The following fintech trends are seen to be shaping the market this year and largely contribute to financial inclusion and economic development.
Embedded finance
Embedded financing creates a seamless customer experience that integrates financial services into customers’ daily lives. Thus, embedded financing enables businesses to offer financial services more efficiently. The collaboration of technology companies and banks to integrate financial products into convenient and user-friendly products that will meet the financial needs of customers becomes a continuous trend that improves customer experience.
According to McKinsey & Company, any scenario where end users engage in digital interaction with any digital platform continues to give rise to embedded financing. Embedded financing provides a solution for financial and non-financial institutions to improve customer experience and develop revenue streams.
Artificial intelligence
To thrive in a digital-centric age, banks are adopting artificial intelligence (AI) technologies and its capabilities to deliver “personalized solutions and distinctive experiences in real time.”
In the past years, banks and financial institutions are now becoming AI-powered. Due to AI technologies, there is reduced data storage and processing costs, increased access and connectivity among financial services, and higher automation. Financial services are gradually becoming AI-powered.
“Building the AI bank of the future will allow institutions to innovate faster, compete with digital natives in building deeper customer relationships at scale, and achieve sustainable increases in profits and valuations in this new age. We hope the following articles will help banks establish their vision and craft a road map for the journey,” Renny Thomas, senior partner at McKinsey, said.
Neo-banks
Neo-banks are banks that are entirely run online and on the cloud. Neo-banks are well-known for using AI technologies and data analytics to provide hyper-personalized solutions for different consumer groups.
Moreover, neo-banks have also been collaborating with traditional banks to develop personalized products and services for end users, as well as integrate financial services and products, including banking, payments, and lending, among others.
According to professional services network Ernst & Young (EY), neo-banks have helped expand income opportunities and improve customer experience through the digital ecosystem.
Digital lending
Banks have so much to gain from digitizing its lending process for various reasons; namely, enhanced customer experience, quality decision-making, and significant cost-savings.
With recent modernization, EY explained, digital lending comes with modernized tools such as machine learning-based models and unified dashboards and data, among others. What makes digital lending more unique is that it offers advanced automation from application processing to data analysis.
Insurtech
Insurance has also been revolutionized by digitalization, paving the way to “insurtech” as another rising trends to keep watching for. With the adoption of technology in the sector, insurance services are now modified by utilizing digital technologies such as AI, machine learning, deep learning, artificial neural networks, and blockchain technology.
In addition, EY shared, insurance companies can provide insurance protection for businesses against cyber threats while allowing customers to tailor their plans to their specific needs. — Angela Kiara S. Brillantes