The banking and finance sector today is dynamically changing at a fantastic speed never seen before. It begs the question – how would the next generation of financial services look like? It’s true. Transformation does not occur overnight, but in small, incremental phases.
It will be fueled by an explosive combination of rigorous regulations, investor capital, globalisation and futuristic financial technologies.
Nevertheless, it is equally evident that technological innovation is at the centre of this lightning-fast changes we’ve been seeing of late. Still, what fascinating developments will the next decade bring?
Here are some ideas that will help stimulate growth in banking and financial services:
Reach Out to the Unbanked
The World Bank Report states that over 1.7 billion adult individuals across the globe have no account with any financial or mobile money provider. About half of these unbanked individuals live in developing nations such as Indonesia, India, Nigeria, China, Mexico, Bangladesh, and Pakistan. High-income economies, on the other hand, do not have significant numbers of unbanked individuals as nearly everyone owns an account.
However, statistics also show that about 1.1 billion unbanked adults globally have a mobile phone. Therefore, these mobile phones can be used to access mobile money accounts and other financial platforms. This presents an enormous opportunity waiting to be tapped. Paired with internet access, there is a huge opportunity for banking institutions to drive financial inclusion.
Statistics reveal that about 1.1 billion unbanked adults globally have a mobile phone. These mobile phones can be used to access mobile money accounts and other financial platforms. This presents an enormous opportunity waiting to be tapped.
Still, these financial services should be designed for unbanked users, many of which are poor, disadvantaged or lack adequate literacy and numeracy skills. The technologies created for these groups will help eliminate the obstacles limiting unbanked individuals from using financial services. Furthermore, providing services to the unbanked will no longer require travelling great distances to meet a need. As such, digital technology will help lower the cost of transaction. Most banks and financial institutions have one core objective – to reach the greatest number of customers possible. Given these facts, it is clear that the unbanked market will be actively pursued in the years ahead.
Get Serious About Blockchain Technology
Blockchain is another trend that will grow in the next few years. About 48% of banking executives in a survey by Business Insider Intelligence stated that AI (artificial intelligence) and blockchain will have the most decisive influence in the growth in the financial sector. No doubt, blockchain will shake the industry globally. As Blockchain drives the new ideology of substituting centralised processes for decentralised finance, it will inevitably drive change in financial systems worldwide. Already, it has led to the creation of a diverse online peer-to-peer (P2P) financial system for monetary dialogues in a decentralised manner. This distributed ledger technology, which gave rise to cryptocurrencies, can help transform existing processes and systems remarkably.
Many cryptocurrencies have been created, and many more will be “mined” soon. Already, several countries are creating their own cryptocurrency. Such a move could significantly push the shift from fiat to cryptocurrencies. The shift will, in turn, boost coin stability, drive the creation of regulatory frameworks, and make people gravitate more towards decentralised transactions. In fact, some financial institutions are already exploring blockchain technology to uncover how it can help cut costs, improve internal processes and increase efficiency.
Speed up Development of RegTech
Technological innovations present tremendous opportunities. However, the finance industry is heavily regulated. It is essential to realise that technological innovation has also given rise to diverse challenges, including data breaches, cyber hacks, and other fraudulent activities. RegTech was created for this purpose. It involves using innovative technologies to manage regulatory processes in the finance sector. Some examples of regtech include real-time tracking of airliners’ locations and automated monitoring of a company’s compliance with sustainability regulations.
However, even as technology companies, legislators and other stakeholders in the finance industry, work closely together to spring regulatory innovations, it will still take some time before everything comes into fruition. One such example is the implementation of biometric authentication for financial transactions, which has met strong opposition after a high profile data theft case that happened in the US. Notwithstanding this incident, recent studies show that the size of biometric authentication market is fast expanding. By 2023, biometric authentication is expected to have over 2.6 billion users.