Do you know that according to the World Bank, over 1.7 billion adults globally remained unbanked in 2017?
That’s a shocking number. But true! This number highlights the significant gap in financial inclusion across the world.
As Bill Gates famously said, “Financial services should be available to everyone, no matter who they are or where they live.”
We have come a long way in addressing this issue, thanks to the innovations in financial technology (fintech). The fintech revolution has democratized access to financial services, making it possible for people from all walks of life to manage their finances effectively.
Let’s have a look into the transformation that technology has brought to the financial landscape and making finance more accessible to everyone.
Tech Evaluation In the Financial Sector
It wasn’t so sudden. The integration of technology in the financial sector was a steady process. So, let’s take a look at those stages to see how technology is revolutionizing the financial landscape and making finance more accessible for all of us.
Fintech 1.0 (1886-1967)
The chapter of ”FinTech” began roughly between 1886 to 1967. This time duration was all about building the infrastructure for a more connected financial world. It was laying the foundation for a global financial connection. The technology involvement was a way minimal at this time. However, the use of technologies that we see between 1886 and 1967 are-
Telegraph and Morse Code: In 1866, the groundbreaking transatlantic cable allowed for much faster financial communication compared to traditional methods. This meant quicker and easier transfer of funds across the vast Atlantic Ocean.
Early Electronic Fund Transfer Systems: This era saw the birth of pioneering electronic fund transfer (EFT) systems. In the US, Fedwire, established in 1918, was one such system.
Fintech 2.0 (1967-2008)
The second wave of FinTech roughly counted from 1967 to 2008. This era witnessed a great transformation. Traditional financial services were finding their footing on computers. A few of the changes that technology involvement brings in Fintech 2.0 are-
Mainframe Computers and Core Banking Systems: These large, early computers were the workhorses of FinTech 2.0. They housed the core banking systems that automated many back-office processes.
Credit Cards: ( 1950s): The introduction of credit cards in the 1950s took place as a step toward a Cashless revolution.
Automated Teller Machines (ATMs): The 1960s saw the birth of the ATM. This was a new era of self-service banking. No longer were long bank queues the only way to access cash.
Early Online Banking (1980s): By the early 1980s, the seeds of online banking were sown. It is denoted as the Internet age. With limited in functionality at first, it allowed for some basic account management from the comfort of home.
FinTech 3.0 (2008-2014)
The Fintech 3.0 was highly popular for the emergence of startups in Fintech. Besides, there was a release of Bitcoin v0.1 in 2009. It is marked as an important event that has a high impact on the financial world. In that particular era, we soon saw the boom of various cryptocurrencies.
Aside from this, the era was also all about the rise of mobile banking. Smartphones have become our new wallets. That means we have various fintech apps for smartphones that let us check balances, transfer funds, and even pay bills with just a few taps. In 2011, Google Wallet was introduced, whereas in 2014 Apple Pay was released.
FinTech 3.5 (2014-2017): Going Global
This period saw FinTech truly going global. Cross-border financial services started booming. It started an era where sending and receiving money internationally became easy.
APIs as digital translators, allowing banks and FinTech companies to talk to each other and collaborate. This opened the door for innovative financial products like India’s revolutionary Unified Payments Interface (UPI).
FinTech 4.0 (2018-Present): The Age of Disruption
These days, the focus is on leveraging the latest technology to make financial services more efficient and offer better customer satisfaction. Let’s dive into some of the emerging technologies that impact the Financial Services Sector
1. Blockchain
DLT records data across multiple locations and synchronizes it across a network. Blockchain, a type of DLT, uses cryptography to securely store data.
DLT is expected to be key in future finance. It allows businesses to secure storage of financial transactions and data exchange between different blockchains.
The best part it does not need a bank or other middleman to perform any transactional process. That’s the power of blockchain technology.
As per the recent report, the global market size of blockchain technology in finance reached $8.1 billion in 2023 and it is calculated that it may hit $80.02 billion by 2032.
It is visible, that this innovation is gaining traction in FinTech. The purpose is to have a secure way to handle payments and store data. As we all look for advanced data protection, no doubt blockchain technology will play a major role in the future of finance.
Besides, existing technologies like smart contracts, NFTs, etc will continue to play a major role in areas like digital wallets and DeFi. Undoubtedly, blockchain has the potential to disrupt traditional financial markets. You would need to hire an expert with blockchain tech proficiency to avail of custom software development services.
2. AI and Machine Learning: Smarter Financial Services
AI, or artificial intelligence, is transforming finance. It uses machine learning algorithms to crunch data and tackle tasks in financial services. Leveraging AI technology helps banks and other institutions work faster and smarter.
Here’s how AI is changing finance:
Data Whiz: AI analyzes massive amounts of data, leading to better predictions and insights for investments and risk management.
Trading Turbocharger: AI models can execute trades at lightning speed, using real-time data to make smarter decisions.
Risk Buster: AI helps identify fraud and security threats, keeping your money safe.
Customer Service: AI personalizes experiences, predicts needs, and streamlines customer support.
Thus, financial service providers are advised to adopt an “AI-first” approach to stay competitive. AI is expected to bring huge benefits to finance, generating up to $1 trillion in extra value for banks yearly. Besides, these days, the emergence of Generative AI in finance is also on the rise.
Generative AI helps financial services by creating realistic data to train machines. This data helps machines learn better and make more accurate predictions.
3. Cloud Computing
The finance sector will widely use cloud solutions in 2024 and beyond.
McKinsey predicts the cloud will create over $1 trillion in value for top companies by 2030. Their research shows cloud use can boost efficiency (38%), cut infrastructure costs (29%), and reduce downtime (57%).
Besides, the Cloud’s automated security features and DevSecOps approach (security throughout development) minimize technical risks.
Moving on, cloud computing is in high demand in the finance sector, as it provides access to shared resources, applications, or storage over the Internet.
4. IoT
IoT is gaining traction in finance with real-world applications. It uses sensors, communication networks, and data management systems to gather information.
One key area is environmental, social, and corporate governance (ESG). Tracking energy use with IoT can help companies achieve carbon neutrality goals and participate in carbon trading. Insurers can use IoT data (e.g., driving habits) to assess risk and personalize insurance products.
In banking, IoT is used for inventory and property financing, where real-time data ensures accurate records and facilitates trust. In shipping, IoT allows banks to track goods and offer new financial products like on-demand loans based on the shipment status.
Besides, wearable tech with integrated banking services (e.g., digital payments) is another way IoT is impacting finance.
How Fintech is Shaping the Future of Accounts Payable(Opens in a new browser tab)
Wrapping up
The road ahead for Fintech is filled with exciting opportunities to bring financial services closer to more people than ever before. As technology advances, tools like artificial intelligence, blockchain, and data analytics are set to take Fintech to new heights.
Here, we saw the list of emerging technologies that can help in the best possible ways to shape the future of the financial industry. It is highly visible that is high time, businesses must consider including them.
These technologies promise to make managing money even more straightforward and secure, opening up possibilities for everyone, no matter where they are or their financial background.
Further, to develop any future-ready software solution for financial services, get in touch with a fintech software development company. Considering fintech trends, such a company can help you in developing hi-tech solutions prioritize security, and the more technological advancements in their work
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