Four of the hottest trends in fintech right now

Technology | John DeCleene 5 Feb 2018

John DeCleene

the financial technology sector has been experiencing a boom in recent years as the next generation of tech-savvy consumers are starting to choose banking apps over visiting branches, are investing in cryptocurrencies instead of buying stocks, and are applying for loans on peer-to-peer lending platforms instead of at their banks.

Consumer demand-driven innovation in the fintech sector has led to a change in how individuals and businesses interact with financial services.

Going mobile

It is no surprise that consumers are increasingly choosing smartphone apps to manage their personal finances given how glued today's society is to their mobile phones.

According to the Millennial Disruption Index survey, 53 percent of millennials do not perceive their bank to be offering anything different than other banks. This means switching from a high-street bank to a more user-friendly mobile banking app is not a difficult choice for many. In fact, one out of every three millennials is willing to switch banks.

Moreover, consumers are not just using their phones to check their account balances and to pay bills. Payments is another area within fintech that is going mobile fast. In 2017, around one in four of adult smartphone users in the United States will use a payment app at once a month or more according to eMarketer. Point-of-sale payment apps such as Apple Pay, Android Pay, and similar solutions will experience an increase in users and transaction volumes. In three years time, eMarketer expects one in three US adult smartphone users to use these types of mobile payment applications.

Artificial intelligence

Advancements in AI technology have given birth to intelligent chatbots that can respond to simple customer service queries or provide 24/7 financial assistance without human supervision.

Moreover, there are several other use cases where AI is being deployed within financial services including automated fraud detection algorithms, discovering anti-money laundering patterns, and fully-automated financial trading, among others.

A PWC study found that 30 percent of large financial institutions are investing in artificial intelligence. Furthermore, fintech startups that focus on AI technology have raised over US$1 billion (HK$7.8 billion) in venture capital in the last two years, suggesting that AI is here to stay.

Biometric security

The most prominent new security features that fintech startups and established banking institutions are betting on is biometric security.

Digital identification through fingerprints is the first step. Facial recognition and voice recognition using smartphones is the next step in beefing up cyber security. Iris scanning is also an alternative that biometric security startups are focusing on.

In light of the sharp increase in cyber crime and data breaches in the last two years, passwords and two-factor authentication are no longer considered secure enough to protect financial data. Hence, the move towards biometric scanning, which is already commonly used by government agencies as security measures, is a trend that will likely continue to grow.

Moving to the cloud

Currently, over 95 percent of businesses use cloud computing services in some form or another according to the latest State of the Cloud Report by RightScale. Fintech startups are also fans of the cloud.

A broad range of fintech startups are utilizing cloud computing services to both build and run their businesses. Through pay-as-you-use cloud computing services, small companies can remove the high cost of building large infrastructure to deliver their product or service to their customers. It also allows startups to scale faster as they can adjust the amount of tech infrastructure they need in line with their funding and customer demand.

Cloud computing can give new fintech companies a leg up on banks as banks usually rely on expensive in-house legacy systems, tight regulatory scrutiny, and suffer from a lack of agility that companies need to adapt to changes in the market.

Cloud computing has moved past simply storing data on the cloud. Now, you can outsource a company's entire IT infrastructure to cloud-based services, which can give fintech startups the boost they need to compete with big banking.

There is no doubt in anyone's mind that financial technology will disrupt the banking and finance landscape. Retail banking and payments will continue to go mobile, artificial intelligence will eventually replace human investment advisors and traders, biometric security will replace passwords and companies will outsource their IT to the cloud are the four trends that will likely play key roles in the transformation of the financial services industry.

Banks and other large financial institutions will have to either incorporate many of these new technologies themselves or acquire leading fintech startups who provide them to be able to compete with the growing threat of innovative fintech startups that are providing new and improved financial services to today's consumer.

John DeCleene co-manages OC Horizon Fintech Fund, one of Asia's first hedge funds specializing in blockchain-related investments. This article first appeared in

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