Before diving into the technologies that contribute to Fintech, it is advisable to have an understanding of what Fintech is.
Read more about FinTech
The term, ‘Fintech’, refers to the amalgamation of finance and technology (two of the largest industries, into a single field), for the purpose of enhancing business operations and the delivery of financial services. Fintech can take the form of software, a service, or a business that provides technologically advanced ways to make financial processes more efficient.
Some major technologies that contribute to Fintech include:
Artificial Intelligence (AI) and Machine Learning (ML)
Artificial Intelligence has been a major contributor to Fintech for years now and has remained relevant to the Fintech Industry. Artificial Intelligence (AI) and Machine Learning (ML) are some of the most used technologies in Fintech, which tend to offer more potential and play an even bigger role in the finance industry, as developments continue. This is because artificial Intelligence and Machine Learning holds many unexplored potentials, and there is still room for innovations that keep attracting investors.
AI analyzes the performance of a financial institution, creates insights, and automates essential organizational processes, such as team administration, documentation and client communication through the aid of a combination of big data and management solutions.
Artificial Intelligence and Machine Learning are widely used in banking in the following areas:
- Fraud prevention – They analyze existing fraudulent cases, detect familiar patterns, allow you to predict possible frauds and uncover dubious financial institutions.
- Risk management – The software analyzes the company’s performance and detects potentially threatening patterns.
- Fund improvement prediction – This is carried out by scanning investment records, thereby, defining the most possible future developments.
- Customer service – The platform analyzes customer data and builds a smart client profile.
Other Artificial Intelligence and Machine Learning applications include credit scoring, fraud detection, regulatory compliance, and wealth management.
Big Data and Data Analytics
This is another major Fintech contributor. It is widely known that data from customers and markets is of high value to Fintech companies. However, through large datasets, consumer preferences and spending habits, an individual’s investment behaviour can be extracted and used to develop predictive analytics. This involves predicting how consumers are likely to behave or respond to certain issues using past information and a mathematical algorithm. The collected data also helps in formulating marketing strategies and fraud detection algorithms.
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Blockchain technology is widely implemented at a large scale in the Fintech industry, largely because of its ability to store transaction records and other sensitive data in a secured place. With Blockchain, every transaction is encrypted with no penetration possibilities, and the chances of successful cyber-attacks are relatively low when Blockchain technology is employed. Blockchain technology is also the backbone of many Cryptocurrencies.
Other benefits of using Blockchain in Fintech include:
- Each network stakeholder has to approve the transaction which makes a hacking attack very unlikely
- It helps international businesses to use universal currencies instead of country-specific money.
This technology contributes to the Fintech Industry by creating automated solutions to supervise regulation, compliance, and reporting. RegTech has the ability to keep track of new restrictions in a single database, thereby, making it easy to adapt a financial institution to legal requirements.
Benefits of RegTech
- economical, fast, and simple control of large data quantities;
- accurate automated search of a particular regulation;
- connecting financial institutions and consumers and protecting their interests.
Robotic Process Automation (RPA)
Robotic Process Automation (RPA), which is a major technology in Fintech, refers to the process of handing over manual recurring tasks to robots instead of humans, in order to simplify workflows in financial institutions and reduce the number of human resources used.
Some of the popular applications of Robotic Process Automation include:
- Statistics and data collection
- Regulatory compliance management
- Communication and marketing
- Operations management
Every year, various transformations and innovations take place in the Fintech Industry, thereby increasing the growth of technology and ever-changing demands of financial markets. Over time, these innovations are incorporated into businesses, thereby, spurring visible growth in the Industry. These Fintech technologies play a vital role in attracting customers and increasing the efficiency of financial institutions.
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