Sibos 2021: The technologies that will shape the immediate future of fintech
Technology moves so fast and is so embedded in our daily lives that, if you work in a technology-driven sector, it’s easy to develop blinkers.
Those who work in financial technology can become so focused on financial technology that the broader picture can be missed. What about advances in automation, in AI, in infrastructure? How close are big changes that will affect every sector–are some making their way from theoretical research into real-world applications?
The disruption caused by fintech was not a one-off event – it was the peak, maybe not even the last peak, of an ongoing event that is shifting how consumers, businesses, financial service providers and regulators all interact.
It’s important to understand potential shifts to know how a business can be ready and react. Let’s take a look at a few questions surrounding how fintechs can keep up with the future.
Why should fintechs take an interest in developing technologies at a broad level?
There’s great value in tracking shifting trends across the industry, and in keeping a watchful eye on new technologies that have the potential to shake things up. In highly competitive markets, there’s a lot of pressure on both young and established businesses to focus on refining and diversifying their current products and services rather than looking too far ahead.
But we have to be honest about how fintech stole a march on incumbent businesses. Many of those incumbents either didn’t have their eye on the future or couldn’t move quickly enough to adapt and adopt mobile technology, cloud-based services and agile development structures (amongst other things). Even now, many are still playing catch-up.
One day the fintechs will be the incumbents. We all need to know what’s about to change the industry, even if it’s not affecting our businesses right now or in the short term. Otherwise, we risk being the disrupted rather than the disrupters.
What technologies are set to change the immediate future?
APIs are already here – and many fintechs have built their businesses on the new ways we can use customer data as a result of APIs. PSD2 and Open Banking have played a big part in this change, but we’re still at the beginning of the opportunities this technology can open up.
As an industry, we do also need to think carefully about what a more integrated fintech sector means. Will fintech continue to be fintech, or will APIs mean that any brand can integrate what fintechs offer? Are there potentially negative consequences for consumers when payments become more and more invisible?
APIs are an example of where we need to not only look at what opportunities the technology presents, but also what their implementation could mean for the competitive landscape, for social responsibility – and a range of other implications.
That same line of thinking applies to artificial intelligence (AI), though science fiction has done way more to warn us of the dangers here. AI is far from fiction though – and it’s already changing fintech, with half of fintech businesses already making use of it. AI can help us make more reliable, safer decisions, significantly reduce human error and power more personalised services. Any fintechs who are not making use of AI should take a very close look at what it is already capable of today.
Blockchain is the other big technology that’s making waves, though in unexpected ways. While it’s known for its use underpinning cryptocurrency, its application in “confidential computing” (a way to ensure privacy and identity) and in smart contracts are also interesting and potentially just as valuable. It’s probably the most difficult technology to predict, however, as its sceptics and enthusiasts are equally as passionate in their views of where blockchain will lead.
What technologies will affect fintech in the longer term?
While many fintechs understand the potential of low-code, some parts of the industry are missing an opportunity here. It has the potential to radically change how new products are developed and brought to market. It certainly won’t replace developers, but it will give fintechs the ability to supplement and enhance their development capabilities.
Low-code enables employees who understand what the customer needs, but have limited coding experience, to get way more hands-on with product development. It’s never going to solve the industry-wide shortage of developers, but it will alleviate it and offer a more collaborative approach that brings fresh ideas to the table through broader participation in the development process.
Another technology that many people are underestimating right now is edge computing. It may not be as exciting as AI or have as much passion behind it as blockchain, but it could shake the industry up more than people realise.
There was a great deal of cynicism around the cloud, even while it was completely changing the infrastructure that underpins financial services. The “micro clouds” that edge computing makes possible may be less revolutionary than the move to cloud, but the lower latency will give some businesses the edge they need to offer something truly differentiated.
Not only that, but worries over data sovereignty regulation disappear when businesses know exactly where data is held and where it has travelled.
How should fintechs avoid getting distracted by overhyped technologies?
People complain about hype, but it’s often incredibly useful as a signpost. Often a “buzz” around something is a good way to find the best film, the best restaurants or even the best fintech technologies.
The key is to use hype as just that – a pointer towards what might be interesting. If fintech influencers and media are breathlessly talking about a topic, it’s neither a reason to fully embrace it or reject it. Cut through the hype and you may find substance or you may not.
Technological change is never done, and the fintech sector needs to keep this in mind with its approach to new technologies. “Looking beyond the hype” is more than a simple platitude.
There is a need to look at the merits of technologies and their applications with an eye not just on today but on tomorrow. There needs to be an understanding of not only the technology but what it can enable. And there has to be an openness to change as technologies become cheaper, more practical and more sophisticated.
It’s important to keep in mind that fifteen or so years ago, some people would ask – how could a start-up compete with a bank with more than a century of history? None of us want to be that guy.
About the author
Alex Reddish is Managing Director at Tribe Payments.
He has previously held roles as both Head of Issuing and Head of Business Relations at Valitor, and Head of European Business at Raphaels Bank.