What Impact Will Fintech Have on the Future of Investing? Experts predict that the Fintech industry will exceed $300 billion globally by the end of 2022. What are the main trends to watch and how is suppose to impact the investment world?
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Fintech is a term used for "finance" and "technology", it is also used to reference any business using technology to automate or enhance financial services. This is a rapidly growing industry, serving both consumers and businesses in a variety of ways.
This industry is rapidly evolving and expected to continue expanding for many years to come. In fact, experts predict that the industry will exceed $300 billion globally by the end of 2022. Fintech can now be used to describe a variety of finance activities including money transfers, online banking and investment management.
In the past, anyone wanting to invest in stocks, shares or bonds needed to seek out a broker. This involved paying brokerage fees, commissions and other charges. For those with a small investment fund, this was extremely prohibitive. After all, if your total fees would add up to $20 or $30 and you only have $50 to invest, it is far better to put that money into other types of investments that don't carry the same fees.
However, the development of Fintech has made it easier to initiate and manage investments. So, how will fintechs shape the future of investing in the coming years?
The Current Technology
Even casual investors are likely to have interacted with robo advisors. For many people, this is their first interaction with investment fintech, allowing access to investment advice and management without needing to speak to a physical broker.
The current robo advisors allow investors to initiate trades, study investment reports and manage a portfolio. There are preset portfolio options and the ability to create a tailored portfolio, with little to no investment experience.
However, this has only scratched the surface of fintech development and there are numerous trends that are likely to build on this technology in the near future.
This revolutionized the investment industry and forced many established players to change their practices and fee structures. Many robo advisors have a very low fee structure and brokerages and investment firms needed to follow suit to remain competitive.
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The Fintech Trends to Look Out For
With such anticipated growth, there are a number of fintech trends that are expected to emerge or grow in the near future. These include:
Blockchain
Blockchain technology is relatively new, but it is gaining traction within the financial services industry. In fact, financial institutions including banks have played a major role in the exploration of blockchain, particularly in regard to SME lending and risk management.
Blockchain solutions may be leveraged to reduce costs and mitigate risks. While blockchain cannot eliminate corruption, it can help to confirm identity and allow the execution of secure digital transactions. This means that we can expect to see more cryptocurrencies emerging in the coming years, creating new opportunities for investors.
AI and ML
Although robo advisors have been around for almost ten years, this technology continues to develop. In fact, one of the fintech trends to look out for is artificial intelligence (AI) and machine learning (MI).
These technologies are a major contributor to the growth of the fintech industry. There is great potential for AI and ML to be used to resolve customer queries and perform other virtual assistant tasks.
For example, when you have an investing query, you may be speaking to an AI-powered chatbot that can not only handle transactions but also offer superb investment advice. ML has allowed AI chatbots to become even smarter, with the technology ensuring the bots can perform complex commands more quickly and efficiently. ML also creates a framework to examine credit data and other factors that may influence investment decisions.
Voice Technology
Many of us are becoming familiar with using voice commands around our homes with smart devices and other integrated technology. However, fintech is also anticipated to add to the convenience for investments using voice technology.
Fintech developers and creators are aware that Gen Z is on the edge of technology trends and products that appeal tend to quickly become a success. So, they can make investment solutions more attractive with the integration of voice technology.
AI-powered voice assistants will offer simplicity and convenience to handle finance-related tasks, allowing secure payments and investment initiation without needing to access a keyboard.
In fact, voice interaction is already in use for many daily banking tasks. Voice technology has the potential to improve financial services. The added security can allow making online payments within seconds, rather than needing to wait days. Leading financial institutions such as Bank of America, Citibank and JP Morgan Chase already offer instant bank transfers thanks to this technology.
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How Fintechs Will Impact Investing Companies
Fintechs are also anticipated to have an impact on investing companies. Investing companies are going to need to evolve to keep up with the new technological developments, which may include:
Cybersecurity
Security is at the forefront of all financial decisions, products and services. Investors need to feel confident that their money and data are secure before they even contemplate a transaction. While there has been a great deal of progress in numerous emerging technologies, the cybersecurity field has been relatively untouched. This creates massive potential for growth in the cybersecurity niche.
Investment companies and firms will need to develop standards for data protection that not only protect their own assets and data but also reassure investors that their funds and personal information are secure. This can be accomplished with the development of fintech cybersecurity products and services.
Adoption of Biometric Security Systems
This follows from the previous point, but with security concerns on the rise, investment companies will need to take further steps towards their security measures in the form of biometric security systems.
Biometric security is an emerging solution that is sure to shape the future of investment and finance products in general. This technology is already available, but the evolution is likely to involve a decline in the need for physical touch. Contactless biometric solutions will allow you to keep your investment information secure without needing to touch any device.
Of course, these systems will need to be integrated into investment platforms, which may require some additional R&D from the investment companies.
New Regulations
In the light of increasing data security concerns, it is likely that investment firms will need to comply with new regulations. There are several agencies responsible for the regulation in the financial services industry; the FDIC (Federal Deposit Insurance Corporation), FRB (Federal Reserve Board and the SEC (Securities and Exchange Commission). Each of these agencies has specific responsibilities and functions independently. So, investment firms will need to continue to comply with new regulations as they are enacted.
From risk management, identification verification tools, fraud mitigation and account verification, it is anticipated that there will be new fintech products and services that will need to be regulated to ensure customers enjoy a highly secure investment platform.
Summary
Technology seems to develop at a rapid pace and fintech may be developing even faster. This is sure to have massive implications for both investors and investment firms in the coming years. Due to its rapid development, fintech products such as contactless biometric security systems, voice technology, artificial intelligence and machine learning will shape the future of investing.
These technologies will be designed to increase convenience for consumers, make investments more readily accessible and improve security. This should make it far easier for newbie investors to initiate trades and develop a balanced portfolio.
The new technologies will also require investment companies to make changes to procedures and processes to meet the growing industry demands. However, these firms should be able to leverage new fintech systems and devices to make the transition easier.
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