Countries may have locked up their borders to mitigate the COVID-19 pandemic, but local and international trade must go on. Innovations such as cloud-based technology, AI, and fintech have stepped in to handle the global market’s current financial needs.
Businesses and consumers are buying more online during this time. Customers are turning to mobile banking to make payments and receive money electronically as physical bank branches have scaled back their hours or completely closed. Is this the new normal? Considering that global investments in fintech are $12 billion today and have more than tripled since 2014, it’s likely fintech and digital financial services as we know them now are here to stay. Here’s where the latest fintech advancements are going:
1.The Evolution of Remittances
For years, immigrant workers would send money home using Western Union. The remittance process required a visit to a local office to fill out a form and hand over some cash to create a wire transfer. The transfer could take days. Advancements in fintech now make it possible to send money worldwide faster from a smartphone. Users don’t have to worry about high fees or figuring out currency exchange rates. All they need to do is log in, enter an amount and recipient, and hit send.
The amount of global remittances today is significant — according to the World Bank, low- and middle-income countries are on track to receive $551 billion in 2019 and $597 billion by 2021 in remittances from family members overseas. With so much money needing to move from one corner of the earth to another, expect to see many more global remittance startups, providing innovations in how people and businesses send and receive money.
2. Digital Banking With a Twist
The COVID-19 pandemic is pushing the most reluctant of banking clients to go digital. Besides mobile banking, there are P2P transfers apps such as Venmo, Apple Pay, and Google Pay. Customers have no choice at this time but to turn to digital banking to replace cash transactions.
Big banks are working on stepping up customer experience on their mobile platform by personalizing the digital experience to make up for the lack of human service. Expect to see more banking services and financial applications to be completed online and followed up with a video chat with a customer service representative.
Barclays has been successfully providing two-way video banking since 2014 to customers through the mobile banking app with great success. Citibank launched a similar service in 2018 in select Asia markets, holding face to face video consultations with high-net-worth clients through their wealth management division. A more sophisticated hybrid of human and digital banking format is likely in the future, as the technology improves, and financial institutions expand globally.
3. Interstate and International Taxation Streamlining
More businesses and startups are selling nationwide and internationally. This creates special challenges when it comes to taxes and corporate fillings. Taxation and filings can be data-intensive. Cloud-based technology could help with more complex tax processes involving multinational or multistate business locations. JPMorgan Chase’s use of artificial intelligence has saved the bank $150 million in payroll. Machines can extract and process data from the $6 trillion worth of payment flows the bank handles every day faster than workers can.
The JP Morgan Chase tech could be incredibly helpful to multinationals needing to file and pay taxes in multiple locations in another way — AI also verifies that data is being collected and used in compliance with regulations.
4. Cybersecurity Advancements
As the world increasingly turns to mobile and online platforms for their banking needs, an increased level of security is needed to protect sensitive, confidential data. Fintech companies are especially vulnerable to cyber threats. Computer Weekly reports that nearly all fintech startups are vulnerable to cyber attacks, despite having the infrastructure in place and plenty of funding to back it.
The rapid growth and adoption of fintech mean cybersecurity is a high priority for all financial firms. A multi-cloud environment will be more readily adopted, with data stored onsite and in the cloud, to spread the risk of compromise. It’s likely you’ll also see more security applications that mimic cloud environments by providing infrastructures built on-premise or in a “private cloud” for security. AI will also play a crucial role in fintech security.
Feedzai is already using AI to detect fraud. The software assesses clients and provides them with a risk profile based on a fraud score to flag and manage higher-risk companies. Mastercard has seen great success with machine learning. The card issuer has cut its fraud rate by 50% by using its Decision Intelligence and AI Express platforms.
The Evolution of Fintech
There’s a fintech revolution in the works that’s been precipitated by the current COVID-19 pandemic. The advancements in cloud-based software and AI (to name a couple) are providing customers with safer and more convenient ways to handle their purchasing and banking transactions.