The use of new fintech is snowballing and overtaking traditional banking services as budding startups introduce new technology to the marketplace.
By Keith Tully, Partner, Real Business Rescue, UK
The rise of fintech has created a ripple in the financial services industry and continues to disrupt the market following the emergence of advanced online banking services and the growing use of cryptocurrency. As the traditional face of the finance sector embraces technology, fintech enhances and closely replaces existing financial services.
Fintech is being embraced and developed by the likes of banking institutions such as Barclays, collective start-ups and specialist hubs established to spearhead fintech businesses into the banking sector. The use of new fintech is snowballing and overtakes traditional banking services as budding start-ups introduce industry-changing technology to the marketplace.
The Dubai International Financial Centre (DIFC), a leading financial hub for the Middle East, Africa, and South Asia, is backing the vision of fintech start-ups and entrepreneurs which are shaping the future of the financial sector. The aim of the DIFC is to reduce the costs associated with innovation by pooling resources and to accelerate the speed of development in order to create opportunities for banks, therefore boosting profitability. By encouraging the growth of investment into fintech businesses, the banking sector continues to explode with new ideas in relation to process management, automation, and artificial intelligence.
Banking reimagined with fintech
The integration of fintech in the banking sector compliments establishments with financial technology, revolutionizing the way customers interact with banks. As users now follow a ‘mobile first’ approach and adapt to a faster pace of living, investment in online banking is vital, creating an ideal opportunity for your business. Fintech disrupts infrastructure for the better, as by automating certain aspects of the customer journey, manual labor is reduced and made instantaneous for the user.
Investment banking integrated with fintech has been inspired by the likes of Revolut, a challenger bank which gives access to cheaper foreign exchange rates with 0% fees on international transfers through an app. The online bank which is a partially crowdfunded venture allows you to trade in Bitcoin and other similar currencies. The digital bank now has over three million customers and the company is worth over $1.7 billion. This is a reflection of the increasing demand for fintech integration in daily banking services. As a result, mainstream banks are digitizing their services.
Concerns commonly associated with fintech include security risks, hacks and data breaches as they are not bound by the same rules as banking institutions. Growing concerns mount around the need for stricter regulation without posing unnecessary barriers.
A report by Fintech Hive, part of the Dubai International Financial Centre (DIFC), the largest fintech accelerator in the Middle East, Africa and South Asia found that fintech businesses increased nine-fold from 91 in 2010, to 839 in 2017, showing an increasing demand for this.
Insurtech is essentially insurance companies embracing tech by streamlining the process with automation, artificial intelligence and removing IT barriers, such as unfit-for-purpose legacy software and archaic software infrastructure which decelerates the customer journey. Intelligent use of fintech reduces manual work and encourages automation to speed up the customer process. Internal checks are complex and lengthy which typically contribute to poor customer service.
A smaller scale example of this is telematics insurance which is the installation of GPS analytics software which transmits information to the insurance provider, including driver style and habits.
Islamic financial technology is rising in the ranks as sharia-compliant financing options are expected to be worth $3.8 trillion by 2022, according to Reuters. Islamic banking as such makes it permissible to integrate closely with halal businesses.
ALGO Bahrain, the world's first Fintech Consortium of Islamic Banks, including Al Baraka Banking Group, Kuwait Finance House (KFH) Bahrain and Bahrain Development Bank (BDB) is the incubator for Islamic finance. ALGO Bahrain aims to launch 15 Fintech platforms by 2022 by offering a cost-effective solution which allows for research and innovation to be executed at an accelerated speed. By offering a specialist service to a Muslim client base, you are able to expand your market.
The rise of chatbots in the financial services industry follows the likes of Apple’s Siri and Amazon’s Alexa. During the launch of a pilot scheme in 2016, Middle Eastern bank, Emirates NBS, launched an automated chatbot, Amelia, to digitally interact with customers. If questions cannot be answered by Amelia, these are passed on to human operators, similar to the chat assistant used by UK banking provider, NatWest, named Cora.
Automated chatbots add a conversational factor to banking and reduce the amount of time manually spent by human operators to answer customer queries. This is an exclusive service which can encourage customer loyalty and open up to a wider market, thanks to the explosion of vast and wonderful fintech services.