Technologies | July 29, 2021

How does digitization impact the financial technology landscape?

In the changing world of VUCA (Volatility, Uncertainty, Complexity, Ambiguity), we all face challenges related to the fast-moving and unpredictable world around us. The same situation can be observed in the finance and banking ecosystem. Today’s banks are nothing like those of 10 years ago.

   

Financial technology is changing every aspect of our lives: the way we do business and the way we deal with banks. Digitization is an inevitable process, and the circumstances related to the COVID-19 pandemic have only accelerated it.

Which financial technology trends are changing the FinTech landscape?

Banking – let’s take this online

TECHNOLOGY

Read on to discover how Banking-as-a-Platform, Open Banking, RegTech, Artificial Intelligence and Big Data are revolutionizing the FinTech sector.

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Digital banking is no longer optional. It is also no longer surprising how many different transactions can be carried out online. Who remembers making deposits and withdrawals at a bank counter, or taking care of loan-related formalities in person at your local branch? Nowadays, we do everything online: we check balances, we lend money, we save, invest and make business transactions. There are also many different tools that allow us to manage our budget: we can invest online and create savings goals. Personally, I use the savings plan offered by my bank. This way I can easily track my savings progress and control how much is left until I reach my goal. Access to banking products and services has never been so easy. Consumers are seeing real benefits: time savings and offers tailored to better suit their needs.

Mobile banking is gathering momentum

Mobile banking is an area that is closely linked to online banking. Nowadays everyone uses their mobile phones on a regular basis. According to Insider Intelligence’s Mobile Banking Competitive Edge Study, 89% of interviewees use mobile banking. The percentage is even higher among the Millennials generation, up to 97%. Thus, to win the mass customer, banks have had to follow this trend as well. The advantages of mobile technology are innumerable, and everything is now available via apps: from socializing to managing money. We can access almost anything we need with one touch of a screen. Mobile banking applications are constantly developed to meet consumer expectations and to facilitate access to the information and services we need the most. In mobile banking, we have access to a wide variety of tools and services: from money transfers, to creating a personal budget and savings goals, to investing serious money. Of course, any tool can be easily customized to suit individual requirements.

Who has the data has the power 

Sources say that 90% of the data in the world has been produced only within the last 2 years. No wonder that modern banks also deal with processing huge amounts of data streams. The problem is no longer the lack of data, but the capability to use it and the knowledge of how to do so. Why is the precise and well-targeted use of data crucial for banks? On the one hand, banks use the potential of the data to help their customers, and on the other hand, they need to respect strict data and privacy regulations. Using modern financial technologies such as Artificial Intelligence and Machine Learning has become commonplace to help clients with their personal finance management (e.g. identifying the gaps and potential risks in their financial situation and offering advice on the best instruments to invest in).

Neobanks are disrupting the market

The term “neobank” was used for the first time around 2016 to describe FinTech providers that were challenging traditional banks. Historically, banks have been the main partner for business funding. The landscape has changed and the market has become more competitive in recent years, with neobanks emerging on the scene and becoming an attractive alternative.

Neobanks use disruptive technology to serve customers quickly, in areas in which traditional providers have retreated or have not been able to keep up. Statista predictions state that by 2028 the neobank market will reach a value of US$722.6 billion.

Cryptocurrencies

Another important aspect is the use of cryptocurrencies by neobanks. Although this technology still gives rise to extreme emotions, from skepticism to enthusiasm, it is impossible to deny its vast potential. The global cryptocurrency market is predicted to reach $1087 million by 2026. Neobanks can take greater risks and present a competitive offer with the use of this technological trend. This way, they can create a new revenue stream for themselves (e.g. by enriching the offer with an extra paid package), attract new customers interested in cryptocurrencies, and reduce customer retention.

Chatbots

According to market research, by the end of 2019 just 4% of banking and financial institutions had implemented chatbots. Significantly, by the end of 2020 this number had risen to 13%. Why are chatbots so popular? Thanks to algorithms, it is possible to automate certain processes – whether simply an online customer service or investment advice. Such solutions offer greater accessibility of services at lower cost. At JCommerce, we also take pride in developing chatbot solutions! For one of our clients delivering AI-based solutions, we are developing a new version of a chatbot and voicebot conversation system.

The strategic role of a financial technology partner  

Existing financial institutions are proving that they are ready for change, even though they deal with legacy technologies and processes that pose significant challenges. To this end, partnerships with financial technology providers are key in the digitization of the banking industry. The landscape of FinTech is being transformed thanks to either high-quality software or low-code technology. Nowadays digital change can be achieved via partnerships with financial technology providers. At JCommerce, throughout 2020 we observed an increased interest in collaboration among financial technology providers and banking institutions. As a technology-focused organization, we also observe the rapid development of FinTechs, which are setting up ever more R&D centers in Europe. One such example is Backbase, an Engagement Banking Platform provider from the Netherlands which decided to build development teams in Poland. Thanks to nearshoring cooperation with a financial technology provider, they were able to achieve their goal and add 40 missing specialists (Java programmers, testers) to their development teams. I encourage you to read the entire story of cooperation between JCommerce and Backbase.   

Summary: Where is the FinTech industry heading?

Innovative ideas and new development opportunities are appearing on the market every day to make our lives easier and more enjoyable. And while in many sectors digitization brings the emergence of a new software that streamlines the way we work, none of them has experienced such a dynamic metamorphosis as the Fintech industry. Cryptocurrency, robo-advisors, InsurTech, cybersecurity – the Fintech landscape is changing rapidly and is diving deeper into the behaviors and habits of consumers to meet their expectations. FinTech solutions are also changing the way people do business and handle money on a daily basis, and over the next few years we shall see further significant changes in this industry.

Agnieszka Bujak
International Business Development Manager

Business Development Manager with ten years of sales experience on international markets. At JCommerce, she is responsible for the development of the company's services in the Benelux countries and in France. In her private life, she loves reading (Scandinavian crime novels and professional literature about sales and negotiations), travelling and cooking.