In the past decade, apps like Uber and Airbnb became extensively popularized with much room for the integration of financial components within. Fintechs were able to connect a gap between the more limited capabilities of banks and what consumers desired.
New fintech startups saw these opportunities and designed creative products to allow for mobile payments, alternative finance, online banking, and financial management that enhanced the consumer experience. Seven new technologies can be highlighted to demonstrate the changing arena of the banking industry.
Number one is smart chip technology, or EMV. EMV was designed to shield payments by utilizing a single-use, encrypted password for each individual transaction. EMV improved upon the magnetic strip cards that stored static data.
A second technology is biometric sensors. Biometric sensors include products like fingerprint readers, face scans, and voice recognition, all systems to increase consumer security. These types of technologies have even begun to be integrated into ATMs to ensure customer security that goes beyond simply a plastic card and pin number.
A third development is online mobile banking that allows customers to access their bank accounts quickly through their phone to check balances, make payments, and perform a variety of other personal finance functions.
Branchless banking is the fourth technology changing the landscape of banking. At the end of 2016 in Europe, 9,100 branches had been shut down as financial services were moving away from a branch-centric system to a digital one. Many banks have reduced the numbers of physical locations and have opted for banking through websites or apps to make their services more accessible to a wider portion of customers.
A fifth technology is chatbots, which are used to enhance the customer service experience by answering questions and sending customers to the right places. These bots use machine learning and natural language processing that allows them to pick up on human interactions.
The sixth new technology is artificial intelligence which can have a number of influences on the industry. One of the main purposes would be to detect fraud by using old data and algorithms that can decide if there are patterns of fraud attacks, essentially minimizing manual effort by 50 percent.
The seventh and final technology is digital wallets. Again, this allows for even quicker and better user accessibility and some even offer exclusive deals such as cashback and rewards points.
Cryptocurrency is an honorary mention as it can have a significant impact on banking as we know it. The traditional system of financial institutions tends to be pretty slow because there are various layers of bureaucracy to go through. On the other hand, cryptocurrency would hasten fiscal transactions because it was created on a decentralized public ledger. Additionally, its transaction records can be readily verified but complicated to manipulate, reducing the prevalence of fraud, and thus, saving costs that would go towards combating fraud.
In light of the numerous new fintech companies, many banks are worried, with great cause, that large fintech companies will take over the industry and draw on more consumers. Citibank has predicted that 30 percent of all banking jobs will die out in the next ten years. The only way banks could survive this fintech revolution would be the quick adoption of these technologies.