FinTech – Evolution to Revolution (A complete guide – 2018 edition)
Let’s go back in time. Not much farther but far enough to remember how our lives were before smartphones and the advancements of internet- To the time where there were only cash transactions. If it is difficult for you to remember that time then you, like us, are a part of a staggering revolution that happened in the last five years and took us all in.
Allow me to walk you through the timeline of the gradual but stupefying advancements we made, it was a long walk
- Late 1970s – The banks around the world introduced direct payment/debit. Customers no longer had to go to the bank for every transaction.
- 1980 – Modern credit card has been around since a long time before this but through the 1980s, it had penetrated enough global share to be recognised as the first plastic money.
- 1990 – It became possible to make payments by debit card and credit card, after the introduction of POS
- 1992 – The growth of Telebanking.
- 1997 – The breakthrough of internet banking.
- 2003 – Mobile banking was introduced by the banks
- 2003-2015 – Evolution of mobile wallets, P2P mobile payments, NFC, Mobile cheque deposit.
- 2016 – Unified payment interface
- 2018 – We no longer remember how it was before technology took over and made our lives so much easier.
We have reached at a point where we know how our lives are changed in this cashless economy but we barely have an idea about how big this whole scenario on a global level. For instance, in 2016, Denmark’s central bank stopped printing banknotes and shut down its last remaining mint. And denmark is not the only one, there is a significant shift towards cashless economy from west to Nordic regions and Asia-pacific along with the entire eastern side of the world.
For a rough picture, consider these statistics:
- In sweden, over 95% transactions are digital
- Vietnam announced to be a 90% cashless economy by the year 2020
- In 2016, India pulled 86% of its existing currency to demonetize the black money and move towards digital platforms.
All of this would not have been possible if there was not a reliable a reliable enough alternative to fall back upon. We are in the middle of a time that will be known as the revolutionary time of this era.
Entering a cashless economy is no more a far away dream. It’s the present. And a major part of it is made possible with the help of Finance Technology Apps or FinTech.
What are FinTech?
According to investopedia, FinTech or Financial Technology is a term that can be used to define any means through which people transact business.
Financial technology consists of,
- Mobile wallets like PayPal, PayTM, etc.,
- Electronic credit systems,
- Investment banking – The new generation of investors have more trust on the latest Financial technology than the traditional methods of investment.
Some of the most significant apps in the FinTech industry are as following:
- Avoka – This application is a frictionless business transaction and service enablement application. Mainly helping the businesses whose transaction require applying for a loan, credit card, submitting insurance claims or opening bank accounts.
- BillGuard – This mobile app helps you in tracking your expenditures and protect yourself against fraud. You can see how and where you are spending your money, safeguard yourself from suspicious charges.
- CoinBase – It is a specialised wallet which helps in transactions through Bitcoins. You can save, send, receive or pay using Bitcoins.
- Transferwise – This application is so popular that even Richard Branson has invested in it. Transferwise helps in making international money transfers easy and approximately 90% cheaper than traditional ways.
There are a number of other applications serving the purpose making money matters safer and faster OnDeck, Stripe, Prosper, Skrill, Square, to name a few more. Each one is working in providing a reliable platform for money transactions. It will not be incorrect to say that FinTech and all of these platforms are increasing user-friendliness of financial matters and Bringing the financial world to the financially excluded individuals of the world.
Blockchain as FinTech
Another question that comes to mind while being on this subject is whether Blockchain is categorised in FinTech. And the answer is yes. Blockchain is a very important innovation in the field of Financial technology.
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Don & Alex Tapscott, authors Blockchain Revolution (2016)
Blockchain created digital assets in the form of cryptocurrency, which was an impossible thing to do. Because anything “digital” was always copyable. And blockchain cryptocurrency changed it for the first time by inventing code that was uncopyable.
Blockchain reduces the manual effort taken in financial processes,thereby, reducing the overall time of the activity. It works towards reducing the complications involved in financial processes. In all these respects, Blockchain is a prime example of FinTech.
What are the major features of a FinTech App?
- Integration with multiple platforms:
A fintech app’s function is to gather information from multiple bank accounts, payment applications and other payable service application. A Fintech app must be able to communicate and exchange information among different applications.
- Simplified data analysis:
When you’re expecting general public to shift to a whole new medium of money transactions, you are supposed to make it simplified enough for them to learn and trust as quickly as possible. After all, the highly functional Fintech apps are making the uninformed users to perform their financial operations differently.
- Complementary functionalities:
Consumer needs have not altered with the emergence of FinTech. A typical customer still requires the old basic features with as much innovation and simplicity as possible. SO, it becomes important for the companies to add new system improvements alongside the basic functionalities like managing expenses and savings with an easier and less complicated interface. Alongside this, the system can be made as intuitive as possible. Using artificial intelligence to think for the users is very important. Innovation is the key.
Typical banking solutions, even today, have not understood that the global market runs on only one thing – Customer satisfaction. It’s crucial to stand out in a crowd of basic banking applications and the key to this is providing personalised interface. It gives the user a feeling of uniqueness. Any Fintech app integrated with personal application establishes the strongest possible relation with the user.
- Use of Blockchain:
Today, more and more FinTech applications are relying on blockchain technology to make their apps more reliable and secure. A blockchain is a series of blocks that records data in hash functions with timestamps so that the data cannot be changed or copied in anyway. This gives the apps using Blockchain an edge over the other for a more trustworthy and safe product.
The cryptography of Blockchain technology provides near costless impenetrable solution for securing user data as opposed to regular expensive subjective solutions for security.
Fintech Application Benefits:
- Customer retention and Facilitation
WIth Fintech Apps, you are facilitating the user to know more about your product and the features or additional services that you have to offer. Your goal is to retain as many users as possible. Once you have a big enough customer base, you can start looking for more opportunities to sell them your other products.
- Providing the customers analytics
With the customers using your mobile application, you will be able to look into the user behavior and get more relevant business analytics. When customer spend more time on your mobile application, they show their preferences and priorities, that helps the developer to target customers in a more specific manner.
- Taking benefits of Push notifications
Push notifications in the on-demand financial application world are an amazing asset to businesses. After studying user behavior, you can provide the customers with what they’re looking for. Push notifications are great to boost customer base through in-app marketing.
- Better Customer support
Gone are the days when customers used to scroll through the FAQ section of any Application or website to come across the solution of the problem they’re facing. Nowadays, Apps are using chatbots which are specific in answering the exact issue, the user is facing.
Fintech Application challenges:
- Data security
The key issue that arises during the development of a financial technology application is the issue of data security. It is an established fact that Fintech apps consists of the most important user data, which is the financial data, and any kind of compromise can lead to personal and legal problems for both, customers and the company. Hence, there is no room for error when it comes to data as sensitive as the financial data of millions of people. In fact, in a recent research carried out on 400 banks, it was found that many major banks across the world have one of the other loophole in their security system and weren’t fully secure.
- The challenge of regulations
The financial world is highly sensitive and confidential world, and thus, most of the regulations are formed by the governing bodies of the countries, which make the FIntech apps highly regulated. Therefore, it becomes more critical for the app developers to abide by all the laws and regulations while developing the app. For instance, it’s essential to follow the General data protection Regulations (GDPR) in European countries but still studies have shown that 55% of the applications do not follow this regulation.
- Application Features
The next big task for the developer is to decide on what to keep and what not to keep in the app features. It’s always advisable to make an MVP (Minimum Viable Product) even in the case of financial application. And as a part of that, any app developer would include features like, money transfer, bank statements, receiving money in real time, mobile wallets, etc. but many banks require their apps to have extra features that can improve their profitability and enhance the customer base.
- An amazing User experience (UX)
As an app developer, it is very important to provide your users with an application which is compatible is the multiple UIs, OSs and devices. But along with basic functionality, for a capturing application, it should have an easy yet eye-catching interface. A recent report suggests that 63% of the users have at least 1 financial app on their smartphones. This is a big enough number to not compromise with the user experience of Financial app. The customer’s should not face difficulty in carrying out easy transactions.
It’s a rapidly developing world, more so than it is possible to imagine, and FInancial app is the need of the hour. It’s a big step in building relationships with the customers to provide them with an intuitive, helpful and easy to use application, even in the financial world.