Every year, international trend forecasting think-tank Trendwatching.com releases their eagerly anticipated trend forecast for the upcoming year. This forecast is generally focused on consumer trends and the opportunities that can arise out of them. One of the top listed trends identified is the Internet of Things. Having appeared on the list in previous years, Trendwatching has predicted that in the future the Internet of Things will result in even more objects becoming connected, and in turn this will lead to more ways of deriving value from them for consumers. As in any active economy, this will have broad implication on how consumers work, live, play, and most importantly – pay.
The current status of Financial Technology
The world is in a current state of flux, and every change has an effect on the way people interact with money, and how in turn it interacts with current technology. With the increased ubiquity of smart devices, more and more consumers are sitting with phones, tablets and computers that can accomplish more in a second than banks of the past could accomplish in an entire day. According to the Pew Research Centre for Internet, Science and Tech, over 81% of online Americans feel that access to the internet and cellular technology has made them better informed about products and services than they were five years ago.
With such a wealth of information at their fingertips, immediate gratification is the order of the day. Consumers and business owners alike now demand more from financial technology than ever before. With this demand comes unique challenges and fears over privacy and the safety of one’s information. According to Charlie Firestone, Executive Director of the Aspen Institute Communications and Society Program, “It is, and will continue to be, an electronic arms race between those who will find ways of using personal information to target products and service to customers/users and those who will find ways of protecting and ‘owning’ personal information on behalf of the user. First, there will be greater awareness of the uses to which one’s private information will be put, and second, there will be better tools to own and/or protect that information.”
An underlying factor of financial disruptors is the fundamental change blockchain technology introduces. The markets of the future require more efficient cross currency payments, as uniform transactions processing will occur more often. To that extent, fees charged when operating in the foreign exchange market will need to incur lower transaction and conversion costs to remain competitive in a market where new companies take an active role in providing solutions.
For this reason, banking systems will evolve to remain competitive. According to IBM’s publication on the Paradox of Banking in 2015, this will most likely occur through the integration of emerging techniques such as grid computing, service-oriented architectures, data and storage virtualization and predictive intelligence. Possible hurdles that companies utilising evolving blockchain technology will face will be to ensure that currencies remain liquid across all markets, in order for remittance to occur.
If technology is becoming more accessible than ever before, it stands to reason that previously untapped markets will increasingly participate in the global economy using financial technology to do so. These previously untapped markets (often situated in low income or less developed areas of the world) offer a unique opportunity to leverage the fintech trend. According to the Centre of Financial Inclusion, this will be made possible by Machine-to-Machine (M2M) technology, which allows cross-communication between both wired and wireless devices of the same type. This has already been introduced to great success in several East African countries, where M-Pesa is a popular form of money exchange and micro financing. It has already been singled out by Bill Gates as key factor in bringing formalised finance and managed systems to the world’s poor.
Online security, on demand
As technology grows by leaps and bounds, so does its potential perils. For financial technologies, the side effects can be especially negative. According to Gartner’s Top 10 Strategic Tech Trends for 2015, organisations of the future will recognise their inherent inability to safeguard their financial technologies completely. This will create a need for applications to become self-aware and self-protecting. Every single aspect of financial technology – including electronic payments and transactions, as well as electronic invoicing or bill presentment and payment, will need to offer a superior form of protection.
When considering the roles that smart devices will play in the future of financial technology, this becomes especially important. Companies will increasingly need to look towards digital identity solutions, in order to allow the authorisation process to be outsourced to third party providers. As the need for a multiple step verification process increases, companies will move towards three step verification and beyond, integrating technology such as biometrics in the process.
Looking towards the future
With the financial technology market set to undergo a metamorphosis in the future, it is important that businesses don’t lose sight of the basics of financial technology and what it should accomplish. All fintech creations need to be able to meet the needs of those using them quickly and effectively, and in a cost effective manner. If businesses can remember this while still keeping up to date with new technological updates, the sky is truly the limit.
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