Is jargon holding back adoption of financial technology?
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‘Fintech’ may have become a mainstream concept, but the Covid-19 pandemic has shown how much potential exists for it to be used outside of traditional banking services if industry can persuade potential customers.
The proliferation of consumer and business technology over the past two decades means that, today, every industry comes with its own tech sub-sector. Legaltech, edtech, healthtech, proptech and so forth: a host of specialist fields are disrupting different markets from within.
Perhaps the most obvious example of this lies within the financial services industry.
Financial technology has become increasingly prevalent over the past decade, with both businesses and consumers becoming increasingly comfortable using digital solutions in place of cumbersome physical processes.
As a result, ‘fintech’ has moved from being a niche term to a much-hyped buzzword. However, while this trend might be easy to dismiss as an irrelevant by-product of zealous marketing, we must be careful not to confuse the mass use of fintech (as a word) with the sense that this field of technology has reached maturity.
Far from it: fintech remains in its relative infancy and we cannot allow complacency to hinder further advances in this space.
In keeping with the hype surrounding the term, some may argue that we have already experienced the peak of the fintech boom. Ever since the global financial crisis of 2008, commentators and tech specialists have been promising a finance technology ‘revolution’. Needless to say, this has not transpired as some had hoped.
The rise of fintech promised to empower consumers, giving them more choice and hassle-free experiences. More, open banking – or rather, open data – which sits at the heart of the fintech revolution was meant to make it easier for the public to manage their financial affairs from one place, rather than using lots of different platforms.
However, issues surrounding regulation and an understandably cautious approach to migration from legacy IT has meant that fintech adoption has been limited. Many banks, for example, are still testing the water by digitising individual products or processes one at a time.
If the development, adoption and use of fintech to date has been somewhat conservative, then the coronavirus pandemic is likely to be a catalyst for more radical change. A recent study of more than 2,000 UK adults commissioned by Yobota found that fintech usage was 50 per cent higher in lockdown period between March and June 2020 than it was during the equivalent period in 2019.
Bank branches closed, people were ordered to stay inside and the financial burden of Covid-19 forced many consumers to seek new lines of credit. Meanwhile, support schemes such as mortgage holidays required quick, agile responses from lenders to enable their customers to benefit from the initiative. Consequently, cloud-based banking platforms became absolutely vital for both banks and their customers.
For those financial services firms that are still reliant on legacy IT and on-premise servers, the lockdown period will likely have highlighted the need for them to take a more progressive approach to using technology. Without this, both their staff and their customers will face significant challenges when trying to perform tasks or access information remotely.
Fintech startups and financial service providers must now pursue the possible applications of fintech outside of traditional banking services, such as checking one’s balance or facilitating small transfers. The next phase of fintech development must be focused on open data, cloud-based banking platforms and interoperable technologies that deliver an exceptional customer experience.
Take the example of someone applying for a new credit card. When doing so, the individual is actually taking part in myriad processes: identity verification; credit scoring; product recommendation; application assessment, and the eventual opening of the account.
Each stage of this process presents its own challenges and list of tasks to complete. Credit card providers may currently use tech for some of these stages, but human intervention will often still be necessary for others.
If financial technology achieves its potential, the above scenario would become entirely automated. With minimal time and clicks, a customer ought to be able to review potential products and secure the one they want. They should then be able to manage and pay the balance of their new credit card through their chosen mobile or online banking platform.
A joined-up system with different technologies seamlessly working together would provide an infinitely better experience for the end user. At present, such progressive and holistic examples of fintech in action are the exception, not the rule. The financial services sector must work to correct that.
Regardless of the levels of hype surrounding this industry, we cannot lose sight of how far there still is to go. It is important to return to the core idea of the fintech revolution: open banking, open data, cloud-based and interoperable solutions that will completely change the way banks and their customers interact. Now is the opportune moment to push ahead with this vision.
Ammar Akhtar is the co-founder and CEO of Yobota
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