Over the years, the financial sector has evolved and introduced what we now know as fintech – which is simply the application of digital technology to financial services and products. The evolution has been vast, ranging from mobile banking to payment processors, online investment and savings platform, loans and many more. The technologies are endless and it is believed that this is only the beginning.
According to Goldman Sachs, fintech is set to disrupt over 4.7 billion dollars in global financial sector revenue. Fintech is the change that the financial sector has been waiting for but more innovations are set to disrupt already existing companies and the only way to stand out is to keep track of the incoming trends.
We have already seen the start of this with the likes of Prospa, a startup that is changing the way businesses bank by eliminating the need to visit brick and mortar banks, providing free transaction, free delivery of ATM cards, convenient invoice management, quick balance review features, and real-time analytics, all in all, providing better customer experience virtually. Thanks to digital banks, visits to brick and mortar banks are set to drop by almost 40% in 2022.
The financial sector is poised to depend more on AI to process and handle large transactions. Take the banking industry, for example, AI is projected to reduce its operating costs by 22%, this means saving almost a trillion dollars. AI is already being used by several institutions to enhance customer service e.g Leo by UBA. Its ability to work with unstructured data will make for easy dealing of cyber crimes and financial frauds.
Digital wallets, mobile and cashless payments will drive the financial sector in terms of payments. In 2019, there were about 2.1 billion mobile wallet users. Add the use of blockchain to the mix and there is no telling how widely disrupted the sector will be. The main drivers of the disruption will be Generation X.
China takes the lead
China is an overwhelming leader in almost all fintech categories; from payment to lending to wealth management. With over 800 million internet users, 98% of whom are using mobile, it is no surprise that this is the prime area for fintech to thrive. China also has a high rate of investment than the rest of the world, this is equally an added factor. At this point, China is an exemplary leader and the best case study for how the fintech revolution is growing and evolving.
Thanks to blockchain technology, we have what is called smart contracts. Basically smart contracts are a way to digitize contracts that would normally require the services of lawyers and tedious processes. In smart contracts, parties sign a smart contact using cryptographic keys as a digital signature. Instead of paper, the contracts are encoded in computer language. Thanks to blockchain the codes cannot be tampered or altered. All devices that get the first digital copy of the contract will serve as witnesses and these devices would all see to the execution of the contract and fulfilment of all terms.