Traditional banking institutions have fallen behind as fintech startups have become trailblazers for new developments in software and rapid advances in technology. This reality has created an irreversible shift in the global financial landscape wherein startups are paving the way and banks and big financial players are busy playing catch up.
Here’s a look back at the 5 things that revolutionized the fintech industry in the past 10 years and raised the bar for the entire financial services world.
- Open APIs setting the stage for new technological developments
Banks and traditional financial institutions are quickly learning that opening up to third-party innovators is the fastest and most effective way to innovate. This wasn’t always the case but it’s definitely one of the strongest factors that have impacted the financial services space in the past decade. Direct integrations save time and money for all parties involved and pave the way for third-party companies to create software designed to enhance otherwise cumbersome processes. APIs today create new pathways for more cost-effective models that integrate banking data and access - allowing businesses access to more and better services and customers access to better user experiences based on their unique data.
- Global online payment processing
In the early 2000s eCommerce started to pick up steam and PayPal played an integral part in its success by enabling frictionless online payments. The ability to conduct business across borders became as easy as the click of a button. In the past 10 years, online payment providers have upped their game and PayPal has been facing some serious competition. Global payment processors - many that started off as FX and money transfer companies - focused on differentiating their brands by putting their resources towards better processing power, local data storage, data encryption, better integration into sales and invoicing software, and more. Today, payments companies able to operate locally on a global scale are winning more business from online companies marketing their products and services internationally.
- Blockchain and cryptocurrencies
We can’t talk about the past decade without focusing on blockchain and cryptocurrencies which have taken the open innovation movement to a new level. Cryptocurrencies have served as a massive disruptive force when it comes to the banking sector as they’ve been able to bypass many of the problems associated with traditional banking and provide a faster and less expensive way to transact. While it’s long-term impacts are still unclear, what’s amazing is how fast it’s been implemented to the extent where it’s really reshaped the online payments industry. It’s also set a new standard when it comes to increased transparency and open technology which is sure to impact other areas of the industry as customers benefit from increased ease when it comes to moving and controlling their funds.
- AI - Automated Financial Advisors
Developments in automation technologies designed to provide financial advice are proving to be something to pay attention to. Sometimes called robo-advisors or virtual assistants, this technology is fueled by machine learning and implemented through formats like live chat and activated based on specific consumer behaviors. This is still a relatively new field where many have ventured into but only a few have proven to be successful. The mix of human and machine is still necessary when it comes to providing useful financial advice but automation still has other applications designed to power sales and customer engagement. Its applications are currently best applied in marketing and operations but future implications expand into a more comprehensive offering.
- Mobile Banking
Mobile banking has extended the formal financial system to include more people - specifically in developing countries. Mobile payments still have a long way to go, especially in Western markets as most still prefer to use traditional payment methods like credit cards. Still, the advances made to date are substantial, specifically in the past 10 years as infrastructure costs have gone down significantly. A 2018 study by ING found that one in five consumers (21 percent) have transferred money via organizations other than their main bank in the last 12 months. This trend is significant and will undoubtedly set the stage for advances in B2B commerce as well.
We’re excited to be part of the fintech revolution and can’t wait to see what the next decade has in store for the payments industry!