Over the past several decades, technology has changed the way we do everything. Financial technology (also known as fintech) has changed the way we handle and manage our money and the way banks and other financial institutions operate. Financial technology has resulted in easier processes, more transparency, efficiencies, and fewer errors with improved communications between banks and their customers.
Benefits of Technology in Finance
There’s no doubt that technology has benefited the financial sector for years. Here are some of the advantages of using technology in finance:
Accessibility
Everything from using tax software to opening a bank account has shaped the way we manage our money. Mobile apps and digital platforms are perhaps the most impactful technological advancements in recent years, allowing for the digitization of basic services. Now, consumers can manage their bank accounts by transferring money, implementing direct deposit, and checking their financial data.
Convenience
Consider all the ways you manage your money without visiting the bank. When was the last time you were even in a bank? Financial services technology has bridged the gap between traditional banking practices and digitized solutions to help consumers of all types perform various tasks, such as submitting inquiries, making payments, applying for personal and home loans online, and allowing us to shop online.
Speed
Financial technology has drastically reduced the time it takes to complete transactions. In the past, banking processes could take to complete, but financial technology allows you to see money deposited in your account the same day.
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Customer Experience
Technology in modern finance has improved the overall customer experience because of its convenience and speed. Now, mobile payment systems and credit card platforms make it possible to pay for things within a matter of seconds instead of writing checks. Additionally, technologies like chatbots have streamlined customer communication. Now, chatbots can answer basic questions and direct customers to the right person or place for more complex issues.
Technologies Used in Modern Finance
To accomplish all the benefits we just discussed takes several different applications of technology, including the following:
Artificial Intelligence
Artificial intelligence (AI) works alongside machine learning (ML) to carry out essential but basic tasks such as fraud detection. Combined with automation, these technologies can also be used for consumer-facing services like credit card application applications and approvals. AI is also used to provide more personalized experiences to customers, providing helpful insights based on account information.
Blockchain
Blockchain technology has advanced throughout the financial sector. This technology led to the rise of Bitcoin and other cryptocurrencies, but blockchain has many more use cases. Essentially, blockchain is a database that maintains various data blocks in a chain. A new block is added with a timestamp and transaction data when a new transaction occurs. Blockchain has extended beyond cryptocurrency and is used in various sectors, especially wealth management because it’s transparent and secure. Once a block is added to the chain, it can’t be altered.
Online Banking
We’re already discussed how online banking has offered better convenience, but this technology is usually leading in various financial technologies because of its ease of use. Traditional banking is declining as members of all ages embrace digital banking in the form of websites and apps because it’s more convenient. If everything you can do at a bank is available at your fingertips, there’s ultimately no reason to visit your local branch.
Digital Payments
Modern finance is digital finance, resulting in software designed to help people make payments with their smartphones and other devices. As a result, cash is essentially a thing of the past. Now, most businesses take credit and debit card payments, and you can even pay your rent online.
Security
As the financial sector continues to digitize, security and privacy are significant concerns for customers. However, new technologies have been developed to protect consumer privacy and data and secure the safety of their money, personal information, and transactions. Technologies like encryption and biometric data protect user privacy online and can even automate IT tasks, such as fraud detection, security testing, and more.
Robo-Advisors
Investing can be intimidating for the average person. Most of us aren’t taught about investing in school and only know about retirement accounts because some employers offer them as a benefit. However, with the boom in robo-advisors, more people are starting to understand investing to help grow their wealth over time. Robo-advisors work primarily on algorithms and decide which stocks and bonds to invest in on your behalf. There’s no freedom to choose your own investments, but it’s a great way to break into the world of investing if you have limited or no knowledge.
The Future of Fintech
No one can predict the future. However, as technology advances, the financial sector will be at the forefront. However, it’s not just the banks that benefit. Non-banking financial companies (NBFCs) use this technology to offer alternative finance options, including insurance and various types of loans. For example, now, you can apply for a home loan online instead of filling out a long application form.
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Financial technology will continue to make finance more inclusive, offering better financial resources for low-income individuals with low or no credit scores. In addition, these technologies offer a lower barrier to investing, saving, and lending for groups that otherwise didn’t have access to financial services.
Additionally, these technologies will make experiences with financial service providers more personalized. For example, there are already apps that analyze spending and can help users save money by identifying recurring expenses. This type of hyper-personalization can translate to any
financial service, working with AI to provide recommendations based on a user’s financial profile.
Final Thoughts
New software in the finance sector will continue to help us change the way we save, spend, and invest. Technology benefits consumers, banks, and other financial institutions, with several already being used by millions of people every day. Fintech is poised to grow as more financial institutions work towards providing better solutions for consumers and working to improve internal processes to eliminate errors and bottlenecks.
Megan Isola
Megan Isola holds a Bachelor of Science in Hospitality and a minor in Business Marketing from Cal State University Chico. She enjoys going to concerts, trying new restaurants, and hanging out with friends.
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