Digital waves in the financial industry

January 23, 2017

In this year´s World Economic Forum in Davos, CEOs of the world´s largest banks, including Germany´s Deutsche Bank and Spain´s BBVA, have addressed the importance of the role technology is playing in the financial industry. Like what happened in other sectors, the digital transformation is reshaping the banks, from their infrastructures to the financial services they are providing.

The most known fintech revolution could be the Blockchain, which is a distributed database of a continuously growing list of ordered records called blocks. Once a block of data is recorded on the blockchain ledger, it’s extremely difficult to change or remove. According to Wall Street Journal, today more than 40 top financial institutions and a growing number firms across the world are starting to experiment with this technology as a secure and transparent way to digitally track the ownership of assets. For example, the Monetary Authority of Singapore is poised to become the latest central bank to test its own digital currency, in which a trial of blockchain-driven system will be used for interbank payments in order to speed up and simplify interbank deals. One outstanding advantage of blockchain would be that it helps banks to significantly reduce the operational and structural cost so that they can operate in a more efficient way.

Another trend to watch is the rise of automated financial advisors. Companies like Credit Karma, Betterment which offer automated algorithm-driven data-based financial advisory services are forming part of the ecosystem. However, instead of providing users with actual financial services, these companies often choose to stay neutral, which is to say they are being the neutral intermediary that helps customers find financial services and keep track of their various accounts. As indicated by New York Times, although both companies and banks are still far from having digital assistant that could actually solve financial problems for users, all the players in the field are working with machine learning and artificial intelligence that will increasingly provide proactive analysis and advice.

In contrary to the growing technologies mentioned before, Cloud computing has established a solid role in banks and the financial sector has taken significant steps in incorporating the use of this technology. British bank Oak North became has moved its core financial systems to the cloud with AWS (Amazon Web Services) and Spain’s BBVA has referred cloud infrastructure service provider. Yet at the same time, banks have to ensure a safer and scalable cloud in order to deal with the enormous amount of data generated in this digital era.

As observed the Financial Times, banking in Europe is also expected to be transformed by new EU regulations that will force banks to provide third parties with access to the data of any customer who authorize it, which could make it easier for banks to pinch their competitors ‘clients and to offer more products from rivals.

What’s more, the adoption of open API (application programming interface) which could turn banks into a platform for fintech companies to avoid competition; Peer-to-peer systems that enable customers to easily and cheaply transfer funds to each other and Data monetization for merchants which let merchants gain new understanding of customer behavior and patterns, are all new trends to watch.

mobile payment

It is also noticeable that Asia, as an emerging financial market, accounts of 50% of the project in fintech. Online shopping and ride-hailing are among the hottest tech arenas and as the shift takes place, China is leading the trend. According to a McKinsey report about China´s fintech boom, the country leads the world when it comes to total users and market size. One example would be that China´s shoppers pay with their phone more so than people in any other country , a record of 195 million for in-store and online payments in 2016 as observed Emarketer. Leading the way are WeChat, the turbocharged messaging app from tech giant Tencent, and Alipay, the wallet app run by Alibaba´s Ant Financial, which according to the Financial Times have more than 500 million clients, a figure that is 10 times the level of the world´s biggest banks.

There is no doubt that the relentless transformation within the financial sector will continue with the technological upheavals, which requires banks and other financial institutions to make heavier investment in the future, including recruiting the digital talents needed for the industry. The Master in Fintech Solutions of Barcelona Technology School is designed to prepare qualified talents in fintech, shaping the digital future of the financial industry. Are you ready?



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