FinTech automation is taking traditional banking by storm, pointing to a future where banks transform to FinTechs.
Clearly, traditional banking is heading towards an overhaul, as the teller, the loans guy, and the Fixed Deposit experts all enter our devices and cars. They analyse our behaviour in real time and over time to improve themselves, talk to us via voice chat, and store all our data in secure cloud locations. Alresdy, the pandemic has ensured that future of FinTech is contactless.
As the financial landscape is transforming with FinTechs, intelligent automation can restructure manual interventions and offer autonomous decision-making capabilities for process automation. From customer onboarding, fraud detection, to loan underwriting, intelligent automation tools are being used aggressively by banks to offer a seamless and hassle-free experience to the customers.
The lucrative sector of FinTech has been witnessing funds and partnerships too. For example, LoanKuber, a digital-first mortgage platform, raised a Pre-Series A round of INR13 crore led by Lets Venture and participated by Inflection Point Ventures among other investors. Also, BharatX, a FinTech startup, raised Pre-Seed round of US$250,000 led by Java Capital to enable embedded credit on consumer facing platforms in India.
FinTech will be the leading financial services sector in the near future, and in the coming time, it will compete with the much more formal banking sector head-on
“FinTech will be the leading financial services sector in the near future, and in the coming time, it will compete with the much more formal banking sector head-on. There already have been Open Banking and Neo Banking in trends, due to the lack of regulatory leeway collaborating with the banks. In fact, some Neo Banks have created a very large customer base that is truly loyal to these FinTechs,” he says.
“Today, banks are relying on customer inertia to abandon the formal banking services, this exit barrier will keep diminishing to the point of inflection where the formal banking structure will become redundant in the world,” he adds.
As banks evolve from traditional banking to automated, banks will become FinTechs. Big established banks will absorb upcoming tech from smaller Fintechs. For example in November, the Citi Group made strategic investment in Singapore based FinTech Qapita.
Key Trends in FinTech in 2022
The key trends that will dominate the FinTech sector in 2022 include cloud, AI, big data analytics, RPA, chatbots, and API banking.
The advantages of employing cloud computing include efficient storage, management, and assessment of information.
“Cloud computing is the efficient storage of large data sets allowing swifter data analysis. The recent progress in the banking and financial sectors will continue further, especially after the adoption of mobile technologies and IoT,” says Arora.
Big Data Analytics
AI, big data, and analytics-based platforms manage and analyse large amounts of data available.
“They uncover hidden patterns, correlations and offer deeper insights to innovatively visualise results for better decision making. This can further help banks and insurers to significantly improve risk management, through improved and (more) real-time insights into the customer behavior,” Arora explains.
Using data analysis in fintech is not just about an inclination. It helps companies reach remote markets and audiences, irrespective of their locations. It is a complete transformation
“Using data analysis in fintech is not just about an inclination. It helps companies reach remote markets and audiences, irrespective of their locations. It is a complete transformation,” he adds.
Financial markets are deploying Robotic Process Automation (RPA) to speed up processes by automating the manual processes.
“RPA in finance allows human-like automation of repetitive mundane tasks. Instead of depending on APIs to combine several systems into a single platform to perform set routines, RPA notes the user’s actions in a graphical user interface (GUI) and repeats those actions in the same platform,” says Arora.
Moreover, API banking is decentralising control and bringing all products on one platform at competitive prices in the financial industry.
For instance, in August, Astra, an automation platform for money movement, reported a record annual growth of 392% as it since the launch of its Automated Bank Transfer API earlier this year. Since then, the company completed more than US$20 million of automated transfers with a 99.997% success rating, a 1,000X improvement over standard ACH failure rates. Additionally, 90% of these transactions were completely automated and required no action from the user.
“By giving users insights into their financial transactions, API banking is paving the path for a whole new banking environment, where customers have much more power and can switch between service providers,” says Arora.
By giving users insights into their financial transactions, API banking is paving the path for a whole new banking environment, where customers have much more power and can switch between service providers
“Eliminating barriers between businesses, wherein everyone has access to the same data, helps in the overall growth of the financial industry, and a marked improvement in the quality of services available. Hence, there is absolutely no doubt that API banking is revolutionising the banking sector in India just as core banking once did, ushering it forward to a digital future,” he adds.
India also saw the launch of 1SilverBullet, a transformational financial B2B gateway for the investments, insurance, and lending verticals within the financial services space. The COVID-born startup aims to build networks that allow businesses to communicate with financial product manufacturers through an API.
Recently, several developments point towards the adoption of automation in FinTech. Last week, Astra launched its first-ever card-to-card instant payment API. Through a strategic partnership with Cross River Bank , a FinTech, the infrastructure will enable FinTech developers to fund accounts and facilitate deposits via the debit card payment rails.
According to Juniper Research, mobile money transaction values will exceed US$870 billion in emerging markets by 2026, as the payments-as a platform model accelerates. However, even smartphones may become irrelevant as in-vehicle payments, where payments are made via vehicle systems without using a smartphone to process the transaction, are on the rise. A study predicts that the global transaction volume of in-vehicle payments will exceed US$4.7 billion by 2026, up from just US$87 million in 2021.
The Tech Panda has observed before that growth will cascade into different industries as FinTech adaption causes tectonic shifts. FinTech innovation led adaption has been encouraging overall growth. The industry is trying to include rural India in its success story too. 2022 will usher in much more as automation spreads into FinTech.