We are witnessing a new technology/ application/ process taking shape every few months. Sometimes, one wonders if the methods used today, will continue in the 6 months to come. Banking sector and Financial Organizations give short notices to individuals to implement new rules and regulations. Being in the loop of major developments is important, as it could be the difference between the success and failure of a BFSI firm.
Banking in 2030 is going to be very different from what is it today. Many companies including Facebook and Google have launched payment applications. A technology company will soon be a part of retail, finance, telecom, and many more.
Let’s have a look on how some of these trends may play out in the coming years
1. Tech companies drive deeper into Banking
Multi National Corporations (MNCs) launched new age products/ services to disrupt the financial sector. This was just a tip of the iceberg.
Apple launched the Apple Card with Goldman Sachs. Facebook announced Facebook Pay, a payment mechanism that works with Messenger, Instagram, WhatsApp and Facebook, in November.
Big Tech companies have started lending to small business’, as a lot of banks are not lending to them, or are lending with too many conditions. Amazon lent an estimated $1.5 Billion to sellers in 2017 and $1 Billion in 2018. Every quarter PayPal makes more than $1 Billion by extending working capital loans with 70% of them in areas where banks have shut down their branches. Square Capital has made $5.5 Billion by offering loans in the past five years.
Facebook has planned to launch a cryptocurrency payment network in the next year with its digital asset, Libra.
2. Banks and Fintechs prioritize providing customer insights
Banks and Fintechs are very close to providing the perfect solutions to customers and at the right time. Back in 2019, the Hunnington Bank launched ‘Heads up’, a software that gives customer advice on achieving financial goals.
Upcoming bill due dates and spending activity will be notified by an alert on the app. Subscription payment alerts may notify a customer about the charges or when a free trial has ended. Customers are also notified in case they have been double charged for something by someone. The insights are provided by a software, which uses predictive analysis to analyze data transactions and spending habits to provide valuable insights to the customers.
3. Banks find additional ways to partner with Fintechs
HSBC Bank had launched a digital lending platform last year which was built with Fintech. These partnerships are expected to grow as the banks look to capture the digital lending space.
A large number of online lenders have started licensing their softwares to banks. In order to provide better and efficient services to customers fintech leaders are to tie up with banks across the globe.
Amount is licensing loan origination technology to various banks including Banco Popular, TD Bank and Regions Bank. On the other hand Blend is working with BMO Harris bank and others to offer in auto loans and provide an insightful customer experience.
Fintechs are quicker to understand the consumer lending niche and improve customer experience with fast funding of the loans.
4. Data – the biggest flash point!
There have been mild conflicts between Fintechs and banks over customer data as both of them need data to perform important tasks. A number of partnerships and recent industry initiatives with the motive of stabilizing data sharing practices advised that the solutions were near. However this year could see a conflict between Banks and Fintech over Data sharing.
A recent conflict between PNC Bank, PayPal and the data aggregator Plaid created tensions as some customers lost access to Venmo, a third party payment application.
The banks have now installed a data aggregator that will improve data security. Banks claim the customers have no idea what they are agreeing to when the give permissions to certain apps, hence these aggregators helps them collate data and secure all consumers jointly.
These are a few trends which are shaping the way for the Trillion Dollar Banking and Finance industry.
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