Digital is starting to dramatically change the financial world

The 21st century’s digital revolution has since quite some time been discovered  by both Startups, and existing companies as a means of boosting top and bottom line. But no revolution stands still

 An area with significant expansion and no signs of slowing down is Financial technology (FT), which is transforming banking as we know it  and bringing it firmly into the digital arena. The network of players powering the growth of FT has grown massively in 2015 and the growth of investment shows the health of this ecosystem. Acc to one of the leading international chartered accountant firms KPMG global FT investment topped 2015 $20bn up from 2014 $12bn.

 FT firms disrupted already worldwide the small business credit marketplace by developing tech that streamlined the lending process and sped up the loan-making process.  Traditional lenders, such as banks and other financial institutions took a cautious route towards digitization. Thus worldwide non-bank lenders came in and stole part of their market, via cutting processing times and offering low interest rates

 There are basically three sectors which are drivers of this development.

 BIG DATA

 Big data helps to promote efficiency, productivity and new product developing. . New businesses esp those dealing with large numbers of customers and large amounts of buying and behavioral data enjoyed the recent FT boom. With this ‘Big Data’ has again proven its great value for businesses.

 While Big data is a useful tool to help manage a business and promote revenue growth, but it isn’t a magic cure. It needs going on Innovation, good management and proactive approach to business. Considering objectives and legal requirements is vital in helping a business navigate big data.

THE CLOUD

 The arrival of “Cloud’ plays also an important role in the development of FT   Cloud is ultimately about renting rather than owning IT services and accessing those services through an internet connection rather than needing servers on your premises, Cloud started as a cost-saving tool, but companies increasingly use it to interact with mobile workforce across a range of devices. It is also seen as a good way to get the best of technologies with state-of-the-art security and efficiency.

Like Big Data the cloud can’t  solve every problem. But the ability to scale up and down when needed, is a very very very important feature to companies facing increasingly uncertain futures and who want to de-risk via reducing capital investment.

Clouds  flexible functionality lends itself also perfectly to businesses venturing into IoT “the internet of things” the sensor -filled network of physical devices, vehicles, buildings, which is expected to also help the smooth introduction of autonomous (driverless) cars in the foreseeable future.

CROWDFUNDING

Another area of FT which has extremely fast developed esp in the startup area is crowd funding, which offers a significantly easier way to access capital than the way via big investors. Simply put, crowd funding is a method of sourcing investment on a digital platform through small amounts of money from a large number of risk loving people.

 Crowd funding can also be used as a market research tool. With the number of investors high, it shows the attractiveness (or unattractiveness) of a business concept. Still crowd funding helps predominantly to access capital.

 Like Big Data the cloud can’t  solve every problem. But the ability to scale up and down when needed, is a very important feature to companies facing uncertain futures and who want to reduce their capital investment.

Clouds  flexible functionality lends itself also perfectly to businesses venturing into IoT “the internet of things” the sensor -filled network of physical devices, vehicles, buildings which will help the smooth introduction of autonomous (driverless) cars in the foreseeable future. 

 PAYMENT INNOVATION

Startups are finding new ways to manage finance. For example in the field of international money remittances, startups are taking on the banks as banks are perceived to be expensive and slow,

 Thought-leading FT companies help expose areas where banks or traditional providers under perform. They expose the areas where banks' are insufficiently innovative, using this as a powerful tool to change and put the consumer first.

This is no longer just a case of faster payment methods, but an entire rethinking of transfers of “value” and how these are undertaken. This presents both a challenge and an opportunity for banks.

While the financial services industry has already one of the highest ratios of IT spend to revenue, three quarters of this are used for maintenance rather than for new services. Banks will need to redress this imbalance.

 What to expect for 2016?

 Innovation in 2016 is going to be turbo-charged by traditional financial services opening up their platforms to 3rd parties. Forward-thinking banks will seek an opportunity to go further and allow innovators access to build better services. Acc experts 2016 should  see innovation in financial services of a quality and at a pace never seen before.

 While payments and lending are still key segments for innovation in financial services the extension of digital disruption has already entered new categories like insurance and mortgages. The impact of price comparison websites on the insurance sector is just the beginning.  But crowd insuring is reaching a significant volume. Not only does this reduce costs, but the psychology of crowds encourages people to think very carefully before claiming, minimizing claims and fraud.

 Mortgages are a challenging market to disrupt, given the amount of capital involved, regulation and the long periods of loans. However innovation is taking place on the edges of the market. Digital has proved itself as very effective in developing new categories for investors and the latest is now taking place with mortgages, where investors take a stake in the buy-to-let mortgage market. (sharing economy another sharply growing sector)

We all know innovation is not only about product/services and processes, but also about new application for existing products/services. Recognizing this  we will have to adjust to lots of innovations in the financial sector in the years to come. Let's  stay flexible, keeps us young.