COVID-19 Accelerates the FinTech Revolution
Fintech has long been on the rise, but could the novel coronavirus pandemic finally be the accelerant that makes financial technology the norm for everyone?
Financial technology – FinTech – has become increasingly important to both consumers and businesses over the past six months.
The onset of the coronavirus pandemic, and the lockdown measures that were subsequently introduced, forced offices and bank branches to close. In doing so, it has meant that both financial services companies and their customers had to instead rely upon digital solutions.
A recent survey of more than 2,000 UK adults underlined this point. It found that 66% of people were regularly using financial technology between March and July 2020 – this is an increase of over 50% compared to 2019’s usage figures.
It stands to reason that tech will play a greater role when the physical world has been cut off from us. However, there are likely to be larger and more long-lasting consequences of this trend.
Coronavirus spurred digital transformation in finance
COVID-19 will greatly accelerate the so-called “fintech revolution”. In many cases, what we have experienced in 2020 will prompt financial services firms to implement more sophisticated technologies and, importantly, migrate from legacy IT systems to cloud-based platforms. At the same time, the pandemic has evidently encouraged many more consumers and businesses to use digital solutions in place of traditional offline processes; a trend that will not be reversed even if the virus is brought under control.
After all, anyone who has become used to managing their financial affairs or securing new financial products from the comfort of their own home during the lockdown is unlikely to be in a rush to queue up in a bank branch or wait on hold on the phone to achieve the same outcome. As we are so often told, there is a “new normal”.
Some finance companies are already well placed to serve customers in this “new normal”, owing largely to the fact they had already developed or adopted progressive technologies. Others, meanwhile, are racing to adapt.
How financial services can embrace new tech
Financial service providers must, if they have not already, recognise the importance of cloud native technologies.
For banks, moving their IT infrastructure from local servers to the cloud allows for a multitude of processes – be it onboarding, credit checks, opening new accounts or communication between bank and customer – to become much simpler. What’s more, financial technology built on the cloud is naturally more scalable, meaning it can handle periods of high demand with no downtime.
Migrating to the cloud also ensures professionals have easy access to the critical data and systems necessary for their tasks. Alternatively, forcing such groups to interact with on-premises servers and legacy technologies not only risks COVID-19 contagion, but reflects a lack of innovation within a company’s operations.
Once this first step is complete, it becomes easier to incorporate other aspects of fintech onto a cloud platform.
Why interoperability is crucial
To date, many finance companies have taken a somewhat piecemeal approach to financial technology.
This is common due to the fact that fintech startups are predominantly focused on solving a single issue; they have developed their products to provide specific solutions to specific problems. However, having the greatest identity verification software or product recommendation algorithms will not mean much if the consumer is then unable to, say, take out a new loan without a time-consuming back-and-forth with a member of staff.
Interoperable fintech built on a cloud platform is vital in delivering a great experience to the end user; this is why the most successful financial service providers put interoperability between technologies at the heart of their digital transformation. For example, there already exist some credit marketplaces in the UK that have entirely digitised their pre-approved loan services, meaning a loan can be secured within just a few clicks.
Positively, some quarters of the finance industry are already realising that the sector needs to develop entire systems rather than standalone technologies if it is to properly bring about a “fintech revolution”. The survey mentioned above showed that, during the lockdown, 21% of UK adults secured new financial products without speaking to a single human being (be it a credit card, overdraft, loan or something else).
The cloud remains a necessity here, as it allows a company to interact with all of its technologies from one single location – which can be accessed anywhere.
Why finance must move with the times to survive
COVID-19 has illustrated the absolute necessity of forming the right partnerships to create technologies that seamlessly connect different banking accounts, products, and services.
To tha end, the lockdown only accelerated a trend that was already gathering momentum, with customers expecting more and more from digital banking. As such, the quality of a finance company’s digital offerings has become – and will remain – a major differentiator between competitors.
In fact, when asked if the quality of a bank’s financial technology is an important factor when deciding whether or not to go with them, almost half (47%) of rtespondents said yes. Expect this number to climb higher in the months ahead.
Finance companies must recognise this and learn lessons from the pandemic so far. Progressive choices are required, and the advantage will lie with those businesses who make the best ones.