Stay ahead in Fintech: RegTech, AI, and DeFi
Victor Fredung, CEO, Shufti Pro
While overall fintech investment is said to be on a downward trend, it cannot be disputed that there are continuous advancements in the industry. From AI adoption to increased use of regulatory technology, there are numerous changes and trends businesses are already seeing and can expect to see more from.
With the ever-developing technology in the market, fintech companies will begin to implement the most appealing features in an attempt to enhance customer experience, reinforce business propositions, and of course, increase revenue. Having insight into the top three trends within the market will help fintech businesses carve out the most profitable adaptations to their platforms.
1. Regulatory technology is on the rise
Regulatory technology, or RegTech, is a branch off of the fintech tree that focuses on technology to track regulatory procedures. This subset is becoming increasingly popular amongst fintech businesses and institutions as it begins to revolutionise compliance processes across the board.
As more financial services continue to pivot towards digitalisation, the level of risk around regulation can begin to rise if not protected against. With digital change being seen as both a breeding ground for innovation and risk, businesses need to be vigilant towards fraud, hacking, data breaches, etc. This is where RegTech solutions come in.
Throughout the year, we’ll begin to see a great uptake in the use of RegTech across fintech companies to transform their platforms, making them more attuned to safety protocols for both themselves and their customers.
2. DeFi & Blockchain is just getting started
While the cryptocurrency market has suffered a major blow in the past year, the crash does not necessarily equate to the death of crypto. In fact, the overall global economy has simultaneously taken a hit which is largely responsible for the crypto crash.
Although the crypto market share may be down, technology continues to rise. Blockchain technology has been presenting the promise of its numerous real-world applications, and will undoubtedly gain traction as people get their heads around the logic and potential use cases.
One of the key drawbacks of blockchain and decentralised finance (DeFi) is the expensive, slow process of transactions. Since crypto is here to stay, continuous advancements such as fast and low/no fee transactions are at the top of many leaders’ agendas.
3. AI Automation
Artificial intelligence (AI) is very quickly becoming extremely popular, thanks to tools such as OpenAI’s ChatGPT, and almost every industry can benefit from these innovations. While a lot of the technology is still in its infancy, early adopters are spurring development through various tests. The two major benefits to the fintech industry are AI decision-making and conversational AI.
Whilst decision-making can make a significant difference in fintech, the process requires time, high attention to detail, and labour – all while businesses are trying to maintain their competitiveness. AI can revolutionise this by evaluating facts and determining solutions, based on the available data. This means fintech professionals will not only be able to stay on top of their competitors in the market, but also optimise their work.
Fintech companies also deal with a plethora of questions and queries from customers and usually have to go through the process of waiting to connect to an operator for help. Conversational AI can greatly improve the customer experience, by reducing the wait time, thus increasing retention rates. This technology not only reduces the need for banks to hire numerous operators but also combats the slow response times faced by customers.
Innovation, Development and Adoption
As the fintech industry is always moving and elevating, it is expected that we’ll continue to see many more trends and developments in RegTech, AI, and blockchain over the coming months. As businesses begin to experiment and implement the technology in various ways, there will be even more potential applications and ways of improving numerous daily processes. The greater the adoption rate, the faster we can learn from and develop with AI. Digital transformation has certainly been a pivotal moment for many financial institutions as they begin to invest in the innovations and technologies to transform their platforms.
By implementing and becoming more attuned to trending features, fintech companies will start to reap the benefits of a more aligned and tactical approach to regulation, blockchain, AI, and many more possibilities.
How to identify the signs that your IT department need restructuring
Eric Lefebvre, Chief Technology Officer at Sovos
For firms to execute transformations and meet their overall vision, it is crucial that their CIOs are able to recognise the signs that their department is in need of some internal change. In the current economic climate, CIOs working to fulfil their organisation’s priorities and meet business goals might hesitate to acknowledge that their IT department needs restructuring, never mind be able to identify the signs.
However, these problems rarely fix themselves and organisational restructuring requires conviction and determination from leadership for it to occur successfully. So, what are some of the key signs that CIOs should look out for?
Struggling to keep up with industry demands
CIOs unsurprisingly are working in an extremely demanding environment at the moment. Meeting these evolving demands is crucial for companies. When demands are not met and not handled properly, this can have a lasting impact on organisational goals and objectives, and even impact the way in which transformations are put into effect.
Depending on the organisation’s structure, the way in which being unable to keep up with demands manifests itself can differ. Despite double digit reductions across the industry, the search for talent across the tech world continues, project costs continue to rise as the cost of labour has increased and schedules have been disrupted by significant attrition. Many companies will also find business costs, such as that of third-party software, are higher than planned and technology debt continues to pile up faster than it can be sunset.
Whilst leadership teams might dedicate their department’s attention on the factors discussed above, they may find that their team will fall short when it comes to timely deliverables and helping maintain your organisation’s tech stack and guide its business transformations. Looking beyond the immediate problems of high costs and considering an internal reshuffle may be the solution for many IT departments.
Internal conflict within the team
Organisational designs with underlying issues can cause constant friction, especially when they go unacknowledged. An IT department that lives in conflict will certainly be reflected in results and less than successful tech transformations. CIOs will find that by adopting an organisational design which works through staffing issues, will better innovate, especially if they can all work together.
Department leads should have a strong understanding of their team’s work environment and guide them through any long-term or potential problems. When an individual is working in a demanding or complex industry, working well with your team shouldn’t be the main impediment to innovation. By acting quickly to eliminate internal conflict, CIOs can better lead and ensure their team’s focus is entirely on producing more optimal outcomes.
Delays are commonplace
When a large amount of your team’s time is spent setting objectives, budgets and timelines for the projects they are working on, it is vital that they are met. When delays are coming from the IT department, they will inevitably hinder the development of any business transformation, especially if it prompts teams to spend excessive amounts of time rearranging budgets and timelines and therefore hindering innovation.
IT departments are a crucial aspect in many different parts of a company’s transformations, so remaining on track when it comes to timelines and innovation is critical to operational plans. If delays have become commonplace in an IT team, and external factors are impacting projects, CIOs should look at restructuring an IT department to solve these issues.
The strongest team relationships do not happen by accident and are the result of good planning, strong leadership and a motivated team. CIOs can ensure this by providing vision and long-term strategy with clear goals and objectives to produce high levels of quality output.
When internal issues are noticed in an IT department, and are noticeably impacting team morale or productivity, this should indicate the need for departmental restructuring. Be that due to an inability to meet market demands, issues with productivity and meeting deadlines or internal conflict, these issues all risk a department’s functionality and an organisation’s ability to achieve its goals. In short, don’t overlook the warning signs!
The need for simpler cross-border payments must be a priority for all banks
Mushegh Tovmasyan – Founder of Zenus Bank
Despite the transformative changes we have seen in the banking sector over the last decade, there remains a considerable disparity in accessing financial services from country to country and even vital day-to-day services such as cross-border payments or funds transfers.
A strong emphasis on banking personalization has driven us towards bigger and better digital experiences. Meanwhile, continuous globalization and the requirement to engage across borders means the need for global financial inclusion where individual customers, as well as businesses, have the same sort of access to useful and affordable financial services across transactions, payments, and savings, through digital banking is more apparent than ever.
The rise of challenger and neo banks, as well as fintech providers, has transformed the capabilities of the banking sector, which can now offer a vast array of services to customers. These include new interactive service models, from cryptocurrencies, Buy Now Pay Later products and embedded financial lending services from companies across various sectors – ranging from supermarkets to global sports companies – outside of the banking industry. Meanwhile, the pandemic exacerbated the trend towards completely digital companies that operate remotely and need to be able to provide cross-border services instantly to work with other globally-orientated partners, pay staff anywhere across the world and expand global supply chains into new geographic markets.
One area that is growing rapidly is Latin America, where fintech investment has accelerated significantly. The region saw growth of nearly four times, rising from $4.1 billion in 2020 to $15.7 billion in 2021. Latin America serves as a perfect breeding ground for fintech start-ups. Primarily because banks across the region have, historically, only served affluent individuals due to a lack of competition and stringent credit requirements. A large portion of the overall population is still underbanked, ranging from 30 percent to 50 percent in major countries. Even for those with credit cards or bank accounts with local banks, the user experience is generally poor, while many banks have failed to invest in technological infrastructure and improve the digital experience.
Clearly, across the region, there is significant demand for access to a global secure bank account for a range of needs. For employees in developing economies working for companies who currently wait weeks to be paid through local banks. For small businesses looking to access and collaborate with new markets, and to provide access to a strong currency – the U.S. dollar – for those in developing countries with less stable economies, transforming the capabilities of international digital banking. This trend has only accelerated as remote working has become the new norm and companies employ staff all over the world. We at Zenus, therefore, believe offering a secure, transparent and scalable international bank will be vital for banks to provide financial inclusion to millions of people, businesses and organizations still without these essential products.
Consequently, the banking sector is now investing heavily in products that can offer secure, transparent and scalable international payment services that will be vital for providing financial inclusion to millions of people, businesses and organizations operating in developing economies. Cross-border banking, for example, and the ability to transfer money across bank accounts from different countries, provide a unique challenge that many banks are looking to address. While money has always been transferred across borders, the increase in cross-border flows of both capital and citizens in today’s world has resulted in more financial organizations looking to provide this service instantaneously.
In response, international banking licenses – the concept of globally-focused banks running on the same technology infrastructure across each country under one global license – are now being repurposed by banks to not just service High Net-worth and ultra wealthy customers but for anybody, anywhere in the world, especially in emerging countries where the need exists the most.
Banking accounts can be opened remotely and accessed from anywhere, providing customers with a global footprint, constant access to their funds and providing access to a global account for those in developing countries with less stable economies.
At Zenus, we believe this growing trend will be one of the defining changes across the global banking sector – helping to address the recurring problem of transferring money overseas from a complex, expensive and time-consuming process to an instant routine task – and is the main area we are investing and working with strategic partners to help scale these services for customers across the globe. By also offering our banking infrastructure via API’s and White Label services, we enable prominent Brands and fintech providers to expand their global reach and explore new revenue verticals. UK fintechs, for example, could service US clients or Latin American clients helping cross-border banking to become accessible everywhere.
These changes will also help complement the rise of embedded finance services such as Banking as a Service (BaaS), providing financial services to any company, no matter the sector, that is looking to adopt and implement these products on a global scale. The concept also has the potential to transform and democratize in developing nations, where it can take a few weeks for people to be paid through local banking channels.
That is our mission at Zenus – to make it easier and safe for clients to access, send, receive and store money in the U.S. from anywhere globally. Our international license gives customers constant access to their funds without requiring U.S. residency or citizenship.
The demand for simple and seamless cross-border payments could help transform the global banking system. Not only by providing new standards for the global banking sector but by ensuring customers can have access to an international bank instantly and no matter where they are based.
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