Financial Technology: Your Questions Answered

Finance Leadership

Financial technology is continually evolving. For some, it’s challenging to grasp the total capabilities that are possible. For others, the benefits are strikingly apparent. For CFOs, financial technology is an absolute game-changer as it is changing the role of the CFO and their finance team. 69% of leaders agree with this statement and recognise that traditional finance tasks will be automated, such that leaders’ roles will require more decision-making and strategy. 

What is Financial Technology? 

As you likely already know, fintech is the combination of the words “finance” and “technology.” It refers to the computer and software tools that are enabling the banking and financial services industry. Such devices include products like mobile payments, digital transfers, crowdsourced loans, automated accounting and robotic money management. 

Although fintech is in its early stages, its impacts can be felt by both businesses and consumers alike. 

Bitcoin and other types of fintech

Types of Fintech

There are many forms of financial technology that are reshaping how businesses and people work. Let’s take a look at some of the significant kinds of disruptors. 

  • Cryptocurrency: Gone are the days when money has to be tangible. Cryptocurrencies are digital and decentralised currencies that rely on encryption. Transactions are validated. One of the most popular cryptocurrencies is bitcoin. 
  • Blockchain: Helping to power cryptocurrency is blockchain. Blockchain is a distributed ledger technology that secures data in blocks. For a transaction to occur, every network must validate the additional block that verifies a transaction. The fact that the ledger is distributed helps to reduce risk. 
  • Regtech: Working in finance comes with an immense amount of regulatory risk. To assist with compliance risk, many startups and big firms are creating reg tech or regulatory tech. For example, regtech processes like Know Your Customer (KYC) use multi-step methods and automation to verify customers and reduce fraud. 
  • Insurtech: Insurance is also going digital. There are many new forms of insurance, like the company Lemonade, which uses artificial intelligence to design customised insurance plans tailored to customers’ exact needs.
  • Robo-Advisor: Some companies have adopted automated tools for investment advice that use algorithms and artificial intelligence. This reduces the fee that is inherent with traditional human advisors and opens investments to a broader (and also younger) customer group. 
  • Smart Contracts: To save the hassle of verification, buyers and sellers can take advantage of smart contracts, or computer programs that execute contracts. This saves both time and money. The use of such programs and blockchain-based programs is helping to reduce risk within the business. 

There’s something that all of these technologies have in common, namely data and automation. Data automation is the process of information automatically updated based on existing and additional inputs. The use of big data propels these tools. The application of automation makes it easy to manage and be efficient. 

What We Can Learn from Financial Technology Disruptors

Regardless of the specific business and process you manage, there is fintech that can directly help you or fintech that can inspire change within your organisation. 

Broadly speaking, fintech is following these trends that are contributing to a more efficient marketplace: 

  • Highly Personalised Products: Everyone’s financial history, situation and goals are very different. As such, fintech disruptors are using personalisation and tailored products to meet consumer needs. Incumbents in finance have generally focused on the edges, the highly tech-savvy or the price-conscious consumer. Because technology is widely accessible and can be made to be user-friendly to meet the customer where they are, these fintech products are broadening the market and better serving people from all walks of life. 
  • Use of Automation: Automation is making lives easier on the business side and the consumer side. On the business side, there has been a noticeable reduction in the need for manual processes. Therefore, human resources have more time to focus on analytical tasks rather than repetitive ones with robotic process automation (RPA). Automation solutions such as SolveXia also improve compliance with improved data accuracy, full analytics, bank-grade data security and audit trails. Perhaps the best part is many of the automation solutions integrate with existing data legacy software reducing the risk and cost to adopt and try it out.
  • Powered by Data: Customer data is not something new. However, how information is being stored, used and transferred is something that is changing the way businesses work. With real-time data, platforms that can sift through big data and export analytics, and the use of predictive and prescriptive analytics, to name a few, data is reshaping business decisions for the better. 
  • Platform-Based: Lenders have ripped a page from Airbnb and Uber’s business model. Rather than having capital, these companies serve a marketplace of buyers and sellers and act as the connection between the two. As such, lenders like Lending Club have followed suit by connecting borrowers and lenders. This has removed the need for capital and reduces risk on behalf of business owners. Just take a look at all the individuals and companies that use a crowdsourcing model of funding rather than taking a loan from a bank. 
  • Collaborative Team-Players: Not all technology startups are here to shut out the big players. Instead, many big firms are leveraging the toolstack of such innovative companies to serve their existing customers better. Also, these collaborations allow for companies to attract new customers.

What Can Financial Technology Do For Me?

Taking a look at the big picture, CFOs used to focus on the past. It was a role that often required overseeing books and ensuring accounting procedures were processed correctly, so reporting was accurate. However, big data and fintech are changing the function to be forward-looking and more about securing a successful financial future. 

Not only can financial and analytical platforms, like SolveXia, help to process data for insights, but these tools offer so much more, including: 

1. Increased Efficiency: Automation saves time. That’s a fact.  For example, it’s expected that finance teams spend 60-80% of their time pulling together data to create reports. However, automation can do that for you. Plus, platforms like SolveXia allow you to set it up so that stories go to exactly who needs to see them, without having you lift a finger. As such, automation has shown to streamline core processes and increase productivity by 80%. Thus, your team can spend their time doing what they were hired to do - analyse data and help make informed decisions. 

2. Increased Accessibility: With data being stored in the cloud and securely accessible, people can work from anywhere. As a CFO, you need information on the run. If you’re travelling around the world and running to and from meetings, real-time data and reports can always be available at your fingertips. This means you can reduce stress and stay digitally connected to all areas of risk and reward. 

3. Make Informed Decisions: Numbers don’t lie. Data automation removes human error, enabling market-leading data accuracy allowing CFOs and finance staff to make the best business decisions with insightful and reliable data. Of course, in business, there’s always uncertainty. But, analytical tools and statistical processes like prescriptive analytics can help to predict the future accurately. Therefore, you can reduce the risk of your decisions today as you’re able to estimate better what will happen tomorrow based on accurate historical and live data. 

4. Increase Standardisation: Your core practices have to comply with regulations. No matter how frequent you turnover your staff, having technology platforms will help you standardise processes. For example, SolveXia uses analysis that is saved in steps within the system. Therefore, if anyone from your team is out for a day, or leaves the company indefinitely anyone can step in and continue processes properly without data or compliance risk.

5. Decrease Reliance on IT: Fintech systems are designed to be used by anyone. You don’t have to be a tech-savvy coder to harness the power of fintech tools. A lot of the tech stack is being built with a web-first strategy to prevent the need of IT teams for deployment or the need for an overhaul of existing systems.

6. Minimise Risk: With more accurate data, standardised steps, audit trails and more, tools are designed to help you reduce your business risk and compliance risk. 

Financial Technology Challenges

Everything beneficial also comes with its fair share of challenges. The biggest concerns with technology and data are naturally security. Data security breaches and the legal obligation to protect sensitive information is most businesses biggest concern. 

As such, fintech disruptors spend a great deal of time and energy to build products that are protected. Furthermore, with such tools, security updates are consistently being made. Therefore, it’s of utmost importance to stay up-to-date with new versions of software and to always check with your provider how secure they are. A good test is the types and size of the institutions they manage. If like SolveXia, they work with many banks which require the highest data security, then you can feel safe.

How to Implement Automation and Fintech in Your Organisation 

No matter the age of your organisation, any introduction of something new is likely to be met with some pushback. A lot of people are afraid of change. But, if your team understand why something is being done, it could help get them on board. 

Here are some tips and tricks to implement automation and fintech in your organisation smoothly: 

  • Augmentation not Replacement: It’s incredibly important that your team knows that technology is not here to replace them. It’s easy to think that automation and robots are taking over jobs, but with fintech, it’s equally important to have highly trained individuals involved to be the decision-makers. These tools are designed to augment human abilities and manage manual and repetitive tasks so that humans can spend time on analytics and communication and free’s up staff time to do more high-value tasks.
  • Change Management: Design business process improvement and use change management to get everyone on board. This could take some time, but it involves getting everyone involved, asking questions, taking small steps, designing a roll-out plan, and testing and refining the results.

The Bottom Line 

Ultimately, technology is aiding the financial industry to function more efficiently, accurately and fairly. By helping both businesses and customers, financial technology is rapidly changing the role of CFOs and teams. 

Since technology innovated exponentially, it’s of utmost importance to adopt technology as soon as possible so you can stay ahead of the competition. Make sure you don’t get left behind.