"Fintech is eating the world," says Alex Lazarow, senior consultant at Forbes. In the last decade, Fintech has revolutionised the global financial ecosystem. Not only has it captured a major share of the finance industry’s transactions, but it has also made everyone a financial service provider. Be it eCommerce businesses such as Amazon or internet service providers like Google, everyone is entering the financial landscape by developing Fintech payment platforms.
With the ever-rising competition and the ever-evolving technology, it is hard to survive in the industry, especially for Fintech startups, particularly the Indian brigade. International giants like Google and Amazon have the advantage of their deep pockets, huge customer bases, and proven strategies.
The key to surviving in this cut-throat world is to constantly innovate and adapt. Technologies such as Artificial Intelligence, Machine Learning, and data analytics capabilities seem to be essential in the race for a fintech company to cement its place in the Fintech industry.
Here, we are going to discuss just that by looking at what Fintech companies must do to stand apart from their competition.
Challenges Faced by Fintech Companies
In his study, Data Science and AI in FinTech: An overview, Data Scientist Longbing Cao has studied various challenges faced by the Fintech industry. Besides inconsistent government backing and rigorous regulatory norms, the Fintech industry faces security breaches, cyber threats, data challenges, ever-changing technologies, monopoly of big players, financial innovations, workflow management, etc. With all these challenges, it appears most difficult for Fintech startups to survive in this competitive market.
However, technologies like AI and ML have made it easier to tackle these challenges. Here, we are discussing some of these technologies:
- Machine Learning: Machine Learning is gaining popularity in almost every aspect of our life. Be it healthcare or e-commerce, these algorithms have become an integral part of the system to enhance performance and provide customers with a more satisfying experience. In Fintech, these algorithms are playing a crucial role, especially on the lending side by consolidating the financial history of a user, by analyzing their spending behaviours, verifying their credibility, etc. One enormous advantage of employing these algorithms is that they are not only fully automated but are also quicker and more efficient, making the process smooth.
- Artificial Intelligence: Artificial intelligence is the next big thing and therefore, most industries are working on developing ways in which they can utilize this smart and evolving technology to their benefit. When it comes to Fintech, AI has multiple applications, be it providing virtual customer assistance, automating the process of lending, detection of frauds, management of various customer queries, market analysis, and prediction, customer verification, or a more effective decision-making process. Therefore, it is natural that AI and ML happen to be the most popular technologies among Fintech companies.
- Blockchain Technology: More and more lending platforms are considering employing this technology to provide a secure experience for the borrowers. It has made the process of lending decentralized and transparent, which minimizes the chances of fraud and creates a safer lending atmosphere for all the stakeholders. Thanks to blockchain, peer-to-peer lending platforms are becoming popular quickly.
- Big Data Analytics:With the digital economy occupying huge mindshare, data has become the new god. The one who owns data controls the market. In the Fintech sector, data analytics improve risk assessments by combining data from different platforms. They, thus, bring a lot of financial certainty to the operating process by managing the cash flow and helping to offer more competitive rates to customers. They also make it easier to strategize by presenting a more realistic picture of the market.
- Embedded Financial Services: Embedded finance refers to the phenomena of integration of financial service on a non-financial service provider’s platform. In recent times, embedded Fintech has become the game-changer as it saves the customers from a lot of hassle, making purchases easier. It is one of the best methods to increase the customer base and gain popularity for an array of service providers in competitive segments like telecom, retail, etc.
- Understanding Social Media: Today, Social Media has become an integral part of businesses. It is the fastest and the most effective way to reach out to customers. It not only helps in bringing new customers to your Fintech platform but also helps in maintaining that customer base through engaging with them, creating an interactive platform where customers can share their experiences, raise queries, offer feedback and customer-friendly suggestions. And it is no secret that a happy customer is the best advertisement. Social media has also become a secondary customer support channel. Being able to track customer behaviour on those channels, analyzing their needs and sentiment, and responding quickly can become powerful differentiators.
With corporations like Amazon and Google entering the field, it becomes important for Fintech companies to stay updated with the latest technologies and use them to their benefit. Only then they will be able to overcome the various challenges surrounding the industry.
Whereas Artificial Intelligence and Machine Learning have become crucial for Fintech, their wider success may come down to the ease with which they bring in tools like data analytics, blockchain algorithms, peer-to-peer platforms, etc. They can use these new technology-driven approaches to plan business strategies, such as embedding their services on other platforms. It’s a cut-throat world, and the firms equipped with the right tools stand a greater chance of ensuring success.