Dear Investors,
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The financial market is constantly shifting, even more so in the last couple of decades. The rise of new technologies and tech giants had both positive and negative influences on the financial ecosystem.
And the strains of 2020 further accelerated the use and need for innovative technologies. That’s why the lines between data, tech, and finances will further blur in the next couple of years.
Hence, it’s essential to examine the key influences and significant-tech players before any major investments in 2021.
Tech Influences
These pioneering technologies will drive the financial market in 2021 and beyond:
1) FinTech
According to Investopedia, fintech is“…new tech that seeks to improve and automate the delivery and use of financial services.” Hence, it’s the perfect blend of finance and technology for small business owners, companies, and international corporations.
Any software that manages financial operations and processes falls under the fintech category.
Everything from mobile payment to online insurance is considered as fintech. And the startup scene is dominating this field, and it will continue to do so in 2021.
However, some of the most conspicuous characteristics of fintech companies are their speed, novelty, and efficiency, which tends to disrupt the financial market.
According to the PWC Global Fintech Report for 2019, financial institutions might lose a quarter of the business or more within 5 years because of fintech. And companies like ChimeTala, Avant, Braintree, and Morningstar are leading the change.
Global investments in fintech have reached $12 billion, which tells us to expect more interferences from fintech companies in 2021.
2) Blockchain
Blockchain is one of the most beneficial and disrupting technologies of the 21st century. Even though the tech was popularized because of the invention of the bitcoin, its potential is extraordinary.
For example, blockchain technology can be used to improve:
Direct messages
Voting
Internet architecture
Advertising
Education
Legal management
Networking
Cloud storage & computing
Stock trading
Real estate
IP
Forecasting
Machine learning
Healthcare etc.
However, the first industry that saw significant changes and will likely see even more is banking. Banks transfer, hold and manage value, and with blockchain, the same functions can be performed by the individual more securely. Thus, the banks become obsolete in this regard, for transferring and holding individual assets.
Blockchain technology could cut up to $20B in middleman costs for the banking industry alone.
However, the financial institutions are recognizing the value and are, in fact, investing in blockchain and fintech startups. Barclays invested in Crowdz, a B2B startup, and the Swiss bank UBS is developing its own blockchain technology.
3) Individualized Data & Customer Intelligence
It’s impossible to talk about the financial market’s impact without considering individualized data and customer intelligence.
Everything comes down to the customer’s worth. And even though the last couple of years brought software that took the industry light years ahead, the room for innovation and improvement is massive.
Focus groups, surveys, and sample size analysis are not doing the trick anymore. That’s because today’s data can provide companies with detailed insights about every step of the customer’s journey. And scattered data points, if analyzed through the proper software, can generate complete customer profiles.
It’s somewhat easy in 2020 to understand what customers want and need. And it will be even easier in 2021.
4) It’s a Digital World
We’re not talking about e-commerce or digital marketing anymore. Today, it’s just commerce and marketing because everything is digital. In fact, the digital payments segment is projected to reach $4,934,741 in 2020, and it’s showing an annual growth rate of 13.4 percent.
And almost every financial sector is moving in the same direction. This includes online payments, online insurance, retail banking, commercial banking, capital markets, and wealth management. Furthermore, 2020 and its challenges only accelerated the transition to digital platforms.
According to Deloitte, by 2025, self-service in finance will become the new norm, and automation will take over most financial processes. Of course, all of the above will require reliable, secure, and seamlessly integrated digital platforms.
5) AI
Reducing costs and mitigating risks have always been on top of the list for financial institutions, and the development of new tech can help with these minefields. Hence, chief economic organizations are entering into partnerships with big tech companies (and startups) to minimize risks and improve forecasting.
And the most efficient way to achieve these goals is with the help of AI.
Everything from natural language processing to pattern identification falls under the AI category. Including machine learning, sensors, mobility, navigation, and more.
Thus, it’s reasonable for the finance industry to invest in AI and utilize this new technology to improve customer experience or avoid risks.
The only sound conclusion from the information above is that the massive leaps in revolutionary technology dictate the world’s trends. And the financial market is not an exception.
Hence, investing in tech giants is not only sensible but necessary.
The impact of technological advancements on the financial ecosystem can be both creative and destructive, depending on the available framework and the market’s flexibility. And these changes usually breed a highly competitive environment.
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Stay Hungry, Stay Foolish:
Matt Allen