ICEMD, ESIC Business School's Institute of Innovation , has presented the Innovation Series report : “Fintech. Innovation in financial services ” . The study addresses the main trends and innovations in financial services, their impact and what technological initiatives are responding to new challenges.
The term Fintech was born from the union of the English words Finance and Technology and groups together all those financial services companies that use the latest technology to offer new financial products and services.
The advancement of technology and the new business and operational models developed by Fintech companies will continue to have a significant impact on the financial system in 2021. A great challenge that the banking sector will have to face, since with the entry of Fintech companies has disrupted the business. Platforms with a comprehensive offer of products in direct competition with traditional banking have arrived in the financial system. On the one hand, the ' challenger banks' stand out , 100% digital credit institutions with a banking license and, on the other hand, the so-called neobanks, which offer traditional financial services in association with traditional banks, often through mobile applications.
There is a race for 100% digital products that allow the least human intervention and cost reduction. In this sense, more and more users are willing to opt for a new financial provider that is not a traditional banking entity, 42%, according to the Funcas Financial Digitization Observatory.
The world of Fintech has simplified the way of investing online for any investment profile. Transparency in the operations carried out and the use of the most advanced technology to ensure the privacy of customer data represent a significant change for the capital markets. They are automated and online managers that, through algorithms, provide financial advice and online portfolio management with minimal human intervention. They offer lower management and custody costs and eliminate decision-making - it's like having a 24/7 advisor.
The blockchain has broken into the financial sector as a new technology allowing the user to take control of their data and processes and have security in their financial operations. The objective is to decentralize the processes and eliminate intermediaries so that these operations have the highest possible security and privacy.
In addition, there is a growing trend of technological solutions that help their clients to comply with the regulation. Its value proposition is based on new technologies such as blockchain, cloud computing and big data, which is why its solutions differ in that they are agile, flexible and precise.
The new 100% digital banks with a banking license offer attractive banking services and products for an audience that likes to operate from their mobile, without having to go to an office to solve their procedures or doubts. Innovations are also emerging that facilitate the automation of corporate financial management. These softwares improve the customer experience and increase efficiency by automating business processes.
For María Albalá, director of the Innovation Hub of ICEMD - ESIC Innovation Institute , “ the rational use of technologies can help the development of the financial sector, as well as other sectors to offer their clients financial services that help them in their own business model. In order not to get lost in the ocean of technologies, it is important to be very clear about your focus: what you want to achieve, what value your client perceives and what skills you need in your teams to get the most out of these tools ”.
“Ultimately, new technologies are tools. We must evaluate and weigh the cost-benefit, have defined what we want to offer and where we can gain a competitive advantage to focus on the strategy, since in this type of process there is the risk of immersing in technology and seeing it as an end in itself ”, adds Albalá.
Impact of the coronavirus on new financial services
Covid-19 has had a hard impact on the fintech sector and startups . Producing, in many cases, a stop in the fundraising activity and hindering its evolution. But this same fact has made it possible for these companies, which by their nature are very quick to adapt to the market, have improved their processes, reduced costs and improved their organizational structure to be even more competitive.
Acceleration in the adoption of new ways of working and relating. Both internally and with our clients, it is not only technology, it is above all a greater degree of collaboration, empowerment and connection between people and teams.
Challenges and opportunities to take advantage of the crisis. Those companies that during these years have developed customer-oriented projects, digital transformation, listening to the customer, and the development of services beyond the product itself that generates emotional experiences, faced the pandemic with a competitive advantage and with the expectation of growth near.
Many Fintech projects about to take off have found themselves without investors and will have to postpone their exit. The period of confinement and the economic recession - hibernation of the economy and critical fall in tourism - will have a domino effect on the financial system: increase in delinquencies (due to ERTE, ERE, uncertainty ...), reduction in income, decrease in the demand for financing, narrowing of business margins ...
Adaptation of costs to demand. Within the fintech world, it can be clearly seen how the effect has been critical, thanks to new cloud technologies and pay-per-use models, many of these companies have been able to adapt their costs to demand. Other more traditional ones, on the contrary, have suffered very adverse effects.
Need to reinvent yourself. Companies have faced a new situation in which the health and safety of people was and is the critical axis of attention. Additionally, managers have had to adapt quickly to a very unfamiliar environment. In the banking sector, the uncertainty about the profitability of the business was already growing in recent years and the need to be creative and reinvent ourselves, fundamental.
Change in consumer
Increase in digitization and mobile use. In the financial area, banks have continued to further accelerate office closings, pushing digitization and the use of the mobile channel. This fact notably increases the population that accesses their finances mobile and digitally.
The consumer has changed the way they interact with companies in the sector. Most of the incidents, questions, etc. they come from the mobile digital channel and not from calls to the telephone service. This is a great change in the way users interact with companies, sending their doubts or problems at the same time they have it, and waiting for a quick response.
Large banks have experienced an increase in default among their clients. On the one hand, there has been a boom in technological needs, technological material necessary for education, work, and personnel. On the other hand, the population has reduced its consumption due to the increase in debt.
Technology has made it possible to detect and adjust to consumer changes in order to adapt to their needs. The technologies of contactless payment and reduction of the use of physical money are another of the observed effects that will continue in the next year. It is a trend that probably favors the use of the card to the detriment of cash withdrawals at ATMs.
Move towards a cashless society . Accelerated digitization, initially forced, but once adopted, irreversible, has led to an increase in online shopping , e - commerce and the use of mobile applications. This has led to a decrease in the use of cash, leading to a move towards a cashless society.
