A look at the latest happenings from across the world as the fintech environment continues to grow.
Fintech, a combination of finance and technology, symbolises the coming together of two worlds—as well as the growth of technology’s usage in financial services. Financial services and technology are inextricably linked, bringing with them both upheaval and synergy.
Fintech start-ups are attracting the attention of financial institutions, who are either investing in them or forming strategic relationships with them. According to McKinsey Panorama, over 80% of financial institutions have formed fintech collaborations. Meanwhile, worldwide venture capital (VC) fintech investment hit $30.8 billion in 2018, up from $1.8 billion in 2011.
While technology advancements appear to be defining a brighter future for certain firms in the post-COVID age, FinTech continues to grow and change the financial services sector environment. It’s all about remaining ahead of the curve in this battle to capture a larger share of the market amid dwindling consumer and company confidence, since improved technology adoption can be the secret sauce for attracting and maintaining consumers in the digital age.
Asset management, insurance, and lending firms are just a few of the important areas of the larger financial sector that have embraced the latest digital technology with vigour. While the COVID-19 epidemic originally drove the investment banking (IB) industry to its knees, recent developments in financial technology adoption appear to be helping them get back on their feet, owing to improved and simplified M&A advising, risk management, and financial asset management solutions.
We’ve all heard of Fintech Version 1.0 and Fintech Version 2.0, but the current philosophy around financial technology investment doesn’t stop there. A variety of elements can push and pull IB thematics while channelling the way technology can slither through and provide a spin to each and every product and service in the Investment Banking market. When it comes to risk profiling, lending, fraud analysis, and payments, tech-based end-to-end models look to take things to the next level. Let’s have a look at how this is accomplished in today’s world:
Penetration of AI Technology – The ‘New Normal’: Fintech adoption in IB models is paving the way for new growth opportunities in the financial services sector, assuring cost-effective due diligence, increasing the value of M&A possibilities, expediting legal checks, and advancing asset-reporting inconsistencies in acquisition agreements. Furthermore, AI-enabled actuarial software is giving a strong push toward providing top-notch, quicker, and more accurate risk advising services.
Furthermore, the seamless use and penetration of AI and ML in algorithm trading, stock market prediction, fraud detection and prevention, client acquisition, risk profiling, and network security merits praise. Technology-enabled valuation models play an essential role in carving out future stock forecasts and assisting smart investment judgments in the face of COVID-induced market volatility.
Value-Based Offerings are Powered by Big Data Analytics- Big data models are increasingly being used by IBs to evolve and provide sophisticated solutions, such as creating customer-centric asset portfolio valuation models, trading and investment assistance, risk advising, and M&A help. Meanwhile, big data is being used to improve internal operations like automated customer service, salary optimization, attrition modelling, fraud analysis, and credit/operational risks, among others.
Furthermore, algorithm trading appears to be gaining traction among big IB companies as a means of assuring efficient financial transaction execution and sound investment selections without the need for human interaction.
Adoption of innovative prediction models, advanced statistical approaches, and guaranteeing privacy and data integration are all essential in the IB area. To guarantee that big data enhances competitiveness and supports wider market penetration, a specific set of issues must be properly addressed.
The Next-Generation Frontier: Robo Advisory Robo Advisory uses high-tech algorithms to give online investment management platforms with safe, quicker, and self-service capabilities. According to market analysts, in the post-COVID era, asset under management utilising Robo Advisory is anticipated to increase by a factor of ten.
Robo Advisory provides for automated changes and rebalancing of portfolio allocation based on algorithms and pre-defined investing criteria with little manual work. The investments are fully automated and have self-learning algorithms, and the cost of operating a robotic automation tool is far lower than performing the same tasks manually.
The Immediate Future of Cashless Transactions: In the face of the present health crisis, IBs are able to improve and supplement existing goods and services, as well as establish new business models, thanks to the greater comfort and safety connected with online cash-less transactions. While social isolation is becoming the new normal in the wake of the coronavirus, financial advisers appear to be reaping the benefits of technological advancements and more cashless transactions.
Without a question, financial behemoths who are first to adopt digital technology have an advantage over their competitors. However, the most significant problem for FinTech is data privacy, as digital transactions are particularly vulnerable to hackers. Nonetheless, in the near future, the digital transition may witness the rise of a digital-first paradigm, assuring a fundamental shift in the value proposition given to customers, with a growing emphasis on digital toolkits and electronic market access. Overall, it’s about how companies refine their transformation goals, incorporate lessons gained from the epidemic, and assess their overall strategic agenda.
” This blog offers generic information. By no means, it is professional advice. The information aforementioned is believed to be factually correct. The information provided is solely based on the author’s judgment and is subject to change. This is not endorsed by any 3rd parties or other brands.”
#FinTech #Synergy&Disruptive #InvestmentBanking #Covid-19 #M&A
Article Credits –
globalbankingandfinance.com / mckinsey.com