FinTech is the term for financial technology. It describes new tech that seeks to improve and automate the delivery and use of financial services. FinTech utilizes to help business owners, companies, and consumers manage their commercial operations and processes by implementing a special software and algorithms, used on computers and smartphones.
It might seem like there isn’t much going on in the FinTech industry in the last decade. However, the adoption of artificial intelligence, digitalization, and online payment integration are only some of the impressive technologies hitting the sector.
In fact, to prove you wrong 2018 was a record year for FinTech investments as the global investment reached $111,8 billion, driven by mega-deals. It has an impact not only on the financial but on several industries, including automotive.
As you already know of the rapidly growing investments in FinTech, let’s have a look at these recent trends in the automotive industry to understand what makes it so successful.
Apple Pay, Google Pay, and Paypal are only a few examples of mobile platforms, dominating the payment space. Even though they’ve been a while for some time now, banks still haven’t managed to sell financial services through them.
Furthermore, the ones we mentioned are widely known and used, but there are now some genuinely disruptive Chinese platforms. Some of these are Ant Financial, Alipay and Wechatpay Tencent. They’re using entirely new infrastructures. They only need a bank acquirer between the customer and the merchant. It allows for highly competitive fees and speed.
For instance, Alipay allows lower volume transactions to be merchant direct. What’s more, you could use these apps if you’re unbanked or underbanked, and exactly these are the people who are a big target for this market.
In China, 577 million people are using mobile payment apps, and the users of this payment method worldwide are expected to surpass 1 billion next year. It shows we’re heading towards a virtual payment world. There are already some cities were paying with cash is considered strange. As most new cars are bought with loans, many people prefer making their monthly payments through mobile.
BaaS – Banking as a Service
Traditional banks don’t seem to get close to the speed of which FinTech startups operate. However, this doesn’t mean they shouldn’t work together. Traditional bank’s legacy systems don’t let banks to spread innovation to their entire customer base that fast. We’re not saying that FinTech startups don’t face regulations and capital requirements. Because they do, the middleware was found, and it’s called Bank-as-a-Service.
What it does is allowing API integration between FinTech and regulated banks. The first provides users with exceptional experience and the second with an actual back office. This possibility led to many FinTech startups negotiating with licensed banks for seamless integration of services that scale the business.
The retail industry has been very impacted by digital transformation. It has transformed into eCommerce, which evolved to mCommerce. Now we’re expecting another upgrade, which is the era of voice commerce or vCommerce.
Currently, 36% of Americans have a smart speaker at their homes, like Amazon Echo or Google Home. Asian and American customers tend to prefer communication with electronics via voice more than Europeans.
As modern cars are network connected and provide infotainment systems voice controls are something extremely useful in the automotive industry. Vehicles could be a high starting point for vCommerce as people could shop online anywhere, at any time, while they’re on the go.
Big data combined with artificial intelligence and machine learning, has transformed the FinTech industry. It allows companies to understand their customers and build the best marketing strategy truly.
The IoT is a huge source of data with all of its connected devices. Moreover, it allows insurance companies to have a clear vision of the risks. Tesla and some other automotive manufacturers have allowed their vehicles to record and send real-time data, like driving behavior, condition, and speed. That’s very helpful when it comes to adjusting the insurance price.
Predictive analytics for Fraud Detection
Cybercrime is expected to cause damages for $6 trillion by 2021. That’s more than the combined GDPs of several countries. What’s worse is that regulators catch almost none of that. That’s a massive issue for the banking industry.
For now, implementing predictive analytics with machine learning seems to be the best solution. This advanced technology detects network intrusions, analyze cybersecurity, secures user authorization, and predicts hacking.
Using AI keeps companies a step ahead of fraudsters. Any weaknesses that are predicted could be eliminated before they even occur.
Furthermore, connected devices seem to be more vulnerable to fraudsters. These devices include modern connected cars. With predictive maintenance, manufacturers could keep track of your vehicle, in case of emergency or theft attempt.
Cloud-based technologies are now being implemented in many industries. They’ve gained popularity among financial institutions as well. That’s because it reduces IT costs and improves scalability.
However, not everyone could take advantage of cloud computing, because high-speed internet is needed. 5G has been the missing puzzle piece for many businesses. What it provides is not only speed but low latency. In the financial sector, it means real-time user experience and no waiting time for payment processing.
As an upcoming FinTech trend, 5G will connect devices at a lower cost, lower power, and yet with more excellent reliability. It will make cloud computing show its full capacity.
ICOs (Initial Coin Offerings) used to raise lots of money a couple of years ago. Last year, this changed. Now fewer projects are doing ICO and selling tokens. That’s mainly because of the SEC crackdown. Countries are even looking to sell a security before it becomes a felony.
ICOs will continue to exist in no doubt. However, Security Token Sale will be the new buzzword. Companies like Securitize are now investing in infrastructure STOs, which will allow building and trading security tokens.
What makes the most difference is that STOs live on the blockchain and not on a centralized database. Moreover, they will allow the tokenization of traditional securities. STO provides way faster clearing and settlement.
A Cashless World
Today, most payments are performed by mobile devices. A significant number of millennials don’t even have a credit card. Mcommerce is on the rise, and countries like Japan and India are joining the cashless community.
For modern vehicles, FinTech provides many advantages for improving user experience. For instance, your car might start “paying its bills” by itself. The predictive maintenance, AI, and mobile payments will allow it to pay for its insurance or maintenance cost. All this makes the payment process easier, because your car has its own digital wallet.