The following is a guest post by Lisa Bigelow who writes for Bold.com.
Robo advisors. Touchless payments. Zelle. These are just a few ways that digitalization has transformed how people manage their money. Although consumers have experienced a few hiccups along the way — lame chatbots, we’re looking at you — fintech is making an enormous impact on how banks will serve their customers now and in the future.
Here are five futuristic fintech trends that reveal where banking is headed.
In five years, AI will dominate customer service
You’ve probably used your bank’s chatbot to accomplish a simple task like disputing a transaction, but have you considered asking it how much you spent at the grocery store last month? Some digital transformation experts estimate that 95% of customer service interactions will be powered by artificial intelligence by 2025.
Consumers expect AI-driven interactions to satisfy bigger customer service expectations, according to a Drift survey. Businesses that delay improvements in natural language processing or that rely on human responders will be at a disadvantage, with one IBM study showing a 99% improvement in response times when using AI. With 38% of baby boomers expecting a 24-hour response, that’s significant.
Yet chatbots are more than basic analytics delivered quickly. They can also offer suggestions on the best mortgage or investments for your finances. Even high net worth investors may be surprised to learn their financial managers rely on roboadvisors for complex algorithms that recommend investment strategies.
In China, digital payments — not cash — is king
Digital payments went mainstream in Asia long before COVID-weary consumers turned away from cash for health reasons. In China — where a mobile payments market worth $17 trillion flourishes — vendors often prefer cashless transactions, even for small purchases. And with 91% of Chinese tourists saying they would shop more overseas if mobile payments were an option, all economies — and their banking systems — will benefit by adopting fintech.
In addition, cash payments don’t always offer consumers more convenience or better pricing, especially with browser add-ons making finding deals easier. Peer-to-peer shopping platforms like eBay and Alibaba have given consumers more choices than ever before. And with players like Venmo and Zelle allowing instant cash transfers, it’s never been more convenient to shop.
Fintech is changing cross-border education
American colleges prize international students for reasons related to finances and diversity. International students value American college educations for their quality and name recognition. Before fintech, financing an international education and recording international tuition payments was time-consuming and difficult.
Fintech helps lower the barrier to entry to the U.S. education market. Take the University of Virginia, which adopted Flywire as a means of helping foreign students establish payment plans and transfer funds. And in China, Superyou and myMoney allow students to complete cross-border transactions with the touch of a mobile button.
What about those who can’t afford the sometimes $70-thousand-and-up annual price tag of American education? Enter Prodigy Finance, a U.K. lender that finances students based on their future earning potential. Think that can’t possibly work? Think again — Prodigy says its repayment rate is 99%.
Students, for their part, are eager to learn about fintech. At Georgetown, MIT, NYU and other top-tier institutions, courses related to financial innovation are filled, with fewer expressing career aspirations in once-hot areas like trading.
Tech startups are also playing a role in increasing accessibility to education with platforms like Bold.org creating and hosting exclusive scholarship opportunities for students.
India is adopting fintech quickly
You already know that China, the U.S., and the U.K. are fintech hotspots. But what about emerging markets with large, tech-savvy populations and unmet banking needs?
Enter India, widely regarded as the “next frontier” in fintech. According to a 2019 report on emerging technologies in banking, PWC ranked India second worldwide in fintech adoption, with a rate of 57.9%, driven by favorable government policies and funding from foreign venture capitalists.
If you can’t beat ‘em, join ‘em
Traditional banks are eager to jump aboard the innovation train. Collaboration is at an all-time high, with staid players such as Lloyds, American Express and PNC partnering with hot innovators like Swave, GreenSky and OnDeck, respectively.
A 2017 PWC study found that 82% of banks, insurers and wealth managers surveyed plan to invest or collaborate with fintech firms over the next three-to-five years, with 88% fearing lost revenue should they not make the move to fintech. PWC says, “Businesses need to understand how this new world affects all of their touchpoints with the customer if they are to actively reinvent their own future and not be at the mercy of external events.”
In addition to improving operational efficiency and lowering costs, traditional banks believe that fintech will ultimately improve the customer experience for less money. And that means fintech will drive your financial decisions sooner than you ever thought possible.
Lisa Bigelow writes for Bold and is an award-winning freelance content creator who helps people learn more about personal finance, real estate and information security. Bigelow has contributed to Finance Buzz, Life and Money by Citi, MagnifyMoney, Well + Good, Smarter With Gartner, Popular Science and Cadre Insights.