Fintech has barely even got started if a new report from EY is to be believed. Less than 20% of banks believe they are doing enough as a business to invest in technology, according to EY’s Global Banking Outlook study. This, despite some substantial leaps forward in technological capability and significant investment.
To combat this, more than half of banks surveyed in the report expect budgets for technological investment to rise by 10% this year, and more than half of banks aspire to be digitally maturing or digital leaders by 2020. Banks appetite to invest and partner with fintech firms may in part explain why last year was a bumper year for fintech VC funding, with $1.8 billion raised by UK firms.
This new investment opens up major new growth opportunities for the already thriving financial technology market.
The impact of fintech is being felt in every part of finance, from retail banking to back-office compliance. But one of the key focuses for banks over the past few years has been using technology to try to deal with stringent compliance and regulation, which slows down, complicates and adds expense to transactions.
Solving this is one of the key promises of distributed ledger technology (DLT) which is being touted as a new way to create trust between institutions, lower compliance costs and create information sharing efficiencies. This year, we are likely to see the first examples of DLT moving from proof of concept into market operation.
Data analytics and machine learning are likely to be another hotspot of activity this year. Many banks have begun announcing project designs in all kinds of areas of the bank, from back-office automation to the use of machine learning to improve execution quality.
For example, JP Morgan is working with UK based data analytics company Mosaic Smart Data to unlock insights from its internal FICC data to improve client handling and FICC performance.
In trade finance, Previse is looking to end late payments for SME suppliers with its advanced machine learning and innovative finance model which creates opportunities for buyers, sellers and banks alike.
The last few years have seen an explosion in financial technology. However, emerging technologies begin to mature, and banks continue to strive to be more efficient and effective, it looks like the fintech surge is only just beginning.