Less than three decades ago, it would have been difficult for us to believe a robot vacuum cleaner being a functional household device. But thanks to technology, it is now something you can conveniently buy off Amazon. Undoubtedly, technology has altered the ways we do things now. Our lives are exceptionally different than what our ancestors may have imagined years back.
Technology has modernized every industry today, be it medicine, space science, home management, etc. Due to the cut-throat competition to progress more and more, technological advancements have been rapid. One such industry that has experienced accelerated growth due to technology is the finance sector. The traditional financing processes are now highly automated and digitized. Making financial transactions is now simply a few clicks away as the banking sector gradually becomes incredibly digital. There are numerous ways technology has impacted the finance industry. Here we discuss some of the ways technology is accelerating the growth of the finance sector:
- The Emergence of FinTech:
The word ‘FinTech’ may confuse you a bit, but it is not that complex. It stands for Financial Technology and is an umbrella term for every business structure that combines finance with technology intending to ease the complex financial processes. Now, that was the understandable part; let us look into it in detail.
The finance sector is multifaceted, with businesses having lengthy processes with the objective of managing their finances. Before technology, business accountants maintained manual journals to record all entries. It was cumbersome and time-consuming; however, they did not have many options. But with the advent of computer software and systems, number crunching is only a matter of seconds. If you seek to develop with technological advancements, hiring a few experts with a suitable degree, such as an MSIST, can do the job for you. They possess exceptional IT skills and can build technological structures to streamline your financial processes. And this is also what FinTech companies are all about, providing optimal and fast financial services. They aim at providing businesses with technological solutions that simplify their financial activities.
Likewise, in the banking industry, financial technology has undoubtedly transformed all processes. Several FinTech start-ups have helped interlink payment platforms globally, which has minimized transaction costs and other hidden charges. Moreover, FinTech solutions also provide top-notch security systems that allow consumers to conduct their online banking transactions without fear. As a result, businesses and traders have found ways to make it easier and less time-consuming to perform their basic financial transactions.
But it simply does not stop here. The concept of FinTech has given birth to some innovative financial instruments that are taking the world by storm, such as cryptocurrency. Let us have a look at what it is and how it works.
- Cryptocurrency and Digital Cash:
One of the most ground-breaking innovations of FinTech is “cryptocurrency,” or digital currency. Now you might wonder, how does a virtual currency exist without government interference? Cryptocurrency is distributed over a vast online network. This decentralized structure makes it safe from government intervention.
Individuals using cryptocurrency store it in a digital wallet. The system uses a public ledger to record all the transactions, and they remain visible in an online database. It is highly secured by cryptography, which makes it almost impossible to double-spend or forge. Cryptography involves the use of numerous encryption algorithms that protect the transactions taking place.
Blockchain is a relatively complex technology to hack, which makes blockchain-based cryptos fairly un-hackable. There are various cryptocurrencies trading in the market today. However, Bitcoin is the first cryptocurrency introduced in 2009. According to Deloitte, more than two thousand businesses accept digital currency, making it a finance norm. Till today, it is also the most popular and most valuable crypto in the market.
- Blockchain Technology:
Over the years, the need to speed up processes while managing massive amounts of information has snowballed. As a result, databases that stored hoard of information over servers came into existence. When we talk about Blockchain, it is not different from a traditional database. Blockchain is a type of database that stores a plethora of information. However, the differentiating factor between a Blockchain and a conventional database is how data is stored.
Blockchain technology functions by gathering information and putting it together in the form of groups. These groups are known as blocks. These blocks have a specific capacity for storing data. Thus, when a block is full, it is chained to a previously filled block. This process continues, and all the information blocks form a chain, which implies Blockchain’s name.
This technology currently underlies the crypto structure. However, FinTech experts believe that it could evolve the financial industry massively if Blockchain expands into a bigger market. Blockchain has the potential to minimize fraud and cybercrime with its immensely secure structure. Moreover, it can also reduce the time and costs made while processing international transactions.
One example of this is the Ripple platform. A blockchain-based application, which allows users to make real-time international payments to 27 countries. Blockchain technology, if widely introduced with its promising features, can transform the finance sector completely.
- Robotic Process Automation:
In the finance sector, low complexity and high-volume transaction are the norms; thus, processes yield better outcomes when automated. Putting human resources in repetitive, manual processes is a waste of time and effort. And this is why robotic process automation has made its space in the financial industry. RPA also massively reduces the risk of human error. It can help cut down costs by reducing the time taken to process high-volume transactions. However, solely relying on RPA is not a viable solution. Experts believe RPA, along with human judgment, can bring about great productivity in financial processes. Gradually, many financial organizations have begun reaping the benefits of RPA, all the while suggesting areas to improve.
The advent of FinTech and the emerging technological innovations in the finance sector have opened various avenues of growth in the financial industry. The concept of digital currency has transformed the traditional mode of payment. Moreover, robotics in automating financial processes promises a convenient and straightforward business structure. We have discussed a few cutting-edge technologies impacting the financial sector today. However, these are by far not the only few. The technological front is consistently advancing, providing more innovative and efficient solutions.