The world of fintech is changing constantly and rapidly. The ubiquity of smartphones has allowed startups to revolutionize finance with real-time payments and peer-to-peer lending, while AI-powered algorithms are changing the face of investing. and portfolio management. Successful fintech companies are democratizing access to finance by bringing the unbanked into the financial system and enabling cheaper, real-time access to credit. with traditional banks.

As new generations of fintech emerge, venture capitalists (VCs) are taking notice and investing billions of dollars in these startups. In 2021, venture capitalists invested more than $130 billion in fintech startups globally, an industry record, representing 20% ​​of all venture capital that year. While many companies will eventually fail, the massive success of companies like Stripe, Klarna, and Plaid can provide venture capitalists with a significant return on investment.

Fintech investment always leads

According to a report by CB Insights, the typical 2021 of fintech is a 169% increase in funding compared to the previous year. So it’s no surprise that funding in 2022 hasn’t kept pace, and certainly the global economic environment hasn’t helped. Data from ABN AMRO Ventures and Dealroom. co shows that funding in the third quarter of this year is down 64% from the record high in the fourth quarter of 2021.

Falling capital after a brilliant year doesn’t necessarily mean the end, and the fintech ecosystem isn’t alone in seeing a drop in venture capital investment. Magazine Inc. reported 20% and 23% less funding in the first and second quarters of 2022 across all sectors. However, fintech remains in the top two most invested industries, only topping healthcare in the third quarter. Fintech remains a force to be reckoned with in the financial industry, although funding has slowed this year.

In addition to sponsorship

For new startups trying to gain a foothold in the market, venture capitalists offer a lot of benefits. While capital investment is necessary, they also offer advice, mentorship to fledgling businesses, and even recruit talent.

The world of heavily regulated finance and VCs bridge the gap between fintech and traditional finance, helping young startups understand the complex web of regulatory regulations and compliance requirements. Startup founders may also find their experienced venture capitalists to be good voices for ideas, mentorship, and strategic brainstorming.

For startups, recruiting talent can be difficult; Without a name or reputation, working at a new startup can seem risky. Since venture capitalists invest in many companies and already have a good reputation in the market, they can help attract talent and even act as referrals for people they’ve worked with before.

The most important support offered by VCs is the financial trial. Many of the potentially disruptive ideas that fintech aims to realize are capital intensive, and it can take several years for a startup to turn a profit. Venture capital investments provide the oxygen these startups need to survive as they grow.

How Fintech is changing the future of the financial industry

Fintech has changed the financial landscape and these changes will continue to snowball. Fintech has caused five major changes in the financial sector to date, and while each has an impact on the trajectory of the financial world, more changes are likely to come.

1. Easy to pay. New payment systems allow users to make real-time payments over the phone from their bank accounts to businesses without using a credit card and at a fraction of the cost. With apps like Stripe, e-commerce businesses can integrate payments into their websites and instantly start accepting payments from dozens of countries. Buy Now Pay Later (BNPL) services like Klarna and Afterpay allow businesses to bypass traditional credit cards and direct credit customers. Customers make installment payments over a set period of time and avoid purchase limits and credit card requirements, often with no interest or fees, except for late payments.
2. Democratization of investment. Apps like Robinhood have disrupted the traditional investment brokers and their fees, giving users free access to the stock market on their phones and making it easier to open and fund an investment account. Investing and buying and selling stocks just got easier. As technology advances, AI advisors will provide better investment and portfolio management services at a much lower cost.
3. Ready in real time. Fintech has eliminated banks as loan intermediaries, even allowing peer-to-peer lending through apps like Kiva and Upstart. SoFi and Credit Karma have accelerated the lending process and enabled near-instant credit approval and access to cash. By increasing the number of potential lenders and borrowers, digital lending can also help more people access loans with lower interest rates and credit scores.
4. Bank in your pocket. Consumers today rarely need a physical bank branch because most of what they need is accessible on their phones. Those who were previously unbanked — those who live in areas where banks are hard to reach or who don’t have a credit score or track record — are hit hardest. The ubiquity of smartphones coupled with the rise of fintech is bringing these individuals into the banking system and unlocking access to a multitude of financial services.
5. Blockchain and Cryptocurrencies. Together with blockchain, cryptocurrency has solved the problem of double spending, and while not particularly popular, the potential of a globally accepted currency has significant potential to change the world of finance. . Unlike cryptocurrencies, blockchains can support smart contracts, set specific execution conditions, and automatically transfer funds based on those conditions, with blockchains providing security measures.

The future of global finance

Fintechs are not yet finished influencing the future of global finance. Investment in fintech remains strong and continues to drive innovation and change in the industry, especially in populations previously underserved or disconnected from the financial system. This includes traditionally unbanked people in industrialized countries accessing the global financial system and small and medium enterprises with easier access to credit from sources. non-traditional individuals are managing their own investments from their phones without fees or commissions, perhaps with the help of AI Advisors. There is still significant innovation potential in this space, which will further support the symbiotic relationship between venture capitalists and innovative fintech startups.

There is no doubt that the financial services industry is changing.

With the rise of modern fintech companies, traditional banks have been forced to sit up and take notice. The next generation of customers – increasingly tech-savvy consumers – are increasingly drawn to the range of benefits offered by challenger banks. So, with an aging customer base, how can traditional banks start to scale?

Certainly attracting and retaining customers must be a top priority. But if one of the main advantages of a traditional bank is its presence on the main streets, amid a series of closed branches, how can it retain customers while attracting customers? a new generation of banking users?

Insight is key, and a lot of it. But what exactly do financial executives want from their UC analytics tools?

The ability to improve customer service

One of the things customers appreciate when they come to a bank is personalized service. Ability to build rapport and trust with a person – without waiting hours for a response. So for those who suddenly have to change the way they do business, their experience should be seamless. Likewise, a tech-savvy generation wants answers at their fingertips. This type of consumer doesn’t mind switching suppliers, so those who don’t meet their expectations may not get a second chance.

Analytics provides a way to help financial institutions improve their omnichannel communication, ensuring easy accessibility and quick responses, regardless of the contact method a customer chooses.

When it comes to phones, tracking call counts, waiting periods, and recording all missed calls opens up a wealth of knowledge – allowing financial managers to better understand customer habits and plan their human resources to respond accordingly.

A way to drive future improvement

With a wealth of data available, financial managers can drill down to uncover customer trends and understand where the organization excels, and where extra attention is needed.

Even better, the information collected can be combined with other data to build patterns. For example, seeing which calls are missed or bounced from one number to another can not only help identify areas for improvement but also help identify customers who have had a negative experience. As a result, this provides an opportunity to mend any broken relationships, before the customer is lost to another supplier.

With a wealth of data generated on a daily basis, financial managers can effectively plan for the future, whether that means scaling headcount to meet needs. change requirements, determine training, or justify decisions to upgrade equipment and improve call quality. Risk assessment

Fraud is an increasingly common risk facing the financial sector. In fact, the industry is estimated to have prevented £736.1 million of unauthorized fraud in the first six months of 2021, equivalent to £6.49 for every 10 attempts.

Analytics can help detect dishonest calls, highlighting suspicious numbers so any encounters can be approached with the right degree of caution. It also plays an important role in risk modeling, identifying customers who pose a risk of fraud to the organization through a variety of activities such as multiple claim disputes or identity theft.

Meeting compliance needs

But with platforms like Microsoft Teams that only store data for a short time, if the data isn’t retrieved and stored elsewhere, the information is lost forever, causing compliance and compliance issues. makes it difficult to create historical reports. If a customer files a complaint two years later, companies with no relevant data could be held liable – a situation that can easily be avoided using UC analytics tools. fit, with unlimited storage.

Consolidate data sources to create meaningful insights

As financial institutions use a variety of communication platforms, they face a large amount of distributed data. Finding ways to unify and understand this rich source of information is invaluable.

Doing it manually is not only laborious and time-consuming but also has the potential for inaccuracies. However, using UC analytics tools, data from a variety of sources can be viewed through a single window to provide meaningful, contextual information that can be used. to inform and positively transform an organization.