For the past years, Fintech has been integrating technological innovations, such as mobile devices, software, sophisticated analytics and data networks into the financial services industry. The number of Fintech companies is constantly increasing and so does the amount of funding they receive. All the efforts of the industry are mainly focused on minimizing human involvement in order to ultimately eliminate the possibility of errors occurring. As positive “side effects” to that process, one can observe a decrease in crimes related to the economic sector, minimization of risks, enhancement of the management procedures, as well as an improvement in tax compliance. Below are the six main developments of Fintech that have the potential to revolutionize the financial sector, as well as our daily lives.

1. Disruptive Innovations

This concept is essential to the Fintech industry and is commonly used with a reference to financial services. In simple words, disruptive innovation occurs when technological developments force financial institutions to revise their effectiveness and reconsider their approach to the sector.
Once upon a time, the introduction of a calculator revolutionized the system and changed the market network, as it was much more convenient and accurate than any other calculation mechanism. Disruptive innovations may also be used by small companies and start-ups that develop a successful way to confront market leaders with an attractive alternative. However, in order to apply the concept effectively, one must take into consideration all the underlying nuances.

2. Regulatory Technology (RegTech)

RegTech is a relatively recent development that works on the compliance of financial services with the main requirements of the financial sector. For instance, this technology brings automatization and digitalization into the AML and Know Your Customer (KYC) legal frameworks, making them more progressive and effective. RegTech has contributed to fraud prevention, as well as client identification and identity verification, which helps eliminate money laundering and terrorism financing activities.
The concept has been supported and promoted by such major regulatory authorities as the British Financial Conduct Authority. Nowadays, international regulators have pursued intensive collaboration with RegTech leaders in such areas as artificial intelligence and machine learning. Moreover, besides improving financial services, RegTech also contributes to significant cost decreases.

3. InsurTech

This is another Fintech development that has found application in the sector of insurance. Moreover, the innovative technology has even facilitated strong competitive pressure for traditional insurance companies, giving start-ups great advantage. This shows that even traditional sectors may experience turbulence with the emergence of Fintech innovations.

4. Initial Coin Offering (ICO)

ICO represents a large-scale fundraising, similar to crowdfunding, helping start-ups that integrate blockchain in their operation. In simpler words, it is a system that enables one to sell a new crypto-currency in exchange for cash. You might have confused it with initial public offering (IPO), but the two are different despite the similar idea. IPO is about a company placing shares on stock exchange, with the goal to get funding through attracting investors. The main difference between the two, therefore, is that ICO enables companies to directly receive cash, while IPO assumes the involvement of third-party investors.

Interestingly, ICO has been banned in China, because of its abuse by fraudsters. The latter was mainly occurring due to lack of proper regulatory framework. There has also been a criminal case initiated against fraudulent activity in ICO in the United States.

5. Artificial Intelligence

Chatbots, as well as voice helpers, have become the essentials in modern customer experience. This effective system improves customer experience and satisfaction, while also reducing operational costs. Front offices of numerous companies around the world have taken advantage of AI, and benefit greatly from the application of this technology.

6. AIP and Internet of Things

It is harder to imagine a bigger challenge for a Fintech start-up than a successful and efficient integration with banking institutions. Banks are dedicating significant efforts to secure their client pools and prevent access to their most valuable resources. In theory, any technological development has the capacity to connect and integrate with the existing financial infrastructure. For instance, imagine a refrigerator being able to autonomously order food or a car being able to autonomously pay for being fueled. This and so much more is expected to be introduced into our lives in the upcoming years.
Assessing all of the developments, there are reasons to believe in the bright perspectives of the future. If the world continues to genuinely embrace innovation, we might soon experience a life of unimaginable opportunities, which will allow people all around the world to live their boldest dreams. Keep your hand on the pulse of innovation and expect the unexpectable!