Technology is truly changing the world – at an increasingly blistering pace. And perhaps nowhere is this more apparent right now than in the world of money and banking. FinTech (finance + tech) is the latest buzzword and represents a huge swathe of innovation when it comes to the way that we bank and manage our money. While online banking is well established as the alternative to going in to your local branch to handle transactions or make balance enquiries this is really just the tip of the iceberg. In terms of the future of money and banking there are some pretty exciting developments on the horizon.
Artificial Intelligence (AI) has been identified as a new frontier when it comes to helping us better understand and manage our money. Cleo, for example, is a virtual personal assistant that interacts with users of the app as if it were a real person. Ask it questions, request help and the responses are chatty and emoji-filled (the app is aimed at 20-30 year olds).
What this AI is actually doing is analysing transaction data sourced from the user’s online banking records over the past 12 months. It can use this to provide insight – such as how much is spent in a particular store over time – and to offer up budget and saving suggestions. Communication happens via Facebook and Messenger. According to the Cleo CEO, the future of banking is within software companies and traditional banks are on the way out. The team at Cleo isn’t actually a bank (it doesn’t have a banking licence) but wants to be the platform for financial management.
Given the accessible language, the mobile focus and a structure that is tailored towards the specific issues that many young people face (saving, budgeting, getting the best credit deals), it’s no wonder that it’s already starting to fly high. And it’s also no wonder that it has plenty of competitors – Xobi and Hublio to name a few.
According to the World Bank there are two billion people in the world who don’t have a bank account. Mobile payments and digital wallets are seen as a much more workable solution, particularly in countries such as India where there is a sea change away from a paper money based economy. New technology such as Ezetap has enabled software that allows for mobile phone payments that don’t require bank accounts. This overcomes numerous issues, from how to manage accounts if you’re too remote to get to a branch, to doing away with the need for cards.
Digital currencies could be a logical next step down the route of digital wallets. It’s already possible to pay for some goods and/or services with a currency such as bitcoin but this has yet to be widely accepted. And with digital currencies comes blockchain – a chain of transactions or agreements that is self-verifying and so doesn’t require a middleman like a credit card provider.
Super cash machines
While digital currencies and online transactions are certainly becoming much more the norm, cash machines are going nowhere just yet. Particularly when it comes to older generations cash is still king – in 2015 17+ billion payments were made in cash in the UK. Plus, the number of cash machines surpassed 70,000 for the first time and 48 million people used them.
However, perhaps in order to keep up with the functionality of the online world, cash machines are also evolving to offer much more than just a simple way to withdraw notes. So, there are plans for the humble ATM to change to become a “bank in a box” – soon you’ll be able to do virtually everything you could once do in a branch without even walking through the door. Video links and mobile interactivity are just two of the features that will enable banks embracing technology to create super ATMs from existing cash machines.
A new approach to credit risk
Although still very much in its infancy there is a move towards reassessing the way that lenders look at the risk a borrower presents. Currently, applying for personal loans or credit cards involves incorporating the credit score of one of a limited number of agencies who use a fairly restricted pool of information. A new approach could involve a much wider spread of data involved in the risk assessment process, including social metrics and default rates. German startup Kreditech is already working under this new approach, analysing borrowers for loans using an algorithm that factors in 20,000 data points in order to provide the lender with a risk assessment.
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