The road to full technology adoption and transformation in any industry is never a smooth one. Financial services are no different. The potential of what advances in financial technology could offer financial services always seemed ‘revolutionary’ and ‘life changing’, yet never as prompt in execution, or take-up. However, when the uncertainty of a global pandemic is added into the equation, abnormal becomes normal; cities without people, offices without employees, business meetings without handshakes.
Against this backdrop, the Center for Financial Professionals (CeFPro), an international research, events and media organization, undertook the third annual Fintech Leaders survey, at the height of the COVID-19 pandemic of 2020, surveying close to 2,000 respondents from July until October, with the objective to provide a voice to the fintech industry. The objective of the international survey has always been to assess the status of the fintech industry, as identified by those working in the industry. Also, to gain a greater insight into the status of financial technology implementation in financial services, assessing the key opportunities, investment priorities, main challenges and benefits and exploring the road ahead. The survey also included rankings of key services providers, and more than 30 individual categories. Fintech Leaders is guided and supported by more than 60 industry professionals, from a diverse range of backgrounds and geographies. To view the findings, visit www.fintech-leaders.com
The results showed a seismic shift in the priorities and direction of the industry. One noticeable change centered around advanced analytics and Artificial Intelligence (AI), formerly the top ranking opportunities in the previous two years’ reports. However, the business necessities resulting from COVID-19 became very evident to most financial institutions soon into 2020. AI was surpassed by mobile and digital services, cloud computing, and business process automation as the ‘stay at home’ orders and working from office restrictions demanded new priorities. All payments were digital, all work was online, therefore digital banking became a necessity to move forward whilst ensuring resilience and business continuity. AI, such a buzz-word for so long with the potential it offered, was in reality and in practice more automation, not advanced mathematical methods and data science. The fintech opportunities were mobile and digital, utilizing cloud technology, staying afloat and moving onwards. A number of online banks appeared to be doubling down on their products and services – a number of incumbents reported that the basics, such as having enough laptops with appropriate software installed for staff to work remote, or adequate security measures, were not in place for the sudden move to remote working.
The CeFPro survey explored what respondents thought would be the key fintech opportunities in five years, to contrast with the immediate priorities and opportunities. Interestingly, mobile and digital services retain similar high votes to 2021, but respondents placed AI as the key fintech opportunity for the future. Was this endorsement of the opportunity AI offers financial services a repeat of previous reports, raising the potential and profile of AI for the future, but ultimately not the opportunity for now? Questions were raised whether respondents to the survey understood the use (and potential) of AI in financial services, or whether it was a one-size fits all? How are AI models designed? How are they tested? Who would have responsibility and oversight of AI? What action will regulators take in the future? Fintech Leaders addresses these questions and concerns, with much uncertainty remaining on the potential and opportunity of AI in financial services.
Similar shifts occurred in investment priorities with expenditure directed to security concerns (including cyber), anti-fraud, payments and transactions. Resilience and business continuity dominated over AI, which lacked the practicalities of keeping business units moving forward and serving their customers. Once payments went digital, banking went digital and if a financial institution is not offering an online payment service, questions are raised over its viability. Security concerns were considerations pre-COVID-19, the remote working further enhanced the need to develop security processes. The concerns were not just within the financial institutions where sophisticated firewalls, security protocols and other checks and balances were in place to ensure smooth operations. Out of the safety of the office, remote working added additional concerns around security. Cybersecurity concerns centered around the customer and protecting their data and information.
Unsurprisingly, given the key investment priorities centered around security, anti-fraud and payments, the key obstacles to fully adopting fintech in financial services centered around cybersecurity, data and customer confidence and trust in the system. Interestingly, these retained top spot from last year. The reputational risk and potential headline risk of a cybersecurity breach, with loss in customer confidence were foremost in many minds. The US CARES Act, introduced to provide financial assistance to individuals and businesses in early 2020, highlighted some of the advantages and shortfalls of working with fintechs, and the potential that collaborative efforts could bring; fintechs were viewed as more agile, responsive and innovative than incumbent financial institutions, able to deliver services to those that needed the aid. Unfortunately, being fast does not mean secure and some of the high-profile fraudulent cases were as a result of the speed, though no accusation of wrong-doing by fintechs themselves.
The Fintech Leaders report deep dives into the above areas, including a number of figures and case studies to illustrate the status of the industry in 2021, and beyond. The report highlights the opportunities, investment priorities and potential benefits. CeFPro also gauged the impact of COVID-19 on the industry, asking respondents whether they considered this to have an adverse effect, though time will tell more than opinions. Fintech Leaders provides a detailed examination of the current status of the industry, though is also forward-looking by exploring where the industry is likely to move to next. COVID-19 has shown that all the best laid plans are subject to change, though when looking back at the fintech revolution, the years of 2020 and 2021 will no doubt prove to be a turning point. Previous Fintech Leaders reports often comments such as ‘that will be the case by 2025’; well events in 2020 and 2021 forced an acceleration of the change already underway, as well as introduce new measures, if nothing else out of necessity more than design. What is often overseen are the details, which held the transition; a great number of respondents stating that initially, there were not enough laptops for staff to work remote, internet connects being below standard of the office environment, or having a place to work at home, among other details. The headlines were around security, technology advances, videocalls and so on. Unprecedented change has already occurred, the direction of travel has changed, the speed of the journey has altered and the future appears exciting and full of potential.
CeFPro’s 2021 Fintech Leaders report gathered close to 2,000 online survey respondents and the opinions of the 50+ Advisory Board with additional research and insight from CeFPro’s analysts from July until October 2020. The Fintech Leaders report addresses the key opportunities in 2021 and 2025, investment priorities, the benefits and challenges of implementation and the impact of COVID-19. To download a complimentary copy of the Fintech Leaders report, www.fintech-leaders.com
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