Technologies To Revolutionize The Financial Sector

The fintech industry keeps paving the way for new dimensions for payment systems and moving the industry forward

As a result of newly developed technologies, major and multidimensional changes of irreversible nature appear in the field of finance. Digital service channels are becoming more and more diversified, leading to the emergence of new business models. Putting forth technological developments in the field of finance and having entered our lives in the early 2010s, fintech industry keeps paving the way for new dimensions for payment systems and moving the industry forward.

Without a doubt, consumer demands play a leading role in this change. Research shows that consumers worldwide have an increasing tendency and trust in financial instruments which facilitate their use of financial instruments and offer them personalized experiences through the integration of their data. There are many trends that are going to shape fintech such as digital banking, blockchain technology, robotic process automation (RPA). At this point, however, there are two developments that we consider to have potential, which are candidates to change both customer and sector habits, namely open banking and invisible finance.

VOICE OF CUSTOMERS: OPEN BANKING

Briefly definable as a service model where financial data is shared with third-party organizations for better financial opportunities and banking services, open baking brings many potentials for customers, banks, and fintech. Considered to be the “most significant digital transformation” of the 2020s, open banking offers many opportunities to customers. The benefits of open banking which will reflect on the customers include, among many others, the capability of managing all accounts over a single platform, managing personal finances, or in some cases reducing the loan approval process, which takes days due to the long review period. Providing customers with a voice, this model allows consumers to have more options such as accessing more personalized products and services, managing money, borrowing, and making payments. Upon the release of the open banking regulation in our country in 2020, open banking applications have started to become the focus of both banks and fintech. These applications are expanding their market day by day.

The global situation regarding open banking, the most advanced examples of which are found in the UK and European markets around the world, according to a report published by Polaris Market Research indicates that the market size is expected to reach USD 128.1 billion by 2030. Addressing the approaches of the industry to open banking, the research conducted by FT Partners proves the importance attached to the open banking by the industry.

Accordingly:

– 86% of financial institutions consider open banking data valuable.
– Eight-tenths of financial institutions have adapted to or plan to operate in open banking.

– 94% of Fintech companies believe that open baking will improve the current state of their services.

ONE-STOP FINANCIAL SERVICE: EMBEDDED FINANCE

At the time of the emergence of the Internet, even the most staunch advocates of the Internet could not foresee that the Internet would cause such a great change and affect our every move and every aspect of our lives. Embedded finance will trigger a revolution of such a kind. Briefly definable as the use of solutions in the field of money/payment by non-financial institutions, embedded finance refers to
the fulfilment of the customers’ needs immediately upon their occurence. This may be achieved through the correct use of data, allowing every company to turn into a fintech company of various scales.

Embedded finance offers us a more personalized experience in terms of payment systems. Conventional systems do not contain options to offer personalized experiences due to their nature. Nowadays, however, consumers do not want universal financial solutions, instead, they want specific financial solutions in an immediate sense, regardless of the platform. This is where embedded finance comes into play. Embedded finance allows the creation of consumer-specific solutions through the wise use of data. Today, we see this in options such as buy now, pay later, share your basket, and so on. Currently, e commerce sites, marketplaces, and retail brands function as platforms with the potential to get to know the customers best due to the data in their hands. There is no reason why they should not gain the loyalty and trust of the customers when they interpret this data and use it specifically for the customers. These platforms have the opportunity to make use of the data in their hands in a correct manner, and to offer services from a single place over a special expenditure. When an e-commerce site provides insurance while selling a technological product, an airline company provides car rental services, or a retail brand offers a special loan to its customer, they gain the relevant customers’ unparalleled loyalty and trust. In addition to all this, it would be a big mistake to reduce embedded finance to online platforms only.

Embedded finance, especially after the pandemic, refers to a world where the customer gets further and further away from the in-store shopping experience, without cash or card, and a world where they can buy their product without waiting in line. We started to see the best example of this in Amazon Go stores, opened by Amazon in 2018. We foresee that the embedded finance market, which we encounter mostly in e-commerce sites, will grow rapidly and spread to many different sectors, especially as of 2022 in Türkiye. When we look at the world, Sweden and Singapore stand out as cashless society models. The report published by Lightyear Capital 2020 shows the estimation that embedded finance in various sectors will generate approximately USD 230 billion in revenue by 2025. Cornerstone Advisors surveyed financially independent individuals in the United States about their favourite non-financial brands’ use and interest in embedded financial products and services.

Accordingly,
• Three-fourths of gaming platform users say that they are interested in an in-game account where they can deposit money, buy and sell virtual in-game items, and collect rewards for game achievements/progress.
• Two-thirds of those who do fitness at home say that they are interested in getting health insurance based on their fitness habits.
• Two-thirds of fashion-savvy consumers say that they might be interested in an investment account from a luxury brand which will allow them to easily invest in the relevant company’s stock.

STEPPING STONE FOR OUR COUNTRY: FINTECH

The knowledge and experience it had in banking for many years put our country ahead of many countries. The investments and technologies developed by our fintech institutions show that this function is possible for 74 payment and e-money companies in our country. As the regulations made especially in the last three years shape the technology ahead of time, rather than trying to catch up, the “National Fintech Strategy”, which is still ongoing, acts as the harbinger of many great developments.

All these developments show that the fintech industry is a significant sector candidate to be the stepping stone for our country. We will keep deepening our activities under the umbrella of the Fintech Committee DEİK Digital Technologies Business Council with the purpose of extending our fintech institutions to the global arena, meeting with international investors, and globalizing the way of doing business.