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The Trends Fueling Digital Transformation for Fintech Businesses in 2021

Emerging technologies such as artificial intelligence, big data, and blockchain are set to make their collective presence felt within the fintech landscape in 2021. Despite evident and accelerating growth, the industry's shifting mindset has led to new needs for businesses, such as hyper clouds or cybersecurity initiatives. After such a tumultuous 2020, how is 2021 shaping up for the future's digital transformation efforts? Or digital transformation initiatives transgress into an entirely new field in the wake of Covid-enforced disruption?

Source: IDC Worldwide Digital Transformation Spending Guide - Use Case Forecast 2020

Despite clear signs of businesses suffering from Covid, we can see in the chart above that spending on digital transformation efforts is still growing, albeit at a slower rate of 10.4% in 2020 - as opposed to 17.9% in 2019. This has led to total spending on digital transformation topping $1.3 trillion by the end of 2020. With massive levels of money arriving into the digital transformation landscape ready for 2021, we’re set for another significant year of fresh innovations and emerging trends. 

Let’s take a more in-depth look into what will play the key role in 2021:

1. Rise of digital-ready banks

2021 will see a continuation of trends that have been accelerated in the wake of Covid, with fewer users accessing brick and mortar banks and instead opting to manage their finances in a solely digital ecosystem. Offering customers the chance to virtually leverage P2P transfers, contactless credit transactions for free, global payments, and even the opportunity to purchase and exchange cryptocurrencies like Bitcoin and Ethereum will carry a significant appeal to the financial sector in a fully digital age. Digital transformation initiatives are quickly making brick and mortar banking redundant in the 21st Century. In an interconnected world, nobody needs to spend their time physically visiting a bank, scribbling through paperwork, and queuing up to be seen. This leads to more digital-only banks cropping up around the world - a trend that’s likely to accelerate further in the coming years. 

According to Mind Inventory, visits to banks are set to drop by 36% between 2017 and 2022 due to the prevalence of digital-only banks and improving online customer experience models. Further benefits to customers can be found infeasible cost-management services, faster bill payments, reset pins from home, real-time analytics, and quicker financial management. While it’s entirely possible for users to simply log into their mobile devices to send and receive finances in a digital age where this would’ve been impossible without entering a high street bank branch, the arrival of cryptocurrencies and digital wallets has offered a glimpse into a fully digital and decentralized future. The emergence of digital currency and both hot and cold wallets where it’s entirely possible to store assets and digital coins like bitcoin within an encrypted offline memory stick before taking them back online to send and receive currency shows just how independent digital banking will become in the future. 

Artkai is taking significant strides in championing the development of digital banking ecosystems that preempt the seismic shift from brick and mortar banking towards online solutions. By creating a digital banking ecosystem of web and mobile applications, online services, ATMs, Artkai has been involved in establishing an international infrastructure for ProCredit Bank that spanned 13 countries. To facilitate such a task, we conducted a heavy range of research projects that expanded to interviews with both the bank’s employees and clients, as well as numerous discussions with ProCredit’s IT department. At Artkai, we divided the design effort into its component parts with clear steps for progression - this resulted in smoother implementation for the client. 

2. 5G and Accelerated Digital Communication

It’s no secret that the future of fintech will hinge on interconnectivity, but the thirst of customers for better-connected devices is leading to more demand for lighter, smaller, more versatile approaches for managing finance on the go. Instead of carrying several devices, customers crave more hybrid solutions like folding smartphones that are capable of displaying larger screens on-the-go to help users make more informed decisions when it comes to their finance. The interconnectivity offered by 5G means that users all around the world can always be seconds away from managing their finance, regardless of the device they’re using. Once again, this is a trend that Artkai has been embracing in recent years through its industry-beating direct banking interfaces. Through developing cross-functional direct banking solutions, Artkai has aided clients in transforming their business models to facilitate the widespread switch from physical banking to online banking. In a world that’s becoming more ready to rely on their various digital devices to perform vital day-to-day tasks, Artkai’s direct banking approaches are an internationally comprehensive solution to ensure that users can keep in touch with their finances no matter where and how they’re accessing their digital banking. 

Because Artkai knows the importance of covering each avenue in which a digital business can embark on digital transformation, we also developed a dedicated mobile application for ProCredit Bank’s customers to access their finances in a simplified but efficient manner. The future will be built not only on interconnectivity but convenience. At Artkai, our solutions ensure that our innovations are accessible to everyone. 

3. New Horizons Offered by Blockchain

Blockchain already forms an intrinsic part of fintech. The facilitation of lightning-fast payments within a truly global reach alongside relatively low processing fees makes the distributed ledgers of blockchain unignorable in the coming years. However, while a future of smart contracts and something of a revolution in decentralized finance seems highly likely, 2021 won’t be the year for it to enter the mainstream. Although, the coming months do seem set to see a ramping up of the accommodation of blockchain technology. Currently, the US and China are leaders in terms of blockchain use, and its adoption rates are increasing in a swift manner. With 88% of global financial services looking to bolster fintech partnerships in a bit to quickly incorporate emerging innovations and ever-expanding global interests in the use of cryptocurrencies, 2021 could be the year where the hype around both crypto and blockchain becomes real - leaving a significant imprint on the financial landscape. 

Blockchain-as-a-Service (BaaS) is set to accelerate rapidly over the coming 12 months, too. According to Fortune Business Insights, the BaaS will grow to a valuation of $25 billion by 2027 - a huge increase on its $1.9 billion valuations in 2019. In a nutshell, BaaS is a cloud-based service that allows users to build digital products through the medium of blockchain. It’s closely related to the sprawling Software-as-a-Service landscape, albeit with the intrinsic help of a distributed ledger. The digital products created by BaaS companies can involve smart contracts, decentralized applications (Dapps), or simply other services that can operate without any setup requirements of the complete blockchain-based infrastructure. 

Artkai has long recognized the influential role that blockchain will play in the future of fintech and has made strides in working to create user experience models that can simplify the complexity of blockchain projects. Through Artkai’s exemplary UX/UI audit and analytics services, we aim to make elaborate projects built on complex emerging technologies both simple to use and straightforward to track. Bolstered by our vast expertise of over 30 fintech projects emanating from banking and investment capital to capital markets and wealth management, we’re well equipped to handle the most diverse of functions and digital technology while optimizing them to deliver for both your business processes and customers. 

4. The democratization of AI

The pandemic prompted something of an acceleration in the democratization of AI and big data. As lockdowns swept across the world, companies, governments, and various other agencies found themselves needing to work in tandem to develop faster solutions to stem the spread of Covid. Big data, AI, and machine learning were the key tools that countless operations turned to. This emerging trend will accelerate further into 2021 and will look to expand towards solving more global challenges and problems facing affected markets both efficiently and at scale. 

The proliferation of AI will heavily affect our daily lives, from our shopping to the food we consume, to how we hire and the way we digest entertainment. Fundamentally, it will be powered by huge volumes of data that relies on powerful computing capabilities. AI will still require monitoring to ensure that we use it for positive purposes, and it will be a joint effort of government and industry. However, there’s little doubt that it will grow rapidly and users will see this scaling process occur faster now that resources are progressively becoming cheaper and more available for business everywhere. 

5. Mass migration to hybrid cloud

Hybrid cloud technology will offer businesses even more flexibility to scale up and down as they wish in 2021. This can be particularly effective for banks that need to rapidly utilize servers that will accommodate a spike in customer interactions and logins while mitigating the risk of over-spending where customer traffic is far lower. The hybrid cloud offers instantaneous and lasting flexibility that can help financial institutions - or just about any business for that matter - to continually adapt to changing conditions and customer needs. The reason why the hybrid cloud is set to become a focal point of 2021 is that there are far-reaching benefits to the technology that have already been proven to help financial institutions. Notably, the hybrid cloud is a cost-effective solution that helps banks to scale their data needs in real-time - which naturally helps institutions to avoid paying for unused capacity. The service also makes the process of banking more efficient. The hybrid cloud allows banks to move digital resources where they’re needed in a much faster manner - allowing them to effectively respond to the changing demands of customers. 

The hybrid cloud also represents a hugely innovative advancement for organizations because it’s not limited to specific geographical locations or even one single organization. It’s also fundamentally safer than alternate solutions. Security threats can change regularly, and the hybrid cloud offers banks access to tools like AI that can be effective in swiftly identifying and nullifying potential online threats. Although the hybrid cloud is set to become a key trend of 2021, some businesses are seeing positive results already. Westpac, an Australian banking giant, migrated its services and adopted a cloud approach in a bid to boost its customer service solutions. The switch helped the bank to significantly reduce the time it took to set up new applications from some 19 days to only 3 to 5 days - it also saw a reduction of over 30% in set-up costs. 

Conclusion

Accommodation of these key trends will pay dividends in helping your endeavor to ride the wave of disruptive technology. Digital transformation initiatives should be the priority for your business if you want to effectively respond to the changing demands of customers and maintain a high level of customer experience. Contact our expert team and let's ride the wave of disruption together.

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