The Future of FinTech

The Future of FinTech
5 min read
03 November 2022

In the past 20 years, digital technology has upended every aspect of our daily lives - including
our finances. One look at a Modern Treasury demo is enough to see just how far digital
transactions have come - you can move money faster than ever before from any two points in
the world. The modern world runs on FinTech services and digital solutions. And the recent rise
of remote work and business operations has only exacerbated that - the value of digital
transactions grew by a third in 2020 on a global scale.

And once people realized the ease of using digital financial services, they weren't likely to return
to their old analog ways. The adoption rates for digital FinTech solutions aren't just intact - it's
still growing. By the end of this year, we may cross the $14 trillion threshold for digital
transactions - more than a 100% increase from pre-pandemic numbers.

All of this leaves us with one important question - where do we go from here? And what does
the future of FinTech hold? We'll explore the question by looking at two technologies that will
likely revolutionize the FinTech space in the next few decades.

Artificial Intelligence

The world's banking industry is already looking at AI technology - and it's no wonder,
considering most estimates show it has the potential to add a trillion dollars of value to the
sector each year. And seeing as plenty of technology firms are slowly encroaching on the
territory of services traditionally provided by the banking sector, financial institutions and banks
will likely adopt a heavy AI focus to stay relevant.

Automatic factor discovery will become a huge thing in banking in the next couple of decades.
Financial models will become far more accurate with better identification of performance-driving
factors - all thanks to machine learning. Graph computing and knowledge graphs will continue
playing an important role, as one of the most crucial ways AI semantic analysis will be applied to
the sector.

Sure, current AI technology is nowhere near the ability to simulate an actual human brain - but
for the purposes of financial analysis, that's not a priority. Currently, machine learning
technologies have proven excellent at identifying patterns in complex data sets and building
associations. And that's precisely what financial data analysis needs. Plus, AI tech is ushering in
an age of better privacy protection through techniques like federated learning - equally important
for the world of finance.

The Rise of Blockchain

The jury is still out on whether existing cryptocurrencies like Bitcoin and Ethereum have any real
chance of replacing mainstream financial systems and services - and the answer will probably
be "no." However, that doesn't mean the underlying technology doesn't show promise. The
Distributed Ledger Technology that powers the entire blockchain world is a game-changer in
terms of transactional data sharing. Having a distributed network where transactions are shared,
recorded, and synchronized will probably change how we approach finances in the long run.
By allowing us to store data about financial transactions simultaneously in multiple places, DLT
will gradually become more important for the world's financial ecosystem. And projects that
focus on cross-chain interoperability will allow blockchains based on various protocols to
transmit and share data - connecting all industries, supply chain management, and payments

And that's just the basic technology that blockchain is based on - in the meantime,
blockchain-based projects have developed additional useful technologies like smart contracts,
non-fungible tokens (NFTs), and decentralized finance (DeFi). All of them are still in nascent
stages of development - but will likely play a prominent role in the world of finance down the

This is clearly visible as soon as you take a look at what traditional stakeholders - like funds and
institutional investors - are doing. Most of them have started increasing the portion of their
portfolios dedicated to digital assets - helping DTL and blockchain technologies disrupt
established norms. DeFi - decentralized finance - is especially taking off, with smart contracts that eliminate central intermediaries. This sector alone now contains digital assets whose value
exceeds $2 trillion.

It's worth noting that blockchain is also slowing starting to get the attention of regulators and
policymakers. Right now, more than half of the world's most prestigious central banks are
studying and testing their own central bank digital currencies. The same is true for institutional
investors, who are examining how DLT and digital tokenization could impact their service
portfolio - for instance, some are offering key escrow encryption to clients with significant
cryptocurrency holdings for additional security.

Also, the DeFi tech market will soon make investments, loans, and other financial products more
widely available without the reliance on traditional, centrally managed financial entities. Through
smart contracts, DeFi eliminates a lot of the counterparty risks that have created the need for
our current financial intermediate and institutions. While it may generate a lot of disruption in the
short term, such a change will likely improve the efficiency of markets in the long run and
increase transparency.

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Alex 9.8K
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