The past ten years have been changing and shifting toward a tech-dominant lifestyle, upending national economies around the globe. According to a report by Research and the Markets, the global market for digital transformation is expected to increase from USD 469.8 billion in 2020 to USD 1,009.8 billion in 2025, at a compound annual growth rate (CAGR) of 16.5%, and that clearly states that we will enter the sci-fi future we have only seen in movies or imagined in concepts.
The fintech industry has undergone rapid technological transformations to meet evolving business needs and changing consumer habits, with Covid-19 accelerating digital disruption. As a result, many new fintech companies have emerged, with 67% of India’s 2,100+ fintech companies founded in the last five years.
How 5 Waves of Tech Have Revolutionized the Financial World?
Over the past few decades, the financial world has undergone a dramatic transformation as a result of technological advancements. This transformation can be broken down into five distinct “waves” of technology. With each wave building on the one before it, financial technology (fintech) products and services have become more complex. These developments have facilitated easier access to financial markets, quicker transactions, and more individualised consumer experiences. There have also been challenges, including worries about data privacy and cybersecurity dangers. Despite these obstacles, the fintech sector is still developing, and there are fresh inventions in the works that promise to further transform the financial sector.
The days of cash and physical money are quickly passing, thanks to debit/credit cards and one-click transactions. As more businesses adopt fintech to offer specialized and efficient services to a broader customer base, India is moving toward becoming a “cashless & contactless economy.” Payment options like mobile banking and payment apps are now accessible around-the-clock.
Some of the contemporary technologies used in daily bank processes have also evolved. Think about data storage facilities. Floppy disks and CDs were popular methods in the early 2000s, and today cloud spaces with features such as file retention, previews, integrations with third-party apps, one-way syncing, selective sync, and headless design have paved their way and have become critical components in the BFSI sectors.
A Closer Look at the 5 Waves of Fintech Evolution
The first wave of technological advancements in the banking industry involved the replacement of manual processes with machines such as mainframes and computers. This allowed banks to handle larger volumes of transactions more efficiently. With the advent of the internet, the second wave of technological advancements brought online banking, which allowed customers to access their accounts from anywhere, at any time through the internet.
The third wave introduced mobile banking, making it even more convenient for customers to access their accounts and conduct transactions on the go. In the fourth wave, banks used new technologies, such as AI, blockchain, and IoT, to drive innovation and improve customer banking experience. And and finally today at the fifth wave we are talking about cloud computing, cloud marketplace.
Diving Deep into Wave 5: How Creating Marketplaces is Changing Banking for the Better
BankTech wave 5 is the most recent and exciting stage of technological advancement in the banking industry. It heralds a new era of progress and innovation that is transforming the way banks operate and provide value to their customers. It’s about banking marketplaces, where banks use cloud computing to offer a wide range of financial products and services on a single platform. This enables the development of innovative and scalable solutions, resulting in integrated ecosystems with increased convenience, transparency, and choice for customers while also increasing bank efficiency and profitability.
To create a successful marketplace for a bank in today’s digital age, it is crucial to focus on the elements of wave 5, which includes architecture, microservices, composability, embedded AI, hyper-personalization, and ecosystem building.
First, a clean and clear architecture with separated elements is needed for easy API connectivity. The architecture should be well-defined and have no overlaps, so that the bank can connect with each other through APIs and consume what they need to. Second, microservices must be well-defined with an interconnected API network. Third, a platform for composability to have interoperability is necessary to create desired outcomes. Fourth, embedding AI into operational processes brings hyper-automation and real-time decision making. Fifth, hyper-personalization using customer data and analytics enhances customer experience. And finally, building a strong ecosystem by partnering with other players in the financial industry fosters collaboration and innovation. To succeed in the digital age, banks must embrace these elements of wave 5.
Overall, the benefits of marketplaces in banking are a natural outcome of the transformative power of wave 5, which allows banks to create innovative and customer-centric solutions that meet the needs of modern consumers.
With the advent of online banking, mobile banking, artificial intelligence, and blockchain technology, technology has had a significant impact on the banking industry. This trend is expected to continue as banks invest in emerging technologies such as quantum computing, machine learning, and digital payments, to provide customers with more personalized, secure, and convenient banking services. The industry will continue to evolve as banks embrace innovation.