- FinTech Innovation
2.1 Virtual supporter
2.2 Artificial Intelligence
2.3 Digital-only banking
2.4 Block chain
2.5 Cloud Technology
2.6 Internet of Things
2.7 Augmented reality
- Innovative Framework for Fintech
3.1 Office of Innovation
3.2 Outreach Assistance Program
3.3 Conduct Awareness
3.4 Coordination and Facilitation
3.5 Interagency Collaboration
FINTECH is said to be financial technology. Financial technology has been worn to automate investments, insurance, trading, banking services and risk management. It is an emerging industry that uses technology to improve activities in finance. Thus the creation of financial technology and its innovation are aimed to keep up with traditional financial methods in the delivery of financial services. The services may originate from various self governing service providers as well as with atleast one licensed bank or insurer. The interconnection is enabled through open APIs (Application Programming Interfaces, are the hooks and software used by programmers to build applications that connect to other firms’ technology. Banks with APIs enable fintech firms to build apps that utilize their infrastructure, like checking account balances) and open banking and supported by regulations such as the European Payment Services Directive.
New innovations in fintech (financial technologies) are allowing financial institutions to serve customers in novel and unexpected ways. The financial industry is experimenting with automation, predictive analytics, new delivery platforms, digital-only banking, block chain and more.
- Virtual supporter
Financial institutions have started to effectively use fintech technologies like Alexa Skills to create educational content for consumers. In the past, human advisors helped consumers understand their options. However, most of the customers have a similar line of questions with slight variations. Banks and other financial institutes tried to answer these questions through frequently asked question (FAQ) pages. But these pages can become hard to navigate due to their length and become ineffective. Therefore Mobile devices, better network connectivity and improvement in artificial intelligence have made chatbots and virtual assistants easy to implement.
- Artificial Intelligence
AI might break up the traditional model of checking, savings, and loan management processes. Now banks have the power to take all the data about a particular consumer and create a particular financial solution in real-time through AI. Along with the power of chat bots and virtual assistants, artificial intelligence is also empowering large scale predictive analytics to help consumers find more personalized experiences. Banks can use the AI-driven predictive analytics to design individual financial packages for individual customers. AI in fintech helps improve customer retention, speed-up loan approvals and prevent financial frauds.
- Digital-only banking
Digital-only banks is said to be the most profound example of fintech technologies on the market today. This cut down infrastructure and human resources costs. So they can deliver cheaper services of the same quality as traditional banks. Thus, a new generation of banks is going all digital to reach mobile-first consumers. As more digital banks start offering better deals to consumers, traditional financial institutions will have to compete. Overall, it will provide better options for consumers.
- Block chain
Even though the viability of crypto currency is a hotly debated topic, there seems to be a consensus that block chain, the underlying technology, can benefit the consumers and the fintech industry. The success of these technologies can bring down the cost of financial services for consumers. Blockchain is reformulating multiple industries. Various largest financial institutions like JP Morgan, Wells Fargo, Bank of America, Agricultural Bank of China Limited, Russian Bank called Sberbank and more are trying to use blockchain technology to provide various financial services.
- Cloud Technology
The industry as a whole was precautious about moving information to the cloud due to security concerns. The fintech industry is bringing up the cloud acceptance. Therefore, the implementation of cloud technology is increasing by speed. Its benefits are as follows
- Faster way to delivering services to consumers.
- Companies can invest less capital.
- Streamlined and modernized operations
- Help to build consumer centric processes.
PwC which leverages the power of FinTech to help companies achieve sustained advantage reported that by 2020, the public cloud will be the main infrastructure model for financial services.
- Internet of Things
IoT is basically various connected devices. Most fintech companies are not utilizing IoT at the moment. As more and more devices get connected to the internet, it opens up new opportunities for financial institutes. So, the deployment of IoT-based insurance services means consumers can take advantage of cheaper rates and get faster services.
- Augmented reality
Quantum computing is attractive to fintech institutions due to the possible increase in speed for financial transactions. So compared to virtual reality, augmented reality is helping fintech institutions enhance and enrich services for consumers. VR requires expensive headsets. But most consumers can access AR technology through their mobile phones. Financial institutions are trying to create interactive AR experiences in physical spaces.
P2P digital payment methods like Venmo and Zelle are growing their market shares. It’s a sign that consumers are ready to adopt these fintech technologies for daily use.
Innovative Framework for Fintech
As FinTech becomes increasingly more a part of the mainstream financial system, it is important for researchers and practitioners alike to understand the implications of this paradigm shift for the financial services industry. The Office of the Comptroller of the Currency (“OCC”) has adopted recommendations developed by its Innovation Framework Development Team that address measures for the OCC to take to encourage the development of FinTech products and services. This initiative by the OCC will affect banks as well as other providers of financial services such as credit unions, consumer finance companies and mortgage lenders.
- Office of Innovation
An Office of Innovation will be established to serve as a central point of contact and facilitate responses to inquiries and requests for interpretation of regulations by financial institutions and FinTech companies. It will also conduct outreach and provide technical assistance and collaborate with domestic and international regulators. The Office will report directly to the Comptroller. And the Office will consist of a
- Chief Innovation Officer,
- An Innovation Technician
- Other Innovation Officers
- Innovation Fellows.
The use of Innovation Fellows is intended to enable the Office to leverage the experience and knowledge of academics, consumer and community activists and the private sector and share and transfer OCC knowledge on regulation and supervision to the Fellows.
- Outreach Assistance Program
A robust program will be established for outreach and technical assistance related to innovation. The OCC recognized that while the outreach strategy can leverage existing avenues for banks, the community and consumer groups, a formal outreach program for nonbanks needs to be developed. Through the program, the Office would offer technical assistance, resource materials on regulatory principles, processes and expectations, to banks and FinTech companies, and would design “rules of the road” for nonbank companies.
- Conduct Awareness
The Office of the Comptroller of the Currency will establish an Innovation Networking Group and create other means to promote awareness of industry innovations among its staff. The OCC will develop a process to review and update training programs in response to industry trends and to address new products and services.
- Coordination and Facilitation
The OCC specific process steps with timeframes and responsible parties for innovation inquiries and requests for regulatory interpretation, includes development and promptness optional agency participation in bank-run pilot programs that test innovative products, services and processes which must meet one of the following objectives:
- Fostering responsible innovation by OCC supervised banks,
- Furthering the OCC’s understanding of innovative products, services, processes or technologies or
- Facilitating OCC policy objectives.
Eligible participants would include banks and significant service providers. Also develop a research function within the Office to collect information on the effect of specific innovations and industry technology trends on the banking industry; and use research and dialogue with industry, consumer and community groups to inform policy and guidance in order to update, modernize or clarify a range of guidance documents.
- Interagency Collaboration
The OCC will leverage its existing cooperative efforts with other domestic and foreign regulatory agencies to discuss innovation in the industry, share information to increase knowledge, develop consistent approaches and provide a clear message to the industry.