Whether it’s online trading or crypto conversions, the future of finance is fluid.
4 min read
Opinions expressed by Entrepreneur contributors are their own.
Financial technology (fintech), for all of its faults, helps us get more things done more efficiently. Artificial Intelligence (AI) takes it even further, allowing us to conduct business and have conversations when there isn’t even another human involved. We can have online chats with bots, for example, to accomplish or learn myriad things. Innovation is always on the horizon, though, especially in the fintech realm.
As more fintech options become commonplace, every industry must either adapt or be phased out. With the turn of the new year, 2020 promises big changes in how we manage, spend and access our money, so you’ll want to keep an eye on some of these emerging trends as you make financial decisions regarding partnerships and investments.
Minimizing Traditional Institutions
Several types of financial business elements that have been handled manually or by standard institutions, like payroll, insurance and securities, are becoming automated. We’re seeing online-only banking that eliminates the cost of brick-and-mortar buildings, and the best of them will be sharing the benefits with their customers in the form of higher returns and lower fees.
Companies adapting quickly to fintech and automation should also work to uphold compliance and maintain good standing with the governing agencies. As regulation and risk-management for fraud, money-laundering and identity theft are becoming big business, regulation technology (regtech) companies are utilizing AI to combat these crimes faster and more efficiently than humans can. The growth of fintech is causing a wave of startups and the opportunity for investment in the regtech realm.
Stepping Up Online Trading
Black box trading is a proprietary, fully automated option for your investments that has been talked up and down for its attributes. It’s legal since it’s not expressly illegal, and relies on algorithmic and low-latency technologies. Computers and data-mining are not infallible, though, so you might want to consider a more personal approach.
Copy trading is basically crowd-sourcing applied to your portfolio. You can choose your favorite investors to follow and mirror their investment moves based on whatever percentage you want to allocate. Not only can it open you up to investments you might not know about, but you’ll also be able to interact with and gain insight from other members and influencers in real-time.
Monitoring Cryptocurrency Advancements and Conversions
In the digital world, financial assets can be used and exchanged with cryptocurrency, which isn’t tied to standard currency systems. Its online, open-source administration doesn’t require banks or governments for regulation or exchanges, allowing anyone to participate in the system from anywhere in the world. However, since there is so little regulation, the cryptocurrency market is extremely volatile. Several companies are trying to be competitive with Bitcoin as the space continues to evolve.
Smart contracts represent one such innovation by allowing people to enter into business contracts online with the terms managed by the system automatically as the parties verify that they’ve held up their end of the deal. This could be revolutionary for the real estate market.
While blockchain transactions normally take place on public ledgers, many people don’t want their financial transactions to be public knowledge for a multitude of valid (or shady) reasons. There are companies out there offering a type of cryptography that makes transactions anonymous and untraceable without damaging the blockchains. This can create interesting options for investors and further regtech developments as well.
Although converting your cryptocurrency to real-world currency is possible with Bitcoin ATMs in many major cities, it’s not easily accessible. There are a few online-conversion services and crypto debit cards. These methods often have fees, taxes and delays that hinder access to your money, which means it’s a wide-open avenue for innovation and new technology to emerge.
Considering Mergers and Collaborations
Finally, as you watch for opportunities to invest or invent, I predict you’ll continue to find that banks are trying to create partnerships with fintech and regtech companies as a means to stay relevant. Don’t be surprised if these are unsuccessful at saving the traditional institutions, because most of them are still trying to operate under the same old standards. They need new strategies for marketing and product offerings, not just new accounts on their books. As you move into 2020, keep that in mind for your own business decisions as well.