Does technology meet finance?

November 2, 2023
8:58 am

Does technology meet finance?

Theodoros – Georgios Bozios is writting…

The technological revolution that took place mainly in the last decade and continues to this day with unabated pace has also had an impact on the financial sector and as a result the financial technology (fintech) industry has developed. In essence, it is the innovative technologies that any company uses in order to have transparency and improvement of financial services compared to the pre-existing (‘traditional’) ones. With the main purpose of expanding the “armory” to address financial problems, the basic prerequisite for using these technologies is access to the internet. Through these technologies it is possible to identify new business models or even start-ups.

Financial technology has advanced the automation of transactions, insurance, investments, sales, payment services and banking. These services can be produced by independent providers, with at least one certified bank or insurance company as part of their membership, and their operation is based on the jurisdictions where they are used. The greatest asset in financial transactions is that they facilitate real-time transactions. In investments, investors have the possibility through platforms to see the trading behaviour of other investors as well as the expert analysts of investments and monitor their strategies, in capital markets, in foreign exchange markets which platforms do not require any or even minimal knowledge in financial markets. Another model that financial technology has developed is robotic advisors which carry out automatic financial advice with almost zero human intervention and operate through mathematical rules or algorithms.

It is in banks that the greatest innovation of these technologies is emerging with the dominant objective of promoting sales, money transfers, lending and all payments in general. Fintech can also change the policy-making of central banks because it would be good for them to develop new models and business frameworks whose effects will be clarified in the long term. In the long run, financial technologies can affect banks in two areas. The first area is by changing the demand for money and the second by changing the industrial organisation of the financial system so that final decisions on monetary policy, financial stability and lending can be made in the easiest and most flexible way. The digitization of banks known as e-banking has digital applications for reliable and fast customer service by offering simple and complex daily transactions to the general public at a fast pace .

So let’s see in detail which technologies are used in finance. The first one is artificial intelligence (AI) providing consumer habits to the companies resulting in them to understand the customers better, for example automatic digital assistance is an AI tool and follows the automatic robotic processes focusing on the specific repetitive tasks. With this process it helps in processing financial information such as receipts and invoices leading to minimizing errors. The second widely known technology is big data which can predict changes in the market in order to create new strategies, create consumer habits and create new marketing strategies. The third and last technology is blockchain, which is one of the latest technologies and has attracted significant investment. With blockchain, intermediaries can be eliminated when making financial payments and the costs of transactions in a financial system can be drastically reduced.

Personal data security in financial technology is the most important challenge for regulators and governments because there is the possibility of interception of sensitive financial data of consumers and businesses. Fintech companies are turning to protect this data in the cloud to tighten compliance rules, one of them is the GDPR regulation on proactive personal data security and the second regulation refers to the Payment Services Directive. In any breach of personal data companies have direct responsibility and arguably the financial sector is becoming a bigger and bigger target of these attacks.

In conclusion, technology and finance come together to a significant extent to influence and evolve, the latter one could call it an industry in order to improve economic activities. The collaboration of fintech with the banking industry will help stimulate growth and the economy.

Bibliography