The latest technologies such as blockchain, AI, and API are indispensable for FinTech In addition to the blockchain mentioned above, FinTech uses various latest technologies such as AI and IoT. From here, I will explain its mechanism and usage.
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Blockchain is a mechanism in which terminals on the network share data on an equal footing and maintain the system without the intervention of a central administrator.
A conventional system is called a “client-server system”, and a central server manages the entire system collectively. On the other hand, the blockchain system is called a “P2P network”, and terminals can directly send and receive information.
The main advantages of P2P networks have cost reduction and stable operation.
In a client-server system, it costs money to install, operate, and take security measures, but in a P2P network, data is managed between terminals, which makes it possible to significantly reduce costs. Also, unlike the client-server system, which can cause information leakage and system down due to trouble with the central server, it is possible to continue stable operation between terminals that are operating normally in a P2P network.
IoT is an abbreviation for “Internet of Things” and means “Internet of Things”. It refers to a mechanism in which not only devices such as personal computers and smartphones, but also various personal items such as automobiles, medical devices, and electrical appliances are connected to the Internet.
With the spread of IoT, it will be easier to generate a wide variety of big data.
Until now, big data has been composed of website data such as purchase history of EC sites, operation data such as sales management of companies, and social media data such as profiles and comments of SNS users. However, these were not sufficient in terms of data volume, real-timeliness, and diversity, and there was a problem with data accuracy.
When things around us are connected to the Internet by IoT, a huge variety of data will be accumulated in real-time. As the number of data increases, the accuracy of forecasts increases, leading to improved customer experience and the creation of new services.
At FinTech, in addition to accurate support for personal asset management and financial management, life insurance measures risks from policyholders’ exercise habits and eating habits, and automobile insurance measures risks from driving skills and vehicle conditions, and discounts on insurance premiums. Is also implemented. Big data collected by IoT is indispensable for the realization of that service.
AI (artificial intelligence) is a technology that enables computers to recognize and infer human abilities.
In the financial industry, data such as corporate financial data, stock prices, newspaper articles, and analyst reports have been used to forecast market transactions, design strategies, and make loan decisions. However, with the spread of IoT, the amount and types of data will increase, and human capabilities alone will not be enough to process it.
AI is useful for analyzing and managing such big data. As machine learning and deep learning evolve, we can analyze and process the amount of data that humans cannot handle, and discover regularities that humans could not find.
In the fintech industry, it is used in Robo-advisors that can provide personalized advice on investment, asset management, and insurance plans, as well as chatbots that respond to customer needs and customer service signage.
API is an abbreviation of “Application Programming Interface”, which is a mechanism to create a contact point between application software on a computer or WEB and an external application. For example, the ability to log in to non-Google apps using a Google account is API integration.
By linking apps with API, you can improve UX without the hassle of creating a new account. For companies, it is easier to acquire users, and at the same time, it has the advantage of reducing the cost of managing and protecting authentication information.
This technology is also attracting attention at FinTech. The “FinTech Common API” provided by IBM is an API platform that connects existing Internet banking and FinTech services and can inquire balances, deposit/withdrawal details, and account information. Fintech company “Money Forward” is developing new services by utilizing such API and linking with its own housekeeping book application.
Biometric authentication is an authentication technology that confirms the identity based on physical characteristics such as fingerprints and veins. It is more secure than conventional security such as PIN and password and is highly effective in preventing personal information leakage and skimming.
Currently, biometrics is used in many places. In China, where payment payments were the first to spread, face recognition is now being used to enter events, utility bills are being paid, and retina recognition is being used to verify the identity of mortgages.
The Japan Automatic Recognition System Association predicts that the global biometric authentication market, which was about 10 trillion yen in 2016, will expand to 50 trillion yen in 2026.
FinTech introduction is the key to the growth of the financial industry
The financial industry is in the midst of innovation, with new services being created one after another due to the development of technology. Let’s sort out the current issues and future trends.
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With the rise of FinTech, various legislation has been developed in Japan since the mid-2010s.
In 2016, the “Law to partially revise the Banking Act, etc. to respond to environmental changes such as the development of information and communication technology,” which includes a system for responding to technological innovation and virtual currency, was enacted.
Subsequently, in 2017, the “Law to partially revise the Banking Act, etc.” was enacted, and the establishment of an open API system to promote collaboration between financial institutions and fintech companies was stipulated.
In 2019, the “Law to partially revise the Law Concerning Fund Settlement to Respond to the Diversification of Financial Transactions Along with the Advancement of Information and Communication Technology” was enacted. Cryptocurrency has been renamed to “Cryptographic Assets”, and a system has been put in place to protect users of cryptographic assets and clarify rules.
However, the legal system for FinTech is still not sufficient. In the future, we will amend the law to subdivide the fund transfer business that provides remittance services, promote financial services across banks, securities, life insurance, and non-life insurance, spread the prepaid card “Payroll Card” that pays salaries, and digital currency. It is believed that legislation regarding salary payments will be developed in Japan.
Providing new financial services requires trial and error in technology and business strategies. However, some financial institutions are reluctant to collaborate with fintech companies due to concerns about safety such as security.
In fact, the revised Banking Act passed in 2017 imposes an obligation on financial institutions centered on banks to make efforts for open APIs, but as of March 2020, banks that answered that they would “support” open APIs. Is 67.1%. Japanese financial institutions, which already have high reliability and advanced financial services, are concerned about the leakage of personal information due to API cooperation and the cost-effectiveness of system renovation.
However, according to Accenture’s survey of financial institutions around the world, FinTech’s delay in responding will result in a loss of $ 88 billion over the next three years. In the future, the promotion of innovation through the introduction of FinTech will be inevitable for financial institutions.
To that end, it is necessary to select a growth strategy that takes into consideration the balance between reliability, convenience, and cost, and to secure human resources who are familiar with finance and IT.
With the spread of FinTech, the demands on financial services are changing day by day. In the future, it is thought that not only highly versatile banking services such as deposits, lending, and foreign exchange but also services that specialize in issues in each industry and area will be required.
For example, industry-specific AI chatbots, Robo-advisors for personal asset management with investment transaction tools and donation functions, and platforms specializing in medical payments that realize patient engagement and reasonable medical expenses. To do.
Such highly specialized fintechs are called ” vertical fintechs ” and will lead the growth of the financial industry in the future. Companies need to scrutinize the insights of their target customers and use effective UX design to help solve their problems.
FinTech is the key to promoting DX for all companies
FinTech transforms various services related to “money” at the center of economic activities. Not only financial institutions such as banks but also companies in the IT and telecommunications fields that provide information systems and Web services are greatly involved. Therefore, it is important to promote corporate DX while correctly understanding the trends and significance of FinTech.
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