The first time people started using metal objects as money was more than seven thousand years ago. Almost three thousand years ago, Western civilizations began using coins.
Since then, we’ve seen how technology has developed in leaps and bounds. Still, the concept of money remains the same. Whoever has the most is the strongest. At the same time, those with it need to find ways to protect it.
Having said that, let us look at three important technology trends in the financial industry.
Online Banks and Financial Corporations
When we think about the world’s biggest banks, names like Citibank, JP Morgan Chase, Bank of America, and HSBC come to mind. These are all well-known financial institutions with plenty of history and a reputation for stability and convenience. Many of us have visited one or several of their branches to open a bank account, apply for a mortgage, or get a credit card.
Unlike these names, the Japanese consumer electronics brand Sony is known for something else. We know about the Sony PlayStation, Sony TVs, telephones, home theaters, and digital voice recorders. Yet, few of us are familiar with Sony Bank, a 2001 online-only commercial institution established by the Sony Group.
Perhaps we don’t know about it because there are no physical branches or ATMs, not a single one. Everything is done online.
With covid-19, this trend will only grow. Aside from a need for isolation and social distancing, there is no need for people to go to a bank. For the banks themselves, they can save thousands of dollars in rent and overhead costs. It is beneficial for smaller institutions, as they can spend that money on online promotion strategies like AdWords for small business services or social media campaigns.
Non-bank Monetary Transfers
Along with five other men, Elon Musk started PayPal in 1998. In 2002 the company went public and was later acquired by eBay for one and half-billion dollars. What started as an idea for hobbyists and families to send money to friends and relatives became the biggest non-bank monetary transfer system in the world.
Payoneer follows a similar story, one of a small, humble beginning that led to unprecedented success. There are many others, including Stripe, Square, Shopify Payments, and Amazon Pay.
But why is that? Why are all these financial companies emerging from the shadows or traditional banks and practically taking over the industry? There are several reasons. First, advancements in technology now allow them to provide a virtual infrastructure that rivals the safety of any government bank. As such, people don’t need to worry about their money being stolen.
Second, these businesses provide a much faster service. A conventional bank will take around three to four working days to transfer money from one country to another. An online money transfer system will do so in seconds.
Finally, it is cheaper for both the sender and the receiver. With features like “sending to a friend,” PayPal lets users in certain countries send money overseas at no cost whatsoever.
Capital One Financial Corporation is an American holdings company specializing in savings accounts, credit cards, mortgages, and auto loans. A former Amazon employee, Paige Thompson, was accused in 2019 of hacking into its system and gaining access to 140,000 social security numbers, over 1 million Canadian social insurance numbers, and 80,000 bank accounts. It is one of the biggest incidents of a security breach in history.
What this story teaches us is the growing importance of cybersecurity and data protection. It is also a warning for banks and other global financial institutions about the dangers of escalation. Like the post World War I arms race between Germany, other European nations, and the United States, escalation details the parallel development of security systems and hacking technologies.
Fortunately, at present, the “good side” is developing faster than the bad one. With the blossoming of blockchain and cybersecurity software programs like SiteLock, AppTrana, and WebTitan, banks are safer than ever before. Threats can be detected before they happen, and when they do, there is an adequate infrastructure put in place to both fight them and minimize the damage caused.
The result is a dual benefit for both consumers and institutions. For people like you and me, our information is kept isolated and safe from danger. As for financial institutions, their reputation remains intact, not to mention preventing financial losses in the billions.
Three technology trends in the financial industry are online banks and financial corporations, non-bank financial entities for the savings and transferring of money, and financial cybersecurity.
As electronic currencies like Bitcoin, Ethereum, and Ripple gain prevalence, these trends will be the drivers in all tech-related financial decisions of the years to come.