Financial technology, or fintech, has taken the finance industry by storm in recent years, and for good reason. The next generation of wealthtech has emerged, and it is changing the way we think about finance.
Fintech is making finance easier, more efficient, and less expensive than ever before. Here's a closer look at how fintech is changing the financial world.
What Is Wealthtech?
The use of technology to provide financial services and solutions to individuals and businesses is known as wealthtech. It is a subset of fintech concerned with investment management, wealth management, and personal finance.
Robo-advisors, digital wealth management platforms, and online investment platforms are examples of wealthtech solutions.
What Impact Does Fintech Have on Finance?
Fintech is changing finance in a variety of ways, including:
- Fintech firms are using technology to reduce the costs associated with financial services. Robo-advisors, for example, provide investment management services at a fraction of the cost of traditional financial advisors.
- Fintech is increasing access to financial services for individuals and businesses that were previously underserved by traditional financial institutions. Online lenders, for example, are providing loans to small businesses that would have been denied by traditional banks.
- Improving Efficiency: Fintech is streamlining financial processes and shortening their completion times. Digital wealth management platforms, for example, enable investors to manage their portfolios online, saving time and eliminating the need for face-to-face meetings with financial advisors.
- Increasing Security: Fintech firms are employing advanced security measures to safeguard sensitive financial information. Biometric authentication, for example, is being used to verify users' identities, lowering the risk of fraud.
What Will the Next Generation of Wealthtech Solutions Look Like?
The following are examples of the next generation of wealthtech solutions:
- Blockchain technology is being used to improve financial transaction security and transparency. Blockchain can provide a tamper-proof and decentralized financial transaction ledger, lowering the risk of fraud and increasing trust in financial institutions.
- Artificial Intelligence (AI): Artificial intelligence is being used to improve financial decision-making processes. Artificial intelligence-powered robo-advisors can provide personalized investment advice based on a person's financial goals and risk tolerance.
- Big Data is being used to gain insights into consumer behavior and preferences. This data can be used to tailor financial services and solutions, enhancing the customer experience.
- Open Banking: A system that allows third-party providers to access financial data from banks and other financial institutions is known as open banking. This system can give consumers a more complete picture of their financial situation, allowing them to make more informed financial decisions.
What Are the Advantages of Wealthtech?
Wealthtech has the following advantages:
- Lower Costs: Wealthtech solutions are frequently less expensive than traditional financial services, making them more accessible to individuals and businesses with limited financial resources.
- Access: Wealthtech solutions make financial services more accessible to underserved populations, such as those who do not have access to traditional financial institutions.
- Improved Efficiency: Wealthtech solutions streamline financial processes, shortening completion times and improving customer experience.
- Wealthtech solutions use advanced security measures to protect sensitive financial information, lowering the risk of fraud and increasing trust in financial institutions.
What Are the Wealthtech Challenges?
Wealthtech's challenges include the following:
- Regulatory Issues: As financial institutions and regulators struggle to keep up with the pace of technological change, the rapid growth of fintech has created regulatory challenges.
- Wealthtech solutions are vulnerable to cyber attacks, which can compromise sensitive financial information.
- Wealthtech solutions frequently collect large amounts of data, raising concerns about data privacy and how this data is used.
- Integration: Wealthtech solutions must be integrated with existing financial systems and processes, which can be a time-consuming and complex process.
- Education and Awareness: Individuals and businesses must be educated on the benefits of wealthtech and how to use these solutions effectively.
What Will Be Wealthtech’s Trends Going Forward?
There are several trends that are likely to shape the Wealthtech landscape. We’ve highlighted 4 of the most important ones.
Customer centricity through new AI-backed investment avenues
Whether it’s simple portfolio optimization or complete investment strategies, mass personalized investing products will surely be a hot new trend going forward.
In fact, Artificial Intelligence opens up new possibilities within the realm of investing as it is able to optimize portfolios, benchmarks, provide new ways of assessing active risks, deliver alternative models, and automate investment processes.
There is, however, a caveat: technological architecture. In order to deliver scalable, mass personalized products, there needs to be seamless processes in terms of market data integration, operational processes, and core systems. API services as well as cloud computing services are likely to stand to gain here.
ESG
Environmental, social, and governance factors are worthy trends to consider when discussing where investing and personal values meet. Value-oriented investing is likely to be on the rise and investing accordingly to one’s personal preferences and/or core values isn’t just a passing fad.
Digitalizing real-world assets
Assets which are represented in any sort of digital form rather than assets which are crypto native, is something everyone should have on their radar.
There is a massive push for tokenized assets within the crypto universe and while still a nascent technology, the crypto crowds have shown us, time and time again, that they can come up with clever and disruptive ways of rethinking finance.
As such, smart contracts, DLT (distributed ledger technologies), and NFTs are something to look out for.
Wealth-as-a-Service (WaaS)
With modern tech platforms, it won’t be long until an open wealth ecosystem comes along to help wealth managers better serve their clients.
Conclusion
The next generation of wealthtech is changing the face of finance as we know it. Financial services are becoming more accessible, efficient, and cost-effective than ever before thanks to advances in fintech.
The advantages of wealthtech are obvious, but there are some issues that must be addressed. Financial institutions and regulators must collaborate to develop a regulatory framework that promotes fintech growth while protecting the security and privacy of financial information.
Wealthtech has the potential to change the way we think about finance and investing as it evolves, making it more inclusive and accessible to all.
