Fintech is changing our financial lives, thanks to services like mobile banking apps and investment robo-advice.
But the technology has quickly been spreading beyond financial institutions as it finds other problems to solve. And lots of businesses have been jumping in. “Every company will be a fintech company,” is how Angela Strange of Andreessen Horowitz put it — a full year ago.
According to Deloitte, the pandemic has only accelerated the trend, pushing companies to innovate at a previously unimaginable pace. The World Economic Forum found that in 2020, fintech firms experienced year-over-year growth of 13% in the sheer number of transactions — one of the few industries to expand in a year when many businesses slowed to a crawl.
With the groundwork laid, where will we be a year from now? Here are three developments to watch for:
1. Increased focus on cybersecurity and fraud prevention
“Automating fraud management is the game changer for 2021,” Oliver Tearle, head of research at The AI Corporation, wrote in an article for PaySource last year. The traditional approach to this problem is far too manual to be effective anymore, he says, and requires almost 24/7 monitoring. But thanks to technologies like AI (artificial intelligence) and ML (machine learning), new tools can more easily recognize and flag anomalies.
These tools are helping accounting departments in companies of all sizes catch fraud before it happens. And there’s a lot to catch: According to a survey from the Association of Certified Fraud Examiners, organizations’ losses from fraud typically amount to 5% of their revenue every year. Yet it’s still hard to detect, with 43% of frauds discovered only through tip-offs, often from employees.
Think of fraud-prevention automation as offering a double ROI: It reduces losses and frees up accounting resources.
2. Tackling payroll and employee reimbursement
“Payroll is the new battleground in 2021,” wrote Ron Shevlin, managing director of fintech research at Cornerstone Advisors. And the battle could become intense as more companies wake up to the benefits of using fintech solutions to streamline payroll and employee reimbursement.
For example, when an employee travels for work, it takes an average of 20 minutes to fill out an expense report — at the cost of $58, according to the Global Business Travel Association. Plus, 20% of reports have errors, which requires another 18 minutes and $52 to fix. Of course, employees working from home have expenses, too — like purchasing office furniture and software. And over an entire company, that adds up quickly.
But with full automation, that $52 fee drops to less than $7, according to one report. Plus, there’s real-time visibility for finance departments, faster employee reimbursements, and real-time policy controls (so out-of-policy spend never happens in the first place). It’s why a large majority of executives surveyed by Forrester said that modernizing travel and expense management is “critical” to operational efficiency and employee satisfaction.
Stay tuned as more companies join the battlefield.
3. Streamlining processes with smarter AI
This will be a big year for intelligent virtual assistants, according to research from Intercom. Business support teams struggled in 2020 to keep up with customer demands and will be leaning more on artificial intelligence in 2021.
That growth will only increase in the years beyond. The market for intelligent virtual assistants is projected to skyrocket from $17 billion in 2021 to $102 billion by 2026. And as AI evolves and businesses find more uses for this technology, it will get smarter — even perhaps to the point of matching human behavior.
As it grows, so will its benefits, like cutting costs, streamlining services, and improving customer experience. And the ROI is high — typically 40 — 100% within three to eight months, according to one report.
Preparing your company
There are a few steps you can take to help your company prepare. Start by updating your business model to incorporate more technology solutions, and assess the ramifications of implementing them. Then look for technology tools that fit your culture and thoroughly train your teams in learning how to use them.
But above all, embrace change and be open to the art of the possible. Fintech is changing how business is done — fast. Don’t get left behind.