Financial technology has become the cornerstone of global development, steadily supplementing technological advances in several fields and industries. The automobile industry has been in a long queue awaiting its merger with the fintech industry. Auto fintech is still a novel augmentation that is steadily getting conceptualized to become a futuristic technology. Some remarkable advances in auto fintech are gradually modernizing simple activities in the automobile industry, like payments or insurance.

The amalgamation of the automobile industry with fintech is the accession of several key developments that have taken place in both industries; the key one being the Internet of Things (IoT). The introduction of IoT platforms has facilitated free-flowing communication between smart devices connected to the internet. The IoT sector individually penetrated the fintech and automobile industries, where it made its niche market. 

IoT in fintech enabled people to make payments and conduct other financial activities using devices such as smartwatches. And IoT in the automotive industry facilitated navigation, monitoring traffic, etc. The auto fintech industry comprises the best of both worlds. 

The global automotive industry is valued at more than 2.8 trillion dollars, making it one of the most lucrative industries. The fintech industry is estimated to cross $700 billion by 2030. The figures suggest that both these industries are powerful and lucrative.

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Factors Influencing the Growth of Auto Fintech

The growth of auto fintech is almost customary owing to the importance both these industries hold in the world economy. Auto fintech bridges gaps between the mundane processes involved in the automobile industry to bring efficiency and convenience. Several factors have contributed to the growth of the auto fintech industry, such as:

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Increasing Production of Vehicles

The manufacturing and distribution of automobiles have been on the rise in recent years. With the growing population, it is almost inevitable that the automobile industry should gain traction. Because of the increasing production globally, the gradual and strategic percolation of fintech has caused revolutionary advancements. Several steps in automobile manufacturing and distribution are now facilitated with technology.

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The Online Shopping Trend

The internet has become one of the most necessary media for data transfer, communication, etc. Several companies nowadays only have a digital presence, reaffirming the importance of the internet. The mass majority well-acquainted with the internet is steadily becoming more inclined to conduct their business, shopping, etc., online. Shopping for cars, motorbikes, cycles, electronic vehicles, etc., is rapidly gaining popularity. Such inclination and changes in the habits of consumers have compelled the intermingling of fintech with the automobile industry.

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Consumer Experience

With most industries trying to enhance their digital presence, there is an evident change in the expectations of consumers, their habits, and their behaviors. Consumer experience is pivotal in shaping the future of companies and industries. Auto fintech provides an improved consumer experience. The increased focus on customer satisfaction is one of the prime factors promoting auto fintech.

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EVs

Electric vehicles are gaining popularity because of numerous reasons, like climate change. The advent of fintech in the automobile industry has caused a shift in consumers’ perceptions. Electric vehicles that provide no added features or technological advancements are receiving criticism. 

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Technological Advancements

The technological developments occurring globally across the globe have found an unstoppable rhythm. Advanced technology facilitates convenience, comfort, and added benefits, like fraud prevention. Online payments, GPS tracking, etc., also make room for fraud prevention, thus, increasing the demand for auto fintech.

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Auto Fintech Trends

The auto fintech industry is still in its infancy. Several companies are conducting research and trials to identify areas that have the potential to become the next big thing. Some of the trends that have already picked pace are:

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Digital Payments

Online payments form the core of fintech. Online payment portals have been employed heavily across all the steps involved in the automobile industry, like production, procurement of material, distribution by OEMs (Original Equipment Manufacturers), insurance purchases, etc.

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Rental and Sharing

Car rentals and sharing are gaining traction because of the prevailing inflation. Auto fintech is gaining popularity in the rental and sharing business as most of these rental services are offered through online applications. 

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Parking, Tolls, and Gas

Many car manufacturers have included automated payments in the car systems that allow consumers to pay for gas, parking, tolls, etc., automatically when prompted. 

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Blockchain

Blockchain technology has already become one of the most popular fintech technologies used by big companies, like Toyota, BMW, Porsche, etc. 

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The Bottom Line

Auto fintech is an exciting industry that is becoming popular among businesses and consumers. Apart from convenience, auto fintech facilitates the steps involved in the automobile industry, like purchases, insurance, distribution, etc. The auto fintech industry is still in its initial development phase, implying a bright future for futuristic car technologies. 

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Lending is one of the oldest and most important financial and trade services provided by banks and financial institutions, playing a crucial role in the economy. Keeping a balance between lending and a well-sustained, smooth-running economy is critical to the functioning of the economy. The financial crisis of 2008 got severely aggravated by the disbalance between home loans and cash withdrawals. Therefore lending, more importantly, balanced lending, plays a critical role in the economy.

What is P2P? 

Peer-to-peer lending, also known as social lending or crowdlending, is the practice of borrowing and lending money between individuals without the involvement of banks or financial institutions. P2P platforms involve three parties, the borrowers, the lenders, and the intermediaries that provide the services. The intermediaries involved in P2P channels are not formal financial institutions but businesses that create a platform to keep money flowing between potential borrowers and lenders. 

The P2P market share has grown exponentially in recent years. The P2P market is expected to grow at a CAGR of almost 30% by 2027 and is expected to exceed $700 billion by 2030. 

The increased adoption of fintech globally is responsible for the astronomical increase in P2P lending. 

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How P2P Works

In P2P, all three parties need not interact simultaneously. The platform provided by the intermediary allows both borrowers and lenders to register by providing their personal information. Then the personal information provided by both parties is verified against their official documents by the service provider. Once the personal details are verified, the platform automatically connects lenders and borrowers according to its preset algorithms. 

Before proceeding with the transaction, the lender and borrower individually are required to accept the interest rates and fees involved in the process. The lender and borrower are required to pay a certain percentage of the loan amount to the service provider as fees, and the borrower is additionally required to accept the interest rate pre-fixed for the loan amount.

The transaction is finally complete after the borrower has repaid the loan, along with the fixed interest rate, and both the borrower and lender have paid their fees to the service provider. In P2P, because there is no involvement of official parties like banks and financial institutions, the interest rates and fees are considerably lower than otherwise. The low fees and interest rates incentivize borrowers and lenders to participate in P2P lending.

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Benefits of P2P Lending

There are several benefits associated with P2P lending, because of which its popularity has increased so enormously. All three parties benefit from the platform. The service provider earns through the fees paid by the borrowers and lenders, and the remaining two parties individually benefit from the simple services.

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For Borrowers

• In P2P lending, borrowers get the opportunity to get lower interest rates on their loan amount, which can help them save and repay much faster.
• P2P loans are alternative options for borrowers, where they can get easier access and more flexible options, compared to traditional loans.
• P2P loans offer better flexibility concerning interest rates, moratorium periods, unsecured loans, etc.
• Unlike traditional loans, borrowers are less bothered about their credit scores in P2P platforms because of their non-involvement with formal channels like banks and financial institutions.
• The process involved in P2P loans is much simpler and quicker compared to traditional channels. 

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For Lenders

• Investors lending through P2P platforms can get higher returns on the loan amount compared to other investment options.
• The platforms are easy to navigate through and register. They also provide opportunities for lenders to choose if they want to proceed with the transaction based on the borrower’s profile.
• P2P lending also allows lenders to diversify their risk potential across different loans, as the capital amount of the lender can be divided into separate loans availed by more than one borrower.

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Drawbacks of P2P Platforms

Although P2P services have gained immense popularity, a few risks and disadvantages are involved in this type of lending. 

• P2P lending platforms require mandatory credit checks on borrowers and lenders to make the platform more secure. Credit checks can filter out people with low credit scores and poor credit history.
• To avail of P2P services, both lenders and borrowers must pay fees to the service provider.
• P2P platforms are a very recent novelty in the lending industry. Their applicability depends on the availability of these services and the legislation surrounding them in different countries.
• P2P lending does not guarantee returns, which implies higher credit risk for potential lenders, as the people availing alternative lending channels are likely to have low credit scores.

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What Does the Future Hold for P2P?

P2P lending is a disruptive augmentation of the fintech world, gradually overtaking a considerable share of the traditional lending channels. The technological developments emerging in the fintech world, are rapidly changing how financial services are provided and availed. Alternative lending options, such as P2P and BNPL (Buy Now, Pay Later), are aggressively advancing toward mainstream lending channels. The P2P lending market is steadily gaining more credibility with established and popular companies joining the battalion. P2P lending is only a scratch on the surface, implying an enormous potential for disruption and growth.

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The fintech industry started as a single-product sector with the advent of ATMs (Automated Teller Machines). It then grew to include more products and services like credit cards from Visa and MasterCard. The industry’s development has been dramatic over the last few years, especially post Covid-19.

Fintech’s growth curve has always witnessed an upward trend. Before the pandemic, online payment, e-wallets, data storage, and many such platforms had already surfaced and caught the attention of a large audience. However, the pace of development before the pandemic felt average, like any other industry. 

The growth of fintech post-pandemic has seen many radical advancements, most of which have occurred in the shortest time. According to one report, the five-year development of the fintech industry in the USA occurred in about eight weeks, suggesting that the propulsion of fintech’s success has been immense.

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The Pandemic Effect

Covid-19 brought the entire world to a standstill. The uncertainties born out of the pandemic were unimaginable, with several countries responding with nationwide lockdowns. With slumped economies, the rate of unemployment grew exponentially. Mandatory social distancing combined with lockdowns wrecked the consolidated economies even further. 

Covid-19 drove the usage and reliance on the internet. Most industries strategize to augment products, services, and platforms to benefit from the reach of the internet. Online education, doctor consultations, contact-free home deliveries, and even online banking became our saving graces. Companies embraced remote working setups and augmentations that could help them sustain the pressure. Travel restrictions also caused colossal damage to the economies and businesses directly and indirectly linked with them.

The fintech industry faced unforeseen impacts with restricted investments, slower growth prospects, and cut-off beyond national borders. However, because of its connectivity, many doors of opportunity opened for the fintech industry to support and drive the global economy.

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The Opportunities in Innovation

The thwarted pace of the economies resulted in many dynamic changes that cropped up very suddenly, like remote working setups. The fintech industry was soon set on the path to recovery, which made way for innovations and newer products that would cater to the post-pandemic world.

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E-Payments and E-Wallets

The fintech industry’s major segments e-payments and e-wallets have been rendered the most rewarding segments for both the companies and their customers. Social distancing and lockdowns incapacitated businesses and consumers from purchasing and delivering products and services. Online payments became the sole survivor during the pandemic by allowing consumers to make payments without being present in person. The benefits of digital transfers and payments grew manifold because of the restrictions. As digital payment services gained traction, they opened the doors for several other augmentations like e-wallets and virtual cards. People grew into the habit of going cashless with online payments, supplemented by QR Codes, payment links, UPIs (Universal Payment Interfaces), etc. After cashless, the next in line for growing popularity came cardless transactions. Virtual card providers grew in numbers and value, which prompted the use of e-wallets even further.

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Financial Inclusion

The pandemic brought fintech’s special attention to the unbanked and underbanked section. The opportunities for innovation to bring financial inclusion to the masses that remain unbanked and underbanked for various reasons, increased. 

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Gig Economy

The gig economy never came under the limelight because of mainstream jobs and professions. During the pandemic, the focus on gig workers increased, especially, due to the introduction of mandatory remote working. The fintech opportunities in the gig economy started taking shape with fintechs stepping in to solve issues such as secure payment channels, online banking, etc.

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IoT

The Internet of Things became one of the most demanded augmentations of fintech, where people used smart devices such as smartwatches to transact and bank. Fintech’s adaptability has enabled it to find a very diverse spectrum of ideas and innovations, like IoT.

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Lending

One of the most rewarding fintech sectors was the lending sector. With most businesses coming to a standstill and people getting laid off from employment, Covid-19 brought a downwards spiral compelling people to borrow money to sustain themselves and their families. The lending business became the hottest sector within fintech, introducing instant and easy loans without the complications of traditional loans and even credit cards. Services like BNPL (Buy Now, Pay Later) took center stage, enabling people to make purchases instantly and make payments at a later date. Peer-to-peer (P2P) lending also became an instant hit among the masses, benefitting both borrowers and lenders.

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Investments

With the economy slumped, digital investments took a turn upwards. Several platforms that provided digital investment options, education, and advice, emerged to support the slackened economy and provide people with the opportunity to make gains.

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Blockchain and Cryptocurrencies

Novel technologies like blockchain and cryptocurrencies have gone through several rounds of debates to ascertain if they hold long-term potential or if they can be called a fad. Blockchains provide secure gateways and transparent, decentralized ledgers that allow quick cryptocurrency transfers, across the globe. Bitcoin gained immense popularity in 2020, with countless individuals trying to find a place on its raft. 

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The Future

The impact of the pandemic has found dominating footing in many businesses, economies, and households. Fintech is one of the few industries that have found rewarding opportunities during the glum. Its success has seen marvelous upturns since the pandemic’s onset, and today, it has become one of the most promising industries in the digital age. The scope for innovation and eventual disruptions in fintech is vast, and it’s only a matter of time before it becomes an essential part of our lives.

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The financial industry has been undergoing remarkable changes since the emergence of fintech. The fintech industry has come as a wave ready to submerge most, if not all, financial processes and activities under its depth. With the growth in the supply and demand for technological developments, there has been an open road awaiting fintech’s outrageous but impressive stunts.

Because of its vast potential and unimaginable scope, the fintech industry has become one of the most lucrative industries. Technology has substantially lessened the restrictive paradigm of national boundaries, making way for closer connections between countries and populations. With improved connectivity and colossal scope, fintech companies are now in cut-throat competition, compelling more intense innovation, application, and adoption of fintech.

A few countries with technological leverages and strong historical positioning have become world leaders in fintech, like the USA and the UK. Silicon Valley in the USA has been home to many techs and fintech giants, like Apple, Meta, etc. Similarly, London has attracted enough attention and traffic to become the second biggest leader in the fintech industry.

However, other fintech hubs, like Singapore, Japan, China, etc., are relatively newer but rapidly growing. The fintech scenescape in Singapore has made it the fourth largest fintech hub in the world. China has a strong hold on the fintech industry, with global giants like the Ant Group in its corner. Even though small in size, the Japanese fintech market strikes as a fresh and promising affair because of Japan’s technological capabilities. 

Japan is the third largest economy in the world, after the USA and China. However, the country is much smaller in size and population compared to its more successful counterparts. While the American population is just over 330 million, and China remains the most populous country with a population of 1.4 billion, the Japanese population is only around 125 million. Such demographics suggest that the Japanese economy is much stronger than these numbers.

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Fintech in Japan

The Japanese fintech market is successful however, it is also bound by several obstacles that have stunted its growth. Tokyo, the capital city of Japan, has been one of the most prominent players in the global economy. Being both financially and economically strong, Tokyo has been home to several fintech startups, some of which are successfully competing at the global level. Tokyo is one of the hubs of financial companies and technological advancements. Tokyo has reported the highest GDP of $1600 billion globally, followed by New York, with a GDP of $1400. Such financial positioning and global leadership suggest an enormous potential. 

The Japanese fintech market has received one of the highest venture capital investments summing up to more than $90 million. Only a handful of countries have high investment values, like the USA, Singapore, the UK, etc. Japan boasts more than 1500 financial institutions, making it an integral part of the global financial system. 

Although the Japanese market has a strong global position with promising potential and scope, it is faced with challenges impacting its fintech journey. 

One of the most challenging points for the Japanese market is the inflexibility attached to innovation. The fintech industry is rapidly evolving, compelling companies to innovate and ideate novel concepts. The cultural setup in Japan proves slightly more rigid than average, which bars random streaks of innovation that could prove disruptive to the traditional financial systems in a good way. The culture and government both, require people to improve and optimize the existing systems to achieve maximum efficiency.  

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Analysis of Reasons Influencing Fintech Development

Several factors influence the reach of fintech and its development. The fintech hubs like Hong Kong, Silicon Valley, London, etc., commonly share most of these factors allowing them to function seamlessly. Assessing these factors gives added insights into the topography of the Japanese fintech market.

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Government Policies

Government support in Japan has received a high rating, implying that the government has set up policies and reorganized its systems to propel the success of fintech and the easy functioning of fintech companies. However, compared to the freedom associated with policies in the UK or Singapore, Japan seems slightly far off in providing the ideal ecosystem to incubate fintechs. 

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Innovative Capabilities

The Japanese population is known for its extraordinary talent and innovative capabilities vis-à-vis technology. The Japanese have found an exciting industry that promises a grand future in fintech. However, the Japanese culture of optimizing existing systems before stepping into new branches overpowers the freedom required for pronounced innovation. 

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Adoption Rate

The adoption rate of technology in Japan is one of the highest in the world. With several other industries also slightly more technologically advanced compared to the rest of the world, Japanese technological adoption is substantially higher than average. However, new technology brings change to older systems. The average age of the Japanese population is almost 50, which is older than its competitors. Psychologically it is easier for the younger generations to adopt new technologies and accept changes than for older ones. Thus, with the rapid developments taking place globally in the fintech industry, the Japanese population remains divided. Its technological leverage prompts the adoption of new technologies, however, its psychology limits this acceptance.

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Overseas Partnerships

The Japanese are known for their strong culture and belief in self-sustenance. Such cultural strongholds influence the entry of overseas business providers and global partnerships, which could substantially help in the fast expansion of fintech firms. 

Top Fintech Companies in Japan

Kyash – Digital-only bank application and e-Wallets

Paidy – Buy Now, Pay Later provider

PayPay – Online payment portal provider

Coincheck – Cryptocurrency platform

Freee – Accounting software and financial services provider

Quoine – Cryptocurrency exchange platform provider

Money Forward – Personal finances management platform provider

Most Prominent Fintech Segments in Japan

Application Programming Interface (API)

APIs allow communication between different applications and software, which enables consolidation of services, like traditional banks offering online services. APIs have gained tremendous popularity in the Japanese market to cater to cloud accounting and payment services.

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Artificial Intelligence (AI)

AI involves designing machines to read, analyze, and interpret human behavior, which gives several insights into customer and product journeys. AI is an advanced technology that is surfacing in almost every industry now. Japan’s technological links have incentivized them to become frontline players with AI.

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Blockchain

Blockchain technology is the newest rapidly emerging technology globally that has caught the attention of the mass majority. Blockchain technology provides decentralized platforms for storing, using, and transferring cryptocurrencies. Several Japanese fintechs have released their crypto wallets, cryptocurrencies, and platforms allowing easy cryptocurrency transfers.

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Closing Words

The Japanese fintech market is one of the most promising segments on the global fintech map. Japan has been home to many financial institutions because of its expertise in technology and innovative capabilities. The level of investments flowing into the Japanese fintech economy has been one of the highest compared to the global fintech leaders and emerging hubs. Fintech has immense scope and potential for growth and advancements, which are well-complemented with Japan’s innovative capabilities.

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The success story of the fintech industry has reverberated through almost all corners of the world. Fintech has engaged the attention of the mass majority of people, businesses, and industries, resulting in stupendous growth. Of all countries participating in the magnification of fintech, a few countries have attained enough expertise and experience to be rendered, world leaders. The United Kingdom is the second biggest leader in the fintech industry.

The UK has been one of the prime fintech markets since the advent of the conglomeration of finance and technology. Because of its deep-rooted connections with fintech, the UK has had the opportunity to develop the four main segments that control and guide the prospects related to a particular industry or market within a country. These four segments are:

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Availability of Talent

The talent vis-à-vis the fintech industry is available in plenty in the UK. From universities to corporate offices, fintech has percolated to the deeper levels of society that have enabled the development of a highly talented population excelling in the fintech industry.

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Inflowing Investors

Because of the ideal ecosystem prevalent in the UK market, investors have found a lucrative corner where talent and ideas are abundant, ensuring that the UK remains a global leader.

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Government Policies

The policies strategized and implemented by the UK government focus on the growth of the fintech industry and the level of investments that fuel its success. The UK government has propelled its stance in the fintech industry by incentivizing capital investors.

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Adoption and Demand

The people living and residing in the UK have been well-acquainted with technology and related industries like fintech. Since the 2000s, the UK population has been exposed to the advantages and convenience of fintech, empowering them with first-hand knowledge of the various benefits that come with it. Such empowerment has spiked the demand and rate of adoption, making way for more innovation and novelty in fintech.

Apart from these factors, the UK government has also been focused on diminishing boundaries and creating bridges with other potential fintech-associated hubs like Hong Kong, Australia, etc. Because of its historically strong position and past European orientation, the UK has numerous virtual benefactors influencing its positioning as one of the world fintech leaders.

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The Topography

Although small area wise, the UK fintech market comprises one superhub and several smaller hubs, which create an enormous conglomerate of fintech firms. The topography of the UK fintech landscape is well-balanced, with London as the superhub.

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London, the Suber Hub of Fintech

The capital city of London not only has massive historical importance on the world map but is also the second highest contender on the map of fintech after Silicon Valley. London compromises almost 75% of the total number of fintech firms in the UK, with almost 94% of the country’s fintech investments flowing into the city. Fintech giants like Wise, Revolut, Checkout.com, Monzo, Starling Bank, Blockchain.com, and many more are located in this superhub and have contributed immensely to setting the scene for successful fintech. The London supremacy vis-à-vis fintech is unmatchable because of its pivotal positioning as the attraction for capital investors. 

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Smaller Fintech Hubs

Apart from London, the UK is also witnessing the emergence of several smaller hubs located in a distributed manner across the country because of their proximity to London and comparatively lower costs to the capital city. Manchester and Leeds have cumulatively attracted fintech startups to base their businesses. Similarly, Scotland, Birmingham, Cambridge, Newcastle, Reading, Wales, etc., are also rapidly building up their fintech ecosystems to invite and accommodate more fintech development.

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The Challenges 

The UK fintech market is well established and thriving. However, the fintech landscape in the UK has its own set of challenges that hamper its pace of growth. 

One of the prime factors posing a challenge is the growing global competition. With the emergence of the upcoming fintech hubs like Brazil, India, etc., and the existing leaders like the USA, China, and Singapore, the UK market is feeling the pressure of dilution. Another prime factor that is disrupting the flow of fintech progress everywhere is cybersecurity. Cyber crimes and attacks are becoming increasingly prevalent with the adoption of fintech and the growing participation of users.

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The dilution of talent is another key factor that poses a potential threat to the UK fintech market.

Top 10 Fintech Companies in the UK

Checkout.com – Digital payments platform provider 

Revolut – Digital-only bank

Monzo – Digital-only bank

Starling Bank – Digital-only bank

Wise – Money transfers and online payments

Atom – Digital-only bank

Zopa – Personal loan provider

Blockchain.com – Cryptocurrency platform

Clearbank – Banking facilities provider

Tandem – Digital-only bank

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Leading Fintech Streams in the UK

Fintech is like an enormous umbrella that has several subdivisions. Each of these subdivisions holds the potential to become individual niches, like BNPL (Buy Now, Pay Later), e-Wallets, e-Payments, digital insurance and investments, digital asset management (DAM), and many more. The UK market is predominantly a global fintech leader, implying that most of these fintech streams are prevalent in its landscape. However, the five most prominent fintech segments dominating the UK are:

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Lending

The lending sector has been the most successful of all. The market has seen a remarkable rise in lenders and borrowers alike, making way for different levels and types of loan platforms that cater to a wider audience on both ends. Peer-to-peer (P2P) lending applications, like Amigo, have gained tremendous traction among fintech users. Iwoca is one of the prime players in the industry today that offers short-term loans and risk assessment services. OakNorth Bank is also a key lender actively participating in the UK economy.

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WealthTech

Wealth management applications and services are increasing in importance globally. WeathTech comprises asset management, investments, assessment and risk analysis, guidance and advice, etc. WealthTech has gained immense popularity in the UK in recent years, with companies like 

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Challenger Banking

Digital-only banks, also called neo banks or challenger banks, have revolutionized the banking system. Challenger banks advocate the existence of 24*7 services, better control and power in the hands of their customers, and secure digital platforms that allow easy banking. Such challenger banks, like Munzo, Atom, Starling Bank, and more, have revamped the UK banking system.

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RegTech

Regulations and compliances are an integral part of the financial system. The fintech industry must have strict regulations, standards, and regulatory systems that oversee the application and abidance of nationwide and international regulations. The UK market is well-established, implying that its regulatory system is more advanced than its lesser experienced counterparts. The UK has also pioneered the creation of regulatory “sandboxes” that allow new firms and technologies to float in the real market to gauge their success rates, improvement areas, and other KPIs (Key Performance Indexes). The concept of sandboxes is rapidly gaining traction in other countries as well. 

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InsurTech 

The insurance sector has been a pain point for most consumers because of the tedious processes involved in assessing and choosing the best one. InsurTech has disrupted the market by bringing in platforms that remove these pain points and provide convenient alternatives. With the rise in the commodity market, the insurance sector has witnessed an evident spike globally. The UK market to has an advancing InsurTech segment, with companies like 

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The Future of Fintech in the UK

Fintech in the UK has had an incredible trajectory with giants like Munzo, Revolut, Wise, Blockchain.com, etc., in its corner. Fintech has tremendous scope for advancements with technologies like artificial intelligence, big data, cloud computing, etc., making its mark in almost all financial segments. The UK fintech market is one of the biggest markets because of the quality of services, innovative capabilities, and expertise in technology. London is the second biggest fintech hub in the world, implying that the network of fintech firms in the UK has evolved due to its ideal ecosystem offering the perfect combination of talent, capital investments, government support, etc.

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The fintech industry has transformed into the goliath of technological developments. Numerous startups have emerged globally because of the immense potential and demand for fintech. There has been an explosion of new technology and innovation because of the excessively growing competition in the industry.

IoT, short for the Internet of Things, is one outcome of the explosion that has gained tremendous importance because of its novelty, sense of originality, and practicality.

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What is IoT?

IoT comprises a network of various devices connected to the internet. The internet link with these devices is the medium of communication, and the devices are varied objects like speakers, fridges, watches, locks, etc., that are internet-enabled. These devices are designed to transmit, store, and process data, for executing instructions and data analysis.

The number of devices currently connected to the internet is more than seven billion. IoT has become one of the hottest sectors within fintech, building a niche market in the consumer electronics department. Consumers these days are heavily reliant on technology, making them more receptive to novel technologies like operating the internet using objects other than their phones, tablets, and laptops.

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IoT in Banking

Digital financial services and products have revolutionized the banking and financial industries. The first and most commonly used IoT platform is the ATM (Automated Teller Machine). ATMs have been in use for many years now. 

IoT devices are the newest augmentation to the concept built around ATMs where consumers can use smart devices, such as their watches, speakers, and car systems, to conduct transactions and other activities.

The fintech industry has found an imminent addition with IoT stepping in.

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How Banking Can Take Advantage of IoT

There is a lot for the banking industry when it comes to fintech. IoT offers several augmentations to the banking industry that could potentially become mainstream methods enhancing the efficiency of the industry, the variety and viability of services and products, and customer experience. Some of the ways by which the banking industry can benefit from IoT are:

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Cashless and Cardless Payments

IoT enables consumers to pay digitally using smart devices without cash or cards. Some methods by which IoT consumers transact and conduct banking include paying for monthly subscriptions, placing online orders through prompt messages received on the devices, etc.

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Wearable Devices

IoT comprises a diverse range of internet-enabled smart devices that come inbuilt with different functionalities, data storing capacities, and technologies. Some IoT devices come in wearable forms, which can be used longer, and for a wider range of functions like tap-and-go payments or e-wallets. Such functionalities supplement banking services in a more convenient and fun way.

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Key Data Insights

The devices used in IoT platforms are designed to store and process data. Banks can use the data collected through these devices for analyzing human behavior, consumer needs, trends, and potential possibilities to enhance customer services. Artificial intelligence has become the go-to technology for most fintechs and fintech-powered banks. 

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Customer Experience 

Banks and financial institutions can substantially enhance their customer experience by studying and analyzing their demands, queries, pain points, etc. They can also offer their customers personalized gamification experiences, which could help build stronger customer relations.

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Automated Customer Verification

Banks can employ IoT devices to conduct verification, eKYC, user privacy, etc., to provide securer services and platforms. Innovative technologies like wearable digital identification, a concept by Nymi, are increasingly becoming a game-changer in the cyber security sector.

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Improvement of Products and Services

By assessing the pain points and demands of their customers, banks have the opportunity to improve their products and services. Planning and strategizing products is an essential part of a successful business plan. Banks can considerably enhance their services and products by taking advantage of key insights into consumer behavior and needs.

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Real-time Communication

Banks can employ IoT platforms to offer real-time 24*7 customer services to their consumers. Chatbots have gained prominence across different industries because of the enhanced customer experience. IoT platforms can also employ facilities like chatbots that provide real-time customer service for banking platforms.

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Voice Instructions

IoT devices are operated through touchscreens, voice commands, etc. Nowadays, IoT devices allow customers to give voice instructions to their smart devices, through which they can also conduct banking and transactions.

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The Challenges

Although the IoT industry is rapidly expanding its customer base, several challenges pose a threat to the industry’s growth and future. Cyber security is one of the main obstacles that hinder its success. Controlling cyber attacks and ensuring secure media and channels is essential with the growing cases of cyber crimes. 

Another challenge the IoT industry faces is the lack of systemization across different IoT devices and platforms. Customers can choose IoT devices as per their needs and budgets. Most of these devices are designed differently, making way for countless ways of data storage, management, etc. Such an unoptimized system creates problems and leaves gaps for data manhandling, cybercriminals, etc.

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Closing Thoughts

The IoT industry has become a rage in our digital age. Interacting with different devices to conduct transactions, make purchases, and carry out numerous other activities is convenient and fun. Consumers, especially younger generations, enjoy diversifying their engagement portals with technology. The growth of the IoT industry has seen incredible heights in the past few years. It is only a matter of time before the world of IoT expands enough to accommodate a much wider range of operations and commands, thus ensuring an impressive growth chart.

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