Today’s world of consumer finance is rapidly evolving. But, according to experts like Dan Schatt and others, the industry is being disrupted by enthusiastic people about creating applications that support financial transactions. These new types of entrepreneurs are motivated to design simple software solutions that will enable us to complete everyday tasks with greater speed and at a lower cost.
The following is a list of 7 technologies that are disrupting the finance sector:
There are now about 30,000 apps associated with financial transactions (e.g., PayPal, Venmo). Moreover, the number of these types of apps is likely to continue growing exponentially to meet a world full of people who are eager to execute these types of transactions.
2) Financial APIs
Financial APIs will play an important role in the “Internet of Value.” This is a future state where money can be moved effortlessly between two entities using blockchain technology and some financial API. This revolution will likely put pressure on the current business models of traditional financial institutions that are not able (or willing) to enhance their capabilities with these types of technologies.
3) Blockchain Technology
The most significant feature of blockchain technology is trustlessness, which allows strangers to communicate and transact without using any intermediary. Although this technology still has many limitations (e.g., speed, power), blockchains (a type of distributed ledger) are likely to gain momentum as more people become aware of its benefits.
Although there is some debate about whether bitcoin will continue to be the dominant cryptocurrency over time, it’s clear that additional digital currencies will enter the market in one way or another. Ultimately, cryptocurrencies will develop into “the future of money,” which will enable us to complete simple transactions in real-time with very low costs.
5) Security Tokens
Likely, security tokens will soon be issued on top of blockchain technology, representing a disruptive transformation for how financial securities are bought and sold. In other words, this type of token could eliminate the middleman (e.g., a stock exchange or investment bank) from many transactions, especially those that require additional steps today (e.g., clearing and settlement). Instead, these functions could probably be executed automatically via smart contracts built into security tokens. In theory, this should greatly reduce the cost associated with completing finance-related transactions while avoiding potentially dangerous errors.
6) Artificial Intelligence
Artificial intelligence is already beginning to play an important role in the world of financial services. For example, over 20 hedge funds now rely on AI for investment decisions. In addition, numerous banks and other types of financial institutions worldwide have started investing in AI solutions and hiring data scientists to identify new ways to apply these technologies within their operations.
7) Social Media Technology
Social media technology plays a growing role in the finance sector by improving access for investors, entrepreneurs, and everyday consumers with greater speed and lowering costs (e.g., crowdfunding). The next generation of social networks might also be used as powerful tools for verifying claims made by people (“truth coins”).