In today's fast-paced world, industries and businesses are continuously challenged to either evolve or remain attached to outdated practices. Our current financial system is one of those industries that struggles to move forward. Access to financial services are still costly due to fees and constant delays, therefore the system is highly exclusive rather than inclusive. Financial workflows require a lot of manual processes because it’s paperwork based, turning it into a very bureaucratic and often inefficient system. Additionally, the financial services ecosystem is extremely centralized and utilizes intermediaries and service providers on a regular basis. As a result, the system as a whole is slow, complicated, and as a result, constantly facilitates opportunities for fraud and crime.
Blockchain implementation in the financial industry
Expected benefits of blockchain include transparency, a decentralized environment, high security and transparent peer-to-peer transactions, to name a few. Despite the financial industry’s resistance to change, blockchain is a technological advancement that financial institutions can no longer ignore; rather these large institutions are starting to recognize the potential value for blockchain to be implemented throughout a wide range of financial processes. In banks,
blockchain technology can improve international payment efficiency (transaction speed) by allowing faster payments to process at lower fees, which eliminates the need for intermediaries. Blockchain also ameliorates trading derivative
operations because of the use and integration of smart contracts that allow parameters and requirements to be programmed into the digital contract, enabling automatic transactions for the execution of commercial agreements efficiently. In addition, blockchain enhances the alternative fund industry
directly, as the industry is plagued with inefficiency
and opacity. Alternative investments (also referred to as “Alts” or “Alternatives”) are non-traditional investments that tend to have very low correlation to the stock market, with high minimums and accreditation requirements for investors. Blockchain provides a key solution to further enhance transparency, security and compliance to an industry that significantly lacks it. Finally, remittance services
are used by millions of people around the world who rely on services such as Western Union or MoneyGram to send money across borders. Blockchain based applications allow everyone, including people who do not have easy access to remittance-service companies, to send or receive money without having to leave their homes, pay ridiculously high fees, or wait weeks for funds to transfer.
Growing interest in crypto funds
A crypto fund is a hedge fund in which the investment strategies are based on crypto assets. The premise behind creating a crypto fund is to make it easier for investors to access and navigate through the crypto investment market, by deferring to a professional crypto manager. The goal of the fund is to produce gains based on investments in cryptocurrencies and ICO’s.
As with traditional fund managers, the core job of the manager is to create a specified risk-return strategy and utilize as much information as possible to yield the results that investors expect.
Fintech trends within the financial system
An estimated $1 trillion
could be saved by 2030 across front, middle and back office functions by implementing Artificial Intelligence and Machine Learning in the banking, investment management and insurance industries.
While it’s unlikely that the human touch will completely dissipate, several front office AI solutions are being developed such as chatbots, voice assistants and advanced authentication and biometrics, all aiming to enhance the customer experience. As demographics change, voice/chat functions will become more crucial to connect with users (IoT - Internet of Things and the beloved, Alexa). Natural Language Processing allows these systems to interpret human language in order to understand and effectively fulfill client inquiries. Companies are even working on combining voice technology with 3D rendered avatars to bring a more human element to the customer experience. Implementing biometrics in the authentication process will provide further efficiencies as transactions and other functions can be verified through thumbprint or facial recognition.
There is a huge opportunity for advanced big data analysis using Machine Learning algorithms, specifically in the insurance, investment management, and lending industries. Within the insurance space, algorithms can be created to make better underwriting decisions and be able to incorporate unstructured data sets on the claims side, such as pictures and healthcare records. The investment management space is still learning how to unlock the full capabilities of AI. There are many quant funds working on trading algorithms to detect inefficiencies in the market and automatically capture the found alpha. Much like the insurance industry, lending can be optimized through advanced data analysis to assess risk and price loans more accurately.
For decades, the financial industry functioned in the same, traditionally slow, and bureaucratic way. Many executional elements in the financial space are still considered manual and require the participation of numerous intermediaries and service providers to guarantee security and transparency during financial transactions. Blockchain technology eliminates bureaucracy and provides increased efficienciencies by cutting out the need for a middleman and allowing faster transactions, while AI algorithms have the ability to analyze and process large amounts of data in a shorter amount of time. The blockchain and the capabilities of AI solutions and machine learning have the ability to bring transparency and security back to the industry, while updating old fashioned practices and providing efficient, low cost services, accessible to everyone in the world.
Natasha Bansgopaul is the Co-Founder and Chief Operating Officer (COO) of THE Global Award Winning FinTech Platform, DarcMatter (DM). Bansgopaul holds an MBA in Marketing, Entrepreneurship, and Strategic Leadership from The Pennsylvania State University, and is the university’s 2010 Bunton Waller Scholar. In this role, Natasha has successfully lead the company through various startup competitions and conferences, resulting in global awards and recognition such as, NextMoney Global FinTech Finals, "Best Growth Stage FinTech Company", Korean Startup Grand Challenge (Top 4 out of 120), and HFM Technology "Best FinTech Solution for Hedge Funds".