The FinTech industry is constantly evolving, especially after 2020. The pandemic kicked off a myriad of technological innovations for many industries. The financial sector was no different, as it forced them to look into automation, voice payments, and more. FinTech startups are also popping up like mad, with 5,779 startups in the US alone. Thanks to this boom, many new technologies have emerged in the FinTech sector. It's an exciting time to work in the industry, as there's plenty of new cutting-edge software and hardware. Here's a look at some of the most promising new emerging technologies in the financial world.
The Emergence of Web3
There's a lot of buzz happening about the potential of Web3 in 2022. It refers to an emerging third iteration of the infrastructure of the internet. In the beginning, there was Web 1.0, the early "Wild West" phase of the internet. It was a time of decentralized and open protocols. We're currently in the middle of Web 2.0, which is highly centralized. It's where most people now primarily do business with large gatekeeper companies in exchange for one's data.
But what exactly is Web 3.0? In a nutshell, it's a new phase of the internet that runs on a decentralized ecosystem. Anyone building a platform or an app in Web 3.0 would do so through blockchain technology. That means central gatekeepers won't own the services, but the users will. Several tech companies are now hard at work building the blockchain infrastructure for Web3.
New Uses for Blockchain Technology
Blockchain, or distributed ledger technology, has become the backbone of the digital finance world. It's the technology behind Bitcoin and other cryptocurrencies such as Ethereum. More recently, blockchain has fueled the NFT (non-fungible token) craze and decentralized finances. A blockchain is an immutable digital ledger that's nearly impossible to change once created. To create a new transaction, users must solve a complicated crypto puzzle. Solving these puzzles is referred to as "mining" cryptocurrency.
Beyond being the inspiration for Web3, blockchain is evolving in other ways. In particular, there's the emergence of Blockchain-as-a-service (BaaS) companies. Similar to software-as-a-service (SaaS), these companies provide cloud-based networks for users to build blockchain applications. Major companies are already jumping on board, such as Amazon with its Amazon Managed Blockchain.
New Forms of Encryption
In terms of security, homomorphic encryption has a lot of potential for the FinTech world. It's an algorithm that lets users perform computations on encrypted data. In other words, an organization can work with a third party while still keeping its data encrypted. The third party can also process the data without decrypting it. That's one of the most reliable ways to protect an organization's data, even while working with others.
AI and Machine Learning 'Robo Advisors'
AI technology has seen some drastic evolutions in recent years. In particular, there's been a lot of progress made with natural language processing and language generation. That's paved the way for Robo advisors at financial institutions, where users can speak to an AI to process payments. The technology is advanced enough to feel as if customers are speaking with a human teller. It's also quicker and more convenient for customers to talk instead of type. Chatbots are becoming more advanced with how they can predict customer behavior and make targeted recommendations.
The FinTech industry is going through a massive technological evolution right now. That's thanks in no small part to the pandemic, which kicked off digital transformation for many sectors. New forms of encryption, a decentralized web, and intelligent Robo advisors are on the horizon. Beyond that, we're sure to see more exciting technological innovations as we head forward into 2022 and beyond.