Trends in financial services are shifting more towards digital systems because of convenience and lower costs. Like most sectors, banking and finances are being made easier to use as we access our phones and the internet more and more. A necessary change to the industries is coming, like many others. Here are some things of which you need to be aware.
Cryptocurrencies Like BTC and ETH
Unless you’ve been living under a rock, you’ve heard of cryptocurrency. Unfortunately, there’s a misconception that cryptocurrency is complicated. Crypto like Bitcoin has a volatile price, but sites like Binance provide up-to-date information. Additionally, you don’t have to know how blockchain works to use crypto. You just have to know that crypto’s decentralized. A transaction doesn’t go through a middleman like a bank. So using Bitcoin, you can do anonymous transactions through a peer-to-peer network with ledger additions on the blockchain.
About the Decentralized Exchange (DEX) EDIT
Basically, a decentralized exchange (DEX) is a way to directly trade crypto and digital assets between users. Peer-to-peer trading allows people to sell assets without a middleman. Initial cryptocurrency exchanges were centralized, then decentralized later on. Unlike centralized exchanges, the decentralized exchange’s backend is accessed on a blockchain. By using DEX blockchains, all transactions are transparent. However, your personal data always remains anonymous. This way, transactions can be tracked and traced without revealing sensitive data.
Trends in Financial Services Include AMM
Automated market makers are a part of decentralized exchanges introduced to remove any intermediaries in trading crypto assets. They are fast algorithms that provide liquidity to the exchange. And because of their predictions, they have recently successfully created prediction markets such as trading and sports betting. In addition, the functional benefits of AMM mean there is a reduced risk of slippage. Slippage occurs when the price of an asset changes before you complete a trade. Automation executes trades much faster than a centralized system.
What are Digital Wallets?
A digital wallet can facilitate cryptocurrency transactions, but they’re not crypto, even though crypto is a digital currency. Instead, a digital wallet lets you transfer money from your bank account to your digital wallet. Then you can pay for goods or services using digital wallets rather than your bank card or cash. This alone makes them more secure. But each wallet also includes sophisticated security like encryption and verification. As a result, digital wallets are widely accepted in retail. In addition, you can easily transfer cryptocurrency between accounts.
MORE: The Most Secure Digital Wallets
Many digital wallet systems are in use now, and some of the best are supplied by the world’s top tech companies. For example, Apple, Google, and Amazon provide their digital wallet systems. You can use these popular and safe digital services between smartphone devices:
- PayPal: one of the oldest and most secure digital wallets in eCommerce.
- Google Wallet: Provided by Google services and accessible anywhere.
- Amazon Pay: supports multiple very fast and easy payment methods.
- Apple Pay: quick and reliable with cashback and savings options.
- Stripe: similar to PayPal but better for eCommerce businesses.
Digital wallets are becoming more popular because of their security and ease of use. You have access to multiple digital wallets at once on your phone, and you can transfer money between them easily. Along with crypto, digital wallets are the future when we eventually go cashless.
Hot Wallets for Temporary Storage
Cryptocurrency is very secure, but it can be hacked when it’s stored online. Having cryptocurrencies has its advantages and disadvantages. For example, cryptocurrency platforms are anonymous, so if you get hacked, you won’t be able to recover your money since you can’t tell where the hack came from. Wallets that store cryptocurrency online are called hot wallets. You can keep all your cryptocurrencies in a hot wallet online. Unfortunately, it’s vulnerable to hackers and is recommended for temp storage only. You need cold storage for the long term.
Cold Wallets for Long-Term Guarantees
Hot wallets are great for temp storage but are targeted by hackers. So eventually, you’ll need a more secure way to store your crypto. Cold wallets let you keep your assets offline. Since cold wallets are offline, they’re basically unhackable, giving you an extra layer of security. You can get cold wallets in two forms. One is a paper wallet, and the other is a hardware wallet. To use a paper wallet, you print out the key you’ll need to login to access your funds but there’s a chance you could lose it. Therefore, it’s better to use an encrypted USB cold wallet and keep it safe.
AI Could Drive Trends in Financial Services
Artificial intelligence and machine learning are changing the world. From manufacturing and marketing to trend prediction and banking, AI is ubiquitous. For financial services, in particular, over 80% of banks are considering using AI to reduce risk and refine functions. For example, AI can make access to services quicker and more secure. However, specific procedures are also made more efficient with AI. For instance, AI can help provide online assistance, detect fraud and assess a customer’s suitability for a loan much quicker than a human teller possibly could.
Digital Only Banking Systems
With digital systems and automation coming together, the future of banking could mean digital-only systems. The current use of online banking forces many banks to close branches and even ATM machines. So it stands to reason that within 20 years, the entire customer banking industry will be online only via websites and smartphone apps. While this is a concern to people with banking jobs, it is at the customer’s convenience at a lower cost to the company. Which is, of course, what business is all about. While it will be gradual, the change is coming.
Summary
Financial trends are changing in a big way.No longer are you forced to go to your bank or ATM. Instead, you have powerful access to the system on your phone. Some current and future changes to the sector include more cryptocurrencies and digital wallets. But AI and machine learning could also lead the way in fraud prevention and even a digital-only banking system.
