Still reacting to the fallout from a major worldwide scandal involving millions of people’s personal data being harvested in an alleged bid to influence political advertising, Mark Zuckerberg’s Facebook is pressing ahead and building on its extensive portfolio.
Alongside live event streaming, shopping, messaging and job searches, Facebook’s latest string to its bow is a new cryptocurrency called Libra. It has formed the Libra Association, an independent not-for-profit membership organisation – making it the latest tech giant to enter the world of Fintech, alongside 28 Libra partners and investors including Spotify and Uber.
Slated for launch in the first half of 2020, while it works on some teething issues in its blockchain system, Libra will allow Facebook users to buy products and services or send money to people with nearly zero fees. You’ll pseudonymously buy or cash out the Libra online or at local exchange points like supermarkets, and spend it using interoperable third-party wallet apps or Facebook’s own Calibra wallet that will be built into WhatsApp, Facebook Messenger and its own app.
The news comes just before the return of London’s Fintech Week in July (4-10), which will see global attendees come together to engage in one of the world’s leading financial ecosystems, and has prompted a review of the disruptive technologies currently influencing the financial industry.
Big Tech and Banking
In an article by Entrepreneur, one of the more evident trends in Fintech is the continual entrance of big tech firms into the financial sector.
Apple Pay, Google Pay and Samsung Pay are all becoming enormously popular among smartphone users. Alibaba, China’s massive online retailer, has made significant progress with its partner, Ant Financial. Now add in the fact that major social media platforms are planning on integrating with ecommerce stores, such as the certain-markets-only Shopping on Instagram feature, and of course Facebook’s Libra, these more flexible payment methods may come to dominate online retail in the future.
AI in Finance
AI offers a highly practical way for major financial organisations to manage portfolio risk and help institutions with regulatory compliance – a task which has become increasingly time-consuming and complicated over the past several years.
AI and its application through machine learning is also being increasingly used to automate processes such as credit decision-making and customer interaction, as well as to help detect fraud and money laundering.
According to Gartner, AI will be used in 37% of organisations before the end of this year and use of AI in financial services is likely to be greater.
The Rise of Challenger Banks
A survey, commissioned by Fintech provider Fraedom, found that in response to the ongoing challenger bank threat, bankers expect their organisations to invest heavily in updating legacy systems (44%) and new technology (26%) in 2019.
With investing in new technology high on the agenda for commercial banks, the survey found that over half (53%) of respondents believe AI and Machine Learning will be the technologies to have the biggest impact on commercial banking in 2019.
Although challenger banks are on the rise, the old guard hasn’t disappeared just yet, and the traditional banks are aware of the threat the new entrants pose.
Traditional banks have the advantage of a large and well-established customer base and strong branding that still evokes associations of trust with many of their customer segments. Challenger banks will have to establish a basis for and then earn trust from consumers, if they are to become a long-term part of the banking sector.