Advanced technologies like blockchain and artificial intelligence (AI) are driving growth in the financial technology (fintech) sector.
This is according to a report published today by market analyst firm Frost & Sullivan ? FinTech: Growth Opportunities in the Global Market.
The report highlights emerging products and services, technology-enabled sub-segments, new business models, and innovations that are set to disrupt the industry.
Commenting on the African fintech front, Frost & Sullivan says the continent is known for innovations such as mPesa, one of the earliest mobile phone-based money transfer initiatives. It points out that the unique nature of challenges in Africa prompted many local participants to innovate.
In recent years, the region received funding from investors from other locations as well, indicating an interest among foreign players.
In SA, the South African Reserve Bank recently announced it would establish a fintech programme to strategically assess the emergence of new technologies in the industry, and to consider its regulatory implications.
Advanced technologies, digitisation and changing consumer demands are leading financial services companies to adopt a more consumer-centric approach, says Frost & Sullivan.
As a result, it adds, many companies have launched innovative products, services and solutions. The use of advanced technologies - which include cloud, platforms, Internet of things, AI, machine learning, blockchain and application programming interfaces - impact company operations and customer experience, says Frost & Sullivan.
It points out the application of technologies enhances the outcome of services and sub-segments like fintech platforms, robo-advisory, insurtech, regtech and paytech, which are expected to grow rapidly.
While it is early days for quantum computing, Frost notes, the use cases and experiments are extremely encouraging.
"With the number of connected devices expected to reach 40 billion by 2022, big data will significantly increase the need for cloud storage, analytics, AI and machine learning within the financial sector," says Deepali Sathe, Frost & Sullivan's ICT senior industry analyst.
"The impact will be seen across banking, wealth management and insurance, and we can expect a significant shift in how the industry operates. New business models and innovative products and services from neo-banks, insuretech and wealthtech companies will drive the change in the entire industry."
Sathe points out that factors hindering market growth include issues related to security of data, the regulatory environment and prevailing confusion, lack of skilled personnel to apply advanced technologies, and a slow pace of change.
"The industry is gearing up to meet these challenges by working together in order to create a more cohesive ecosystem, including liaising with regulators to ensure greater clarity."
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