Twenty-five years ago, the idea that you'd use an application on a mobile device to pay for a cup of coffee was beyond imagination. Today, not only is that type of transaction possible, but it's become commonplace. Put it this way: Financial technology—simply referred to as fintech—has changed the way people bank and will continue to do so.
"Fintech is improving the banking experience in so many ways, and it's only going to accelerate," says Secil T. Watson, Head of Digital Solutions for Business at Wells Fargo Bank. Transactions that once took days or weeks now take minutes, or less.
Wells Fargo is using fintech—a term that refers both to the tools that make banking more efficient and convenient for customers and to the industry of start-ups and firms that help us do that—across the company.
Here are five examples of where fintech is in use today, and where it's headed.
Fintech advancement #1: Biometric authentication
What is it? A better way to verify identity, using unique biological characteristics such as fingerprints, eyes, voice, and facial features.
What can it do? Allows access to secure information and transactions in a more convenient and secure way.
The bottom line: "The day is coming when we will eliminate passwords," Watson says. "They can be stolen, hacked, forgotten—they have all sorts of issues. Your voice, your fingerprint, your eyes: These are all you. They are secure and more convenient."
Fintech advancement #2: Advanced analytics
What is it? The ability to gather, organize, and interpret huge amounts of data.
What can it do? Allow very fast, thorough studies of a set of actions—or transactions—to find anomalies and patterns that can be used to improve service or make predictions.
The bottom line: This is currently in use across our business to improve operations and customer service. One example of many: Using analytics to flag unusual activity, such as email scams, and alert customers.
Fintech advancement #3: Artificial intelligence (AI)
What is it? Broadly, the capability of a computer to imitate human intelligence through machine learning, natural language processing, analytics, and automation.
What can it do? Right now, its impact is most felt in making systems more efficient; in providing deep analysis of lots of data, in communication tools such as chatbots, and in some investment tools.
The bottom line: "Chatbots are an example of AI making banking more efficient, personalized, and even secure," Watson says. "AI has made—and will make—our staff more efficient and smarter, and will improve the customer experience with better service." Watson also envisions a day when loan decisions could be made instantaneously thanks to AI.
Fintech advancement #4: Application programming interfaces (APIs)
What is it? Software code that allows independent systems to communicate with each other, seamlessly and securely.
What can it do? Share information, speed up payments and settlements, and improve the delivery of information on (and about) branch and ATM locations.
The bottom line: "We have a lot of APIs that we're using, and even more that we're developing," Watson says. "APIs make it easier to communicate electronically and share data within the bank, with our customers, and with our fintech partners." One example: Customers who use account aggregation services for financial planning don't have to provide their passwords to third parties that utilize an API with Wells Fargo Bank to share their banking data. These programs can access transaction data with the customer's consent directly from the bank, and much more securely—through an API.
Fintech advancement #5: Distributed ledger technology (DLT)
What is it? A shared platform that creates a trusted source of data directly between transacting parties in network. Blockchain is just one example.
What can it do? Allow real-time clearing and settlement, eliminating intermediaries, reconciliations, and delays in financial transactions.
The bottom line: "It's still in its infancy, with issues around scalability and information security, but in Innovation Research and Development, we are experimenting with how it could allow us to digitize and share standardized data, remove reconciliation processes, and obtain greater transparency among transacting parties," says Laura Fontana, Strategy Consultant at Wells Fargo Bank and leader of the DLT program in the Innovation Group. "Many banking services are rife with non-standard data, manual documentation and multiple system hops or third parties that contribute to the lag and risk in the settlement of a transaction. A distributed application and real time shared data network could make anything from payments, trades, loan closing and syndications, or any finance agreements more instant, transparent and assured."