Emerging Technologies Fostering Digital Business Innovation: Finance Industry

Customer expectations are reshaping financial services: people increasingly demand mobile-first experiences, near-instant transactions, and minimal fees, with less patience for delays or friction. Power has shifted from traditional institutions toward customers enabled by smartphones, information access, and credible non-bank alternatives, lowering switching costs and weakening long-standing loyalty to familiar banking processes. New entrants have broadened what “financial services” means, while legacy institutions are being pushed to redefine themselves without assuming inevitable decline.

Three emerging technology categories—AI, blockchain, and IoT—enable “asset-light” models with high upfront development costs and low marginal costs, unlocking automation and mathematically enhanced services that can deliver major cost savings and improved customer value. Their impact is strongest when combined: IoT generates new data streams from connected devices; AI turns large volumes of historical and real-time data into insights and automation; blockchain can provide secure, auditable infrastructure and reduce reliance on intermediaries, particularly in trade finance and interbank communications.

These technologies increase the urgency of robust digital identity. Open banking under PSD2 expands third-party access via APIs but raises security requirements (e.g., MFA) and complicates user account and login management. Meanwhile, privacy pressure and regulation (PSD2, GDPR, CCPA) push organizations toward more efficient identity and data management, including blockchain-based identity architectures—especially for self-sovereign identity and reusable KYC supported by zero-knowledge proofs.

FinTechs largely compete by digitizing and specializing—offering narrower services, platform-based experiences, and cost advantages—rather than inventing fundamentally new financial products. Payments, lending, trading/credit scoring, and online banks show varying maturity, but collectively they are resetting baseline expectations for speed, cost, and accessibility. Legacy institutions can remain dominant by adopting mobile-centric platforms, modern identity capabilities, and selective acquisition or integration of FinTech solutions.

• PSD2 requires banks to make customer account and transaction information available to third-party providers via APIs.
• PSD2 defines third-party providers including Payment Initiation Service Providers (PISP) and Account Information Service Providers (AISP).
• PSD2 security standards increase requirements for multi-factor authentication.
• FinTech payment services are described as having medium maturity, with no dominant method determined yet.
• Cryptocurrency usage is characterized as niche with limited traction among mainstream consumers and retailers.
• Cryptocurrencies are described as highly volatile because their value is driven solely by demand rather than real-asset backing.
• Digital coins are described as 1:1 redeemable for corresponding fiat currency.
• 38% of unsecured personal loans in the US were made through FinTech startups in 2018, up from 5% in 2013.
• Less than 4% of US households use an online-only bank as their primary bank.
• Regtech investment tripled from 2017 to reach $3.7 billion in 2018.

• “The three key characteristics that separate FinTechs from financial institutions are that they have specialized services, create a platform, and generate significant cost-savings.”
• “Distributed ledger technologies will begin to displace intermediaries – a role that has been critical in ensuring the growth and importance of traditional financial institutions in the past.”
• “Traditional financial institutions are at risk of being displaced in managing transactions.”
• “Continual monitoring of account behavior cannot be done manually – at best AML monitoring is sporadic.”
• “The implications of blockchain integration into financial services will improve the transparency and auditability of transactions, though it will pose challenges for KYC and AML compliance.”
• “IoT comes with tradeoffs, because while the additional monitoring of quality, upkeep, and status of items will reduce the number of claims in the long run, but damaged sensors will increase the reimbursable amount of a claim.”
• “The successful implementation of IoT devices requires strong digital identity capabilities.”
• “Self-sovereign identity (SSI) is the most drastic identity use case enabled by the emerging technologies.”
• “Best practices for blockchain should be followed, such as never storing personal data on-chain.”
• “Integration of physical banking tools with mobile interfaces will be key in keeping the traditional banking sector relevant.”