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Financial technology - FinTech

 Ana CanteliWritten by Ana Canteli on 03 August 2018

Financial technology or FinTech is a new financial services sector that applies technology to improve financial activities. New applications, processes, products or business models, composed of one or more complementary financial services, providing end-to-end management via the Internet, are the elements that define and configure financial technology.

The financial technology was originally used to automate processes in insurance companies, commercial intermediaries or risk management internally, within corporations. This disruptive innovation for the traditional financial institutions was introduced by FinTech startups or financial technology companies, but at the same time, large financial entities started to develop their own FinTech digital businesses. Disruptive changes are those events that force, in this case, the financial services industry to rethink its strategy in the sector.

The consumer profile has become more demanding, more technologically experienced, more sensitive to the applicable privacy policy and demands the integration of the banking industry and wealth management in the FinTech world. This has meant that leading financial institutions and financial advisors in the financial services industry have had to react to the increased competition to participate in the new methods of engaging & customer retention; what has involved the investment of millions of dollars in the legacy systems replacement and development of their own FinTech innovations in the framework of digital transformation. New business models are specializing in areas such as sales, marketing, cognitive use, personal finance, financial advice, operating models, taking into account the legal notice and the applicable privacy policy, which influences the management of big data that can be obtained through the FinTech innovations.

On the other hand, it must be borne in mind that the introduction of traditional financial services industry in the FinTech investments is not exempt from threats since FinTech companies specialized in biggest trends on customer experiences - mobile banking, blockchain - continue to propose disruptive technological changes in the sector. This means that the classic banking entities are forced, not only to maintain their digital efforts but to increase them and extend them to reach where the technological disruptors appear. These third parties, independent providers of new technologies, can offer banks and traditional financial institutions new processes, based on the consumer experience, causing banks to lots the control over the customer experience.

The banking sector is seen as one of the industries most prone to disruption motivated by FinTech advancements since it is based more on information than on tangible products. In particular, the distributed ledger technologies represents a revolutionary change in the business models.

The distributed ledger is a database, which would be equivalent to an accounting book in the banking and financial context, which guarantees that the information is valid.

So far in the financial market, for a person (whether physical or legal) to make a payment to another, they needed the bank as an intermediary, and at the same time, to corroborate the identities of the participants. In addition, the bank will write down in their account book the new balance sheet, the result of the transfer of capital from one person's account to another. Of course, the bank receives a commission for its services, apart from reserving the power to manage this information as best suits them. They can use it to offer you credits of a different type according to your profile, share your personal data with other FinTech companies of the group, etc.

This relationship of dependence on people with banking entities comes to an end with the advent of distributed ledger technologies. Blockchain eliminates intermediaries, decentralizing management.

The blockchain is an immense book of accounts in which the blocks (registers) are encrypted and linked, protecting security and privacy - the identity of the participants is unknown - of the transaction. The blockchain is, therefore, a distributed and secure database, with applications beyond the FinTech sector. Blockchains are managed by a multitude of users or nodes, which are responsible for verifying transactions (or smart contracts) and validating them so that they can be registered in the account book. The transactions are made through tokens. The tokens represent the information that you want to transfer, which is encrypted so that it can be distributed without revealing its content. The token transfers are grouped forming blocks. Each block contains a timestamp and a connection that links it to the previous block. This guarantees that the information contained in any block cannot be altered without altering the rest of the linked blocks. The new transfers that do not fit in one block have to be grouped in the next, which is linked to the previous one.

One of the positive effects of technology in the financial system is that it allows the financial inclusion, financial services to be offered more quickly, responsibly and efficiently. New technologies such as artificial intelligence, predictive behaviour techniques or data-driven marketing can help eliminate guesswork from financial decisions. The financial applications that use AI will not only learn from the habits of the users, but they will also participate in automatic decision dynamics about spending or saving.

Before, to get credit, open a bank account or use a credit card, it was necessary to go to a bank office with the sufficient entity to be able to satisfy all those needs. If you wanted to prepare your business for the acceptance of new means of payment (mobile payments), you had to get the agreement of a large credit firm; not to mention the establishment of the connectivity line and the purchase’s devices. Moreover, that could take months. Now thanks FinTech industry these processes are completed in weeks, if not in days or almost automatically.

This is what has come to be called financial inclusion; the fact that people or organizations living in rural areas or in environments lacking in modern economic structures can access financial services outside of the traditional banking context. Financial technology not only makes the use of financial services more accessible, but it can make them more affordable by reducing the costs associated with the traditional management of those services; a saving that can be passed on to the consumer. If we join this approach to the fact that more and more people have access to smartphones and with them to the internet, we can see that the necessary circumstances exist to universalize the access to means of financing.

In this new context posed by financial technology, document management has a fundamental role. If it had already been pointed out that the financial sector is fundamentally based on information rather than tangible products, it is not unreasonable to think that such information can be managed as units of records or documentary units.

In this sense, the OpenKM document management system can be used to manage the transition that financial technology offers to traditional banking, making it a participant in digital banking in a simple, safe and reliable way.

The document and records management system offers the opportunity to study, in-depth, the processes and internal procedures, to know if it is necessary to update or change them. On the other hand, by having a document management system, the adequacy of the business to legislative and regulatory changes are produced in a more agile and simple way, both for IT personnel who have to implement it, as well as for area managers or departments that study each case.

In this aspect, the OpenKM automation functionality allows repetitive processes organized in phases to be automated, avoiding the negative effects of human errors and discharging human capital from tasks that provide little value. In turn, these processes can be supported in the classification functionalities (assignment of key terms, categories, metadata and more) in an assisted or automated way, to guarantee the strict compliance of criteria.

The entity can also benefit from the use of workflows, which offer a univocal channel of management of processes or procedures through which the service or financial product does not reach a more advanced status unless all the criteria required are met.

If there is a process or service that requires special attention, within OpenKM employees of the financial institution can subscribe to the process, so that every time there is a change, they will receive a notification by email.

Different members of the entity can maintain communication thanks to OpenKM, adding relevant information in the form of Notes to the processes, products or services; showing the relationship that various processes can maintain among themselves and also define the type of link that unites them. Users within OpenKM could enjoy a space called the Forum, which would allow them to share different points of view or consult aspects related to the process, service or even circumstances that affect the case, etc. Moreover, in the Wiki section, for more information, the staff could find the rules, laws or protocols they have to observe to offer the financial product or service, and adequately serve the client.

These functionalities, which are being described from an internal point of view, can also be provided to the client or consumer if the organization so wishes.

OpenKM is accessible, not only through the web browser, but it also offers its own mobile application. Users can download it and enter their username and password to access their session. There they would have access to their profile, to the list of products and services of the entity, and could carry out by themselves the processes that the organization there stipulated. In addition, the user interface can be customized. In other words, the OpenKM of the financial institution can have an appearance, a succession of screens and different functionalities depending on the type of user (employee, client) or even adapt the interface to the user profile (administrative, responsible for the department of an area, large accounts, etc.).

For certain services, it is possible that the organization needs to confirm the adherence of the client or consumer to the conditions of the product or service. In this case, the use of the digital signature - which is another feature that is part of OpenKM - can be an element to take into account, and provide customers who may need it.

The OpenKM document and records management system is a very useful and versatile tool since it can be easily integrated into the organization's suite of programs. The OpenKM software includes SDKs in Java, PHP and .NET that make it possible for the system to be used as a front-end or back-end according to the needs of the users and access information hosted in other applications or repositories from the document manager. The System Reports functionality can give us access to strategic information on how the available resources are being used, or warn us of alerts or incidents. It is a functionality that the client could use to visualize a balance of charges and credits or see how they are using the services of the entity. In addition, the system can offer templates, to facilitate the management of requests, suggestions or complaints.

On the other hand, the search engine integrated into the system allows you to find or retrieve any data, information, document, record or file that we need. The search engine allows searches by free text; even if we transcribe the term incorrectly; the search engine suggests correct terms that give rise to results. Alternatively, we can use the advanced search engine. This allows filtering by locations in the document manager. Search by content - any term we remember, by title, the name of the content. Keywords assigned to the file, by the author, by date range. And other criteria can also be used in combination: the node in which the documentation is located, the category, the type of node that is being searched (we can search for a document, a folder, an email - OpenKM can be used as archiver of this type of communications - or registration). Also, the extension of the file or even the notes added to the information. In addition, in OpenKM it is possible to search for information or documentation based on the metadata linked to the content to be recovered.

The OpenKM document and records management system includes an Optical Character Recognition engine, very useful when it comes to scanning documents that we want to be part of the processes or services that the entity offers.

With OpenKM, banking or financial organizations can offer services such as credits, avoiding the intensive use of paper that this type of service often requires. In contexts of financial inclusion, providing financing to people or organizations in rural locations would involve numerous trips, and that only for the granting of a single loan. Thanks to the OpenKM management system, the employee of the organization can be in touch with the client without either of them having to move from their location; maintaining communication and enjoying a safe and accessible information and data exchange means.

Transferring payments also becomes more agile and straightforward with OpenKM; reducing the number of steps or screens that the user must follow, while offering maximum security guarantees.

As you can see, document management is not only part of the roadmap for companies or organizations that are moving from paper to digital reality, but also the platform to guarantee the supply of products and services in the conditions in which the market currently demands them.

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