Author - Lokesh.Y.R, Asst. Professor, Deparment of Management, RIMS
In the rapidly evolving landscape of finance, the convergence of technology and financial services has given birth to what we now know as Fintech – a term that encompasses innovations ranging from mobile payment systems to Block chain technology. As we venture into the era of Fintech 5.0, the financial ecosystem is transformed into dynamic platform that enables the user to get his services are rendered immediately. In this Blog Post we will try to understand the significance of Industry Fintech 4.O and its transformation to Fintech 5.O.
Understanding Fintech 4.0 and 5.0:
Fintech 4.O the term in the early 2011 that bought the freshness in finance and banking industry a great wave where computers and technology started operating without humans intervention that aims to automate and optimize processes through the use of smart technologies, Industry Fintech 4.O represents the paradigm shift from the traditional financial services to digital platforms using various tools like AI, Machine learning, Big data Analytics, Cloud Computing and other technology driven systems in financial infrastructure. This lead to enhance the operational efficiency, manage the risk and enhance the customer experience on real time basis.
Since the above mentioned technologies started to gain popularity, Customer and Industry was missing something which was lacking to make 4.O more effective that’s why 5.O was initiated in the year of 2018, This transition was driven by continuous development of technology that made customers to bring much more near to the financial services using various advanced robotics and smart technologies resulted in the birth of Industry 5.O era.
There are many factors those contribute in this transition as follows:
1)Emergence of advanced technologies like Internet of Things(IOT), Augmented Reality(AR), Virtual Reality(VR), Quantam Computing and Robotics These advanced technologies enable deeper integration of finance with other sectors to make them more efficient and user friendly,unlocking new business models, and enhance the capabilities of financial services available
across the globe.
2)The finance industry was compelled to update from 4.O to 5.O owing to a paradigm shift toward hyper-personalization of services and fascinating experiences, which was demanded by clients. This change is a reflection of the rising need in the evolving digital environment for personalized financial solutions and improved user experiences.
3)Economic Integration: Fintech 5.0 focuses for ecosystem integration, where finance interfaces with many sectors like healthcare, retail, transportation, and real estate. The result goes beyond standalone financial services and was a major factor in the switch from 4.O to 5.O. Fintech 5.O sets up fresh opportunities for the creation of value and collaboration between sectors by integrating financial services into common experiences and transactions.
4)The principles of Web 3.0 and decentralized finance (DeFi) have been adopted by Fintech 5.O, that employs blockchain and smart contracts to simplify peer-to-peer transactions, automate banking processes and do away with intermediaries. The banking and finance sector is becoming more equitable, transparent, and productive as a result of this paradigm shift towards these decentralized, trustless systems.
Overall, the transition from Fintech 4.0 to Fintech 5.0 symbolizes the financial services industry’s solid commitment to innovation, efficiency, and customer-centricity, propelled by technology’s transformative power and its necessity of adjusting to a world that is becoming increasingly digital and internationally connected.
The Implications of Fintech 4.O and 5.O:
1)Enhanced Customer Experience : Fintech 4.O and 5.O both strives hard to leverage the advanced smart technologies to fulfil the requirements of its targeted customers through customized financial services starting from Chatbots providing real time assistance to VR Reality for pleasant banking experience.
2)One of the most potential of this updation is financial inclusion as by leveraging the smart technologies in the business and other finance arenas, Bigger populated countries like India will be benefitted magnificently.
For Example : These days the biometric based identity cards are encapsulated with all other required documents as they are easy to process and arrive at the end results.(Like linking adhar and Pan, Adhar and Mobile number, Pan and Demat, Adhar and Demat, etc..,)
3)Since the updation was mandate and required, traditional banking participants had to struggle a lot in facing competition from finance based startups and tech giants entering the financial services with huge capital (Like Jio Finance). As 5.O started to flourish , It enabled the new comers into the market and offer the products and services at lower cost challenging the big conglomerates from prompting them to indulge in unnecessary panic creation and risk management measures.
4)Fintech 5.O enables the users to be free from the worries of Cyber threats, encryption breaches and makes sure that all the stakeholder of finance sector are adhering the rules and regulations that are laid by the regulatory authorities and utmost priority is given for data security and protection for all kinds of financial security from the advanced security systems of 5.O.
5)Fintech innovations are having high impact on capital markets by making ease for investment opportunities, automated transactions, peer to peer lending, crowd funding and other Fintech based services with the help of various clearing houses and custodian banks that reduces the transaction costs and helping to increase the market efficiency.
6)Fintech 5.O leads a strong way to strengthen the ethical and environmental implications laid bythe regulatory authorities on finance industry right from basic most function till the major finance affair is taken care by various AI driven technologies to ensure that the stakeholders are benefitted through the various recent technologies.
The Advent of Fintech 5.O will be a revolution in the new era of innovation, disruption and various opportunities in the financial services industry. By employing the power of advanced technologies the stakeholders will be able to unlock the new sources of value creation, empower financial inclusion to all the communities. However, realizing the potential of Industry Fintech 5.O we all stakeholders require using it to the upliftment of financial industry to compete in the global arena and also much care to be given for security, regulatory and ethical challenges that might arise in this great transition. So that we all together will be able to enjoy the sustainable financial ecosystem in the future.