Financial technology (FinTech) is transforming the banking industry, and companies that allow this trend to guide their customer experience could be positioned for long-term success. The road won’t be easy. Increasingly complex challenges in supply chain management across industries mean businesses are relying on modern digital tools to increase revenue streams and remodel their business operations to meet the needs of the rapidly transforming finance sector. According to Research and Markets, the global FinTech market value is expected to reach around $305 billion by 2025.
A peak in FinTech market value isn’t the only notable change in the industry. Global shifts in consumer behavior and supply chain management, sparked by the Coronavirus disease (COVID-19) pandemic, are leaving many manufacturing managers scratching their heads as they ponder solutions to improve supply chain coordination. The strain on vendor and supplier relationships and lack of on-site employees have contributed to inaccurate reporting of item availability and delivery information.
Modern digital tools and simple inter-partner communication along the supply chain are a major factor in reducing the cost of data interchange. Instead of relying on ad hoc systems that use spreadsheets and email to keep track of information from suppliers, retail and manufacturing organizations need robust information platforms that are directly integrated with electronic communication channels.
Supply chain communication best practices
Whether your vendors use older systems or newer B2B communication standards to exchange information, you should look for a single solution with multi-format support. An enterprise resource planning (ERP)-integrated solution helps businesses simplify and reduce the cost of data interchange by using as few moving parts as possible.
ERP-integrated solutions offer multiple modules to execute your business process from a centralized location. This allows for better management of resources and streamlines workflows. ERP-integrated solutions also provide enhanced data security and communication among the workforce.
Enhanced communication is a crucial step if you want to avoid disrupting the entire supply chain operation and seamlessly navigate the speed of the FinTech sector. Highly inaccurate demand forecasts and inefficient order fulfillment are two of the major consequences of delays in communication and complex tracking of information. Industry leaders know this as the bullwhip effect- a small fluctuation in the demand of a product at retail level can instigate a progressive larger fluctuation in demands at the wholesale level.
If it’s that important and beneficial then why don’t more businesses implement this idea? Understandably, it’s expensive to start and you’ll need a highly capable team to execute the perfect ERP-integrated solution. The first time you implement an ERP solution, the data migration will take a substantial amount of time to complete.
ERP systems depend on partner information flowing in both directions. This sets up direct, automated communication between both parties, which trims down the opportunities for operator error. This also means less rekeying, fewer delays, and more accurate inventory and delivery information (or in other words more time for doing the aspects of your job you actually enjoy).
Enabling faster communication between partners by eliminating unnecessary steps and directly connecting their enterprise software is a great way to ensure accurate, up-to-date information about your products and logistics. You won’t have to rely on guesswork, and order fulfillment and replenishment will take significantly less time.
Improving workflow processes
Electronic data interchange (EDI) is useful for efficient and effective supply chain management; EDI can help reduce lead time, save documentation processing cost, eliminate procurement errors, clarify inventory status information and enhance strategic alliances throughout the supply chain.
The first crucial issue companies must be aware of when implementing artificial intelligence (AI) into their business operations is finding the right set of tools for implementing AI. The second important aspect revolves around workflow integration and how seemingly disconnected business processes can be aligned in automated fashion. Lastly, AI needs to focus on creating a data ecosystem that can be used for a better decision-making framework.
Aside from new revenue streams and improved business operations, adoption of long-term AI strategies enables data-driven decisions which can predict future trends and outcomes. AI incorporation allows banks to manage and mitigate potential risks by analyzing a client’s credit history and identifying parameters to predict whether a client will be able to pay back the loan or not. AI can also be helpful in fraud prevention through deployment of automated auditing parameters and mitigation of cybercrimes through providing customer data security.
AI and machine learning (ML) technology play a vital role in combating cyber-attack, working in concert to assist with risk management. The technology is efficient in terms of clustering data together and leveraging forensic analysis to understand the methods of the cyber-attack. Furthermore, AI/ML relies on rule-based learning which instructs the system to combat specific types of cyber-attack and harness information before the damage is done. It also recognizes and learns trends, so that future attacks can be detected and eradicated.
Security issues, innovation speed and user privacy are among the Top 3 challenges facing the FinTech industry. Security is a grave concern in FinTech, of particular concern when considering banks’ legacy systems. FinTech also faces a need for speed in trying to keep up with ever-evolving technologies. Lastly, the industry faces compliance and data storage challenges. This is where the digital transformation of the finance sector begins to impact the supply chain.
The future of AI in FinTech
According to Baker McKenzie, the ongoing economic expansion in the United States has attracted considerable investment in the FinTech sector. The power of AI is in the process of revolutionizing the financial sector and pushing organizations to take on new challenges.
AI will be a game-changer in the financial service segment, and according to a December survey from consulting firm McKinsey & Co., 26% of baby boomers and 44% of Gen Xers have already allowed the digital transformation of the finance sector to influence their banking decisions.
Evidenced by this survey, the popularity of FinTech isn’t going anywhere anytime soon. In fact, accounts among the newer generation of Gen Xers are increasing and they appear to be leading from the front. Wise companies need to invest in the technology and supply chain operations that equip them to adapt to the new trends in the finance sector if they are seeking a lasting legacy.