- The rise of virtual cards and cards with biometrics
- Quantum algorithms can make banking operations 100 times faster
- The emergence of virtual bank branches in the metaverse
- Implantable payment chip will increasingly replace traditional wallets
- Biometrically enabled vehicles become payment devices
In the past decade, the finance sector has seen dramatic transformation – and the changes show no sign of letting up. Financial transactions that were at one point only possible by visiting an actual bank branch now merely require the use of a smartphone, tablet or other mobile device. Not that the finance industry had anything to do with all of these technological advances, mind you! It’s been the FinTech companies towing the line here, with new innovations reaching the financial services industry with increasing frequency, offering consumers more convenient and efficient ways to transact. Consumers today are enjoying more and more convenient platforms and technologies that offer faster banking and payment services, and enable them to manage and grow their money. The finance sector will need to jump on board and adapt to this digital era – or risk losing more and more market share.
Here are 5 innovations disrupting the finance sector.
1. The rise of virtual cards and cards with biometrics
Virtual cards are becoming increasingly popular, particularly because of their secure use. They can be integrated into existing digital wallet services and facilitate transactions through randomly generated card numbers linked to ordinary bank accounts. Virtual cards work exactly like physical bank cards – but instead of being in your physical wallet, they live in your digital wallet on your smartphone. Secured by encryption, they offer a safe and convenient way to pay online, but you can also use a virtual card for contactless payments in stores by adding it to Google Pay or Apple Pay. Some even enable you to withdraw money from ATMs. Virtual cards have their own unique card numbers, expiry dates, and CVC. The secure nature of these cards is expected to drive their demand in a market that’s becoming increasingly security conscious. According to a report by Juniper Research, by 2027, the number of transactions via virtual cards will have exceeded $121 billion globally – increasing by 340 per cent compared to $28 billion in 2022.
SmartMetric has created a nano biometric fingerprint scanner that’s embedded in the credit card. To verify that the user of the card is indeed the legitimate card holder, he or she simply touches the sensor on top of the card, at which point his or her fingerprint is scanned and matched to the one stored in the card, which activates the card for a transaction.The SmartMetric biometric card doesn’t need to be inserted into a reader, has its own internal rechargeable miniature hybrid battery, and is the only biometric card that can be used at most ATMs. SmartMetric CEO, Chaya Hendrick, explains: “The user’s fingerprint is stored inside the card using a separate secure processor to what is used for the payments processing processor, adding another layer of security for the protection of the card user’s own biometrics while providing maximum function for the card”. Hendrick continues: “Given the responses to the consumer survey which also documented the high level of concern consumers have surrounding payments security, we believe that the first card issuing bank to adopt the SmartMetric biometric card will be able to attract significant market share away from traditional credit cards and their issuers.”
2. Quantum algorithms can make banking operations 100 times faster
As banks start to embrace quantum computing, potential use cases for the financial services industry are emerging. Spanish startup Multiverse Computing, a Deep-Tech company developing Quantum Software for Extreme Ideas, headquartered in San Sebastian, has developed a quantum software product for companies from the financial industry that want to gain an edge with quantum computing. Multiverse Computing’s customers include the Bank of Canada, the European Tax Agency, financial services company Bankia, and Spanish banking group Banco Bilbao Vizcaya Argentaria (BBVA). The company’s areas of expertise include market simulation, risk analysis, and portfolio optimisation. Digital solutions often aren’t sufficiently capable of tackling many of the challenges in these areas. Multiverse Computing, however, provides cutting-edge methods and powerful tools, including software for quantum machine learning, outstanding optimisation methods, and quantum-enhanced Monte Carlo algorithms, to enable companies to derive maximum value from the second quantum revolution. The company matches its algorithms to quantum computers that are specifically designed to solve a particular problem. For instance, while IonQ’s and IBM’s quantum computers perform better on machine learning – D-Wave’s computers are more adept at dealing with optimisation issues.
Financial institutions that aspire to become leaders in this digital age will need to embrace quantum technology and ensure it becomes a key component of their banking technology and innovation strategies.
Quantum computers can already carry out tasks like detecting banking fraud or optimising investment portfolios 100 times faster than traditional computers. Challenges like large-scale simulations or determining pricing for complex financial instruments, however, are still quite difficult to solve, and will require quantum computers with larger numbers of qubits. According to leading global investment banking, securities, and investment management firm Goldman Sachs, it will take machines with 7,500 qubits for quantum computing to be of practical use to the financial services industry. However, by focusing on problems that are particularly well suited to quantum computers, even today’s small, error-prone machines can offer quite a number of advantages. And Spain’s CaixaBank believes that, while quantum technology is not yet at the level where data scientists could use this tech on a daily basis, its potential impact is enormous. Financial institutions that aspire to become leaders in this digital age will need to embrace quantum technology and ensure it becomes a key component of their banking technology and innovation strategies.
3. The emergence of virtual bank branches in the metaverse
Central and Eastern European bank PKO Bank Polski wants to be the regional leader in terms of banking in the metaverse and has recently moved one of the most recognisable buildings in the capital of Poland as a virtual bank branch to the Decentraland platform in the metaverse. The virtual branch will be used as a lab to test tech solutions, build knowledge, and broaden experiences – these will all be used for the development of the bank’s businesses. At first, the virtual branch will be used for training and improving the onboarding of new staff members. The bank also wants to test new client communication options in the metaverse. Paweł Gruza, vice president of the management board at PKO Bank Polski, believes that in approximately one decade, the metaverse may become a similar development impulse for the global economy as the emergence of the personal computer, the internet, and the smartphone were. Gruza says: “I would like PKO Bank Polski to be ready to make use of the opportunities related to it, and when metaverse has matured, to set the rhythm in the technological development of the domestic banking sector and the Polish economy.” For the future, PKO Bank Polski also envisions developing solutions for verifying clients’ identities in the virtual world, and exploring the possibilities of offering banking products in the metaverse.
“The implant can be used to pay for a drink on the beach in Rio, a coffee in New York, a haircut in Paris – or at your local grocery store. It can be used wherever contactless payments are accepted.”Wojtek Paprota, founder and chief executive of Walletmor
4. Implantable payment chip will increasingly replace traditional wallets
British-Polish company Walletmor has developed a biopolymer microchip the size of a small safety pin that can be implanted inside a person’s hand and used to carry out payments – much like one would use a credit card. The FDA-approved biopolymer protects the chip and the antenna from any damage and can be safely implanted in the human body. The chip doesn’t create its own radio waves, doesn’t include a battery, and it uses NFC – the same technology smartphones use for contactless payments – which only works in close proximity to an NFC reader. Wojtek Paprota, founder and chief executive of Walletmor says: “The implant can be used to pay for a drink on the beach in Rio, a coffee in New York, a haircut in Paris – or at your local grocery store. It can be used wherever contactless payments are accepted.” Since the launch of the technology last year, approximately 200 people have paid $300 to have the microchip implanted in their hand. To use the payment chip, users need to download the app for the iCard (an EU-based wallet that links to the Walletmor implant) and set up their account. After linking the implant to the iCard account, money can be loaded onto it and the implant can be activated. The chip can then be inserted under the skin by a specialist at a medical aesthetics clinic. The benefits of paying with a hand implant are many. It is incredibly convenient, there is no risk of theft, and you can pay with it anywhere in the world. The biopolymer material is safe, the implant can’t be hacked or used to monitor or gather any information about its user. The user also doesn’t have to be worried about the implant interfering with MRI, tomography, or EKG procedures as it has no effect on these.
5. Biometrically enabled vehicles become payment devices
In-car commerce is slowly but surely becoming an integral aspect of the luxury customer experience, and following a recent global technology partnership between Visa and Mercedes-Benz Mobility, Mercedes-Benz is now offering its customers contactless in-car payment options. This means that the vehicle itself becomes a biometrically-enabled ‘Fuel and Pay’ device, which will render relying on mobile devices and entering passwords for payment authentication purposes a thing of the past. This is made possible thanks to Visa’s Delegated Authentication technology. German and UK Mercedes-Benz customers – with customers from other markets globally following soon – are now able to pay using an integrated fingerprint sensor. Payments can be made directly via the car’s MBUX infotainment system. As soon as the car engine is switched off, the geofencing function automatically identifies the petrol station. The customer selects the desired fuel pump, at which point the system calculates the amount of fuel, fuel type, and the price. The customer then authorises the relevant amount for payment. After filling up, the payment transaction is finalised and the customer receives confirmation of the transaction in the Mercedes me app or the MBUX system.
The benefits of digital transformation are undeniable, and while for many decades legacy systems have done their jobs, they are no longer the most efficient option for the finance sector. With FinTech companies increasingly introducing innovative financial products, systems, tools, and business models – potentially even taking over many traditional models in the future – the entire finance sector is forced to reshape its approach and invest in ongoing digital transformation. This will, in turn, present the sector with a myriad of opportunities to offer customers more efficient products and services.