10 Fintech Trends Disrupting The Financial Industry
Global funding for the fintech business has increased by 96% in the last year. This comes to terms as new technological advancements emerge in the financial industry, thereby promoting the worth of some fintech companies to become “decacorns” (companies valued at more than $10 million).
Financial service users are progressively migrating to the digital arena, choosing online services over traditional ones. Therefore, this motivates financial institutions to make swift judgments, incorporate cutting-edge technology, and improve client service.
As one of the most disruptive businesses, fintech has substantially changed how people deal with financial institutions over the past decade and hasn’t stopped there. Every year, new improvements are introduced to suit the ever-increasing client expectations. That is why, to remain relevant and competitive, business owners and executives must grasp where we are now and where we are heading with financial technology.
So in this article, let’s discuss the top fintech trends that drive the financial market.
Top Fintech Trends Disrupting The Financial Industry
1. Contactless Technology
In the fintech industry, contactless technologies are unquestionably growing. Contactless payments meet the rising consumer desire for quicker, more practical methods of purchasing products and services. Additionally, it’s now simpler than ever for customers to make contactless payments because of the widespread use of mobile devices with NFC (near-field communication) technology.
The three most prominent names in contactless payments in the US are Apple Pay, Google Pay, and Samsung Pay. In addition, a PwC estimate projects that by 2022–2033, there will be $1.08 trillion in global mobile payment transactions, up from $396 billion in 2017.
The popularity of contactless payments is rising due to a variety of reasons. The continued use of EMV chip cards is one. Because these cards are safer than traditional magnetic stripe cards, many merchants now require consumers to use them. In Europe, where EMV chip cards have been widely used for many years, this is particularly true.
The acceptance of NFC-enabled mobile devices as a payment method is another factor boosting the use of contactless payments. In reality, many stores already feature NFC terminals that let customers use their smartphones or smartwatches to make contactless purchases. And as more and more customers become accustomed to making payments via their mobile devices, we anticipate seeing much more growth in this field.
2. Digital-Only Banks or neobanks
The increased competition among banks nowadays forces them to seek new chances to stay afloat. Neobank, the latest fintech trend, is a result of the round for each client, the need to cut maintenance costs and available technology options. A neobank is an internet bank without physical locations or branches. Smartphones, tablets, and personal computers are used for electronic communication and customer service. Neobanks typically obtain banking licenses or join an existing traditional bank as a junior partner.
Currently, there are about 70 neobanks in the world, 40 of which are in the UK. In addition, Sweden will discontinue using cash by 2023, and the other nations are expected to follow suit. As a result, many brand-new banks nowadays opt for a digital-only strategy. Research from eMarketer predicts that between 2020 and 2024, the number of users of neobanks will double.
3. Open Banking
Open banking is a program that enables banks to share customer information with fintech firms and other financial institutions. Programming interfaces (APIs) that let the website or app access the bank’s database can be used for data exchange.
One might ask why conventional banks would divulge their information to other organisations. Open banking, paradoxically, keeps banks competitive. The end-user will benefit from improved service and a more comprehensive range of opportunities, thanks to banks.
You can develop open banking applications that compile all financial data from various banks in one location. Users can deposit their paycheck on one bank’s card, save money on another, and make purchases using the bank’s card with the highest cashback benefit. Financial institutions can use open banking to construct account aggregators. Through a handy app, customers may access all of their accounts.
4. Big Data
Vast collections of structured and unstructured data are called “big data” in the finance industry. Banks and other financial firms can utilise them to forecast consumer behaviour and create plans. The financial industry receives analyses and produces enormous volumes of data every second. Structured data is information kept in-house by a business to provide vital information for decisions to be made at the appropriate moment. An ever-increasing volume of unstructured data is gathered from diverse sources, offering great analytical possibilities.
Modern financial technologies enable Big Data to forecast client behaviour and produce detailed risk evaluations, setting them apart from conventional financial organisations.
5. Advanced Cybersecurity
Cybersecurity in fintech never loses significance and emerges as one of the primary market trends. Financial information is delicate and more susceptible to online dangers. A data leak can be expensive for financial companies.
Every year, more sophisticated security measures will emerge due to the fintech sector’s growing vulnerabilities and risk of cyberattacks. According to Grand View Research, the biometrics market will grow to over $25 billion in the coming years.
Even though fingerprinting is currently one of the most used technologies, consumers are searching for new contactless methods to protect their data and establish their identity. Systems for identifying the voice, retina, ears, vein pattern on the hands, and even DNA will advance in 2022. It is anticipated that the number of industry-specific biometric solutions will increase.
6. Blockchain Technology
Blockchain is a finance technological innovation still emerging but has excellent future potential. In a recent global blockchain study conducted by Deloitte, 76% of respondents said digital assets might displace fiat money within the next 5 to 10 years. Companies can use blockchain technology to protect data, carry out identification and verification processes, record transactions, sign contracts, and improve traceability. The security and dependability of this technology make it advantageous for financial services.
Blockchain should, in theory, be the key technology for developing such a system. Transparency, anonymity, and transaction security are provided for all parties by the immutable data recorded by Blockchain.
We have all witnessed the value of Ethereum and Bitcoin soar throughout 2021, with assets held in cryptocurrencies and decentralised finance totalling at least $40 billion. It already has an impact on macroeconomics and is a worldwide trend.
7. Buy Now Pay Later (BNPL)
One of the fintech trends with the quickest rate of growth is BNPL services. Customers can postpone paying for items or services they’ve bought in-person or online, thanks to BNPL. According to the analysis, the global market for BNPL will increase from $24 billion in 2020 to $67 billion in 2025.
The rise in popularity of BNPL can be attributed to various factors. It provides users with a practical approach to managing their finances. Second, it can assist firms in increasing sales and fostering client loyalty. Third, BNPL enterprises can provide interest rates and payment periods that are competitive.
8. Fintech Super Apps
An app that offers a broad range of services and is widely used is referred to as a super app. It is, in other words, a comprehensive solution that satisfies the requirements of its users. Super applications are becoming more and more common, particularly in the financial industry. Super applications are in a prime position to disrupt the fintech sector, which is ripe for it.
Super apps are becoming increasingly common in the financial sector for several reasons. They offer a one-stop shop for all of your fintech needs to start. Users who wish to access all their financial services in one location will find this convenient.
Also, many great apps work with a variety of partners. Users now have access to a wide range of services and goods they otherwise might not be able to find in one location.
Super apps are frequently developed with a mobile-first mentality. They are therefore created for usage with smartphones and other mobile devices. This is crucial since more and more individuals use their cell phones as their primary means of internet access and financial transaction.
Government agencies and the financial markets present the demands for banking companies. These regulations are so numerous that businesses frequently struggle to follow them. As a result, companies spend a lot of money on lawyers to handle this procedure or risk paying fines if they don’t comply with fintech legislation.
It is hard to adhere to every legislation, especially when these regulations keep expanding. Because of this, demand for regtech is rising right now. It enables financial institutions to monitor the accuracy and legitimacy of their operations automatically.
Client identification, data processing and protection, and risk analysis are all responsibilities of the regtech industry. This makes it easier to follow the law and stay out of trouble.
Regtech enables processing massive amounts of regulatory requirements every second about each line of business thanks to automation, Big Data, and Machine Learning. These automated systems are set up to search for trends in past data continuously. As a result, using regulatory technologies to identify problematic cases or detect fraud becomes simpler.
10. Embedded Finance
Embedded finance connects payments for investment instruments, insurance, loans, and debit cards with virtually any non-financial platform. For e-commerce enterprises, embedded finance services are advantageous since they speed up transactions and help boost client loyalty. Before this, customers had to visit the bank, submit a loan request, complete an evaluation process, and then wait for approval.
However, thanks to embedded financing, users may now quickly and easily obtain credit and make any purchases they need online. Particularly for embedded payments, the projection for this growth is impressive.
Fintech has limitless potential because innovation is built on rapidly changing technological technologies. Companies work to meet customers’ needs who desire better and more varied financial services.