While agile startups have continued to push the limits of innovation, behemoths in the banking sector have not. Instead, they are often early-stage investors in new businesses, providing them access to emerging trends as well as the chance to acquire smaller firms. Established companies also significantly invest in innovation and technology, employing almost as many technicians as conventional employees.
Invariably, the Internet transformed the financial services sector, and new technology and innovation continue to challenge the industry today in the form of Fintechs. Indeed, consumers now want better user experiences, more customization, quicker service, and more choices. Further, Fintech is working hard to stay ahead of the curve.
Among the advances are blockchain-based payments, including micropayments and cross-border payments, and customization and automation through artificial intelligence and machine learning. Undoubtedly, Fintech is breaking the mold. Continue reading to learn more about current and upcoming Fintech trends.
What Exactly is Fintech?
The phrase “Fintech” is a combination of the words “finance” and “technology.” A technology firm is any business that utilizes technology to improve or automate financial services and procedures. Fintech technology enables better and quicker banking as well. Whether utilized alone or in combination, they may increase productivity by enhancing communication with customers, workers, and suppliers. Fintech technologies, in particular, have the potential to simplify processes by combining several software applications into a single and digital ERP system.
As a result, end-users no longer have to spend time on tedious chores thanks to next-generation secure mobile apps. With financial technology at one’s fingertips, making and monitoring payments, sending notifications, receipts, or invoices becomes a breeze. Fintech also enables more funding choices, more credit possibilities, and broader access to innovation.
What is the aim of Fintech? Fintech focuses on technology usage to assist people and businesses in better managing their financial operations. In addition, financial services, formerly limited to desktop computers and laptop computers, are increasingly being performed on smartphones. The industry is enormous, and it will only continue to expand.
Fintech Trends for 2021 and 2022
Customers stand to gain from developments in the financial services industry, whether startups or established institutions initiate them. We list nine emerging Fintech trends below.
Tokenization refers to the process of creating and managing cryptographic tokens on distributed ledgers. Purchasing memes is still in its infancy. Non-fungible tokens, or NFTs, have received a lot of attention in recent months. On the surface, purchasing a meme or a popular online image or video seems absurd. On the other hand, tokenization is here to stay for the foreseeable future, with more assets likely to be tokenized in the coming years.
They may also represent actual or intangible assets such as real estate and houses, both of which are being tokenized. In addition, asset tokenization may improve transaction visibility and streamline sales and purchases by offering greater liquidity and easily verifiable ownership.
2. Increased Financial Transparency
Open banking is a game-changing technology that enables Fintech and banks to exchange data among themselves. It requires banks to send data in a secure, standardized manner to facilitate online information exchange between approved entities, and it is closely linked to PSD2 (Second Payment Services Directive). Unquestionably, it enables third-party apps to manage customers’ banking and other financial information via data exchange through APIs and artificial intelligence. Moreover, many industry insiders think that open banking will radically alter the financial services industry as we know it.
3. More Fintech Regulations
Financial services are one of the most highly regulated sectors in the world. The inclusion of blockchain will bring it to the attention of governments all around the globe. Countries are naturally concerned concerning the rise in high-profile bank breaches. While blockchain investors may be frustrated by rules never intended for them, no one can dispute that security is crucial for any financial services provider. Data ownership is one area that regulatory bodies will carefully examine in the era of digital banking. However, nations will proceed at their preferred speed in addressing these types of issues.
Nonetheless, the most optimal outcome is a set of national standards that is broad enough to meet the needs of both Fintech companies and consumers.
4. Banks That do Business Online Exclusively
One of the most significant recent developments is the rise of digital-only or Fintech banks. What are they? These are banks that conduct all banking operations online and do not have a physical branch or property to avoid long lineups and onerous paperwork. Thus, customers only need a computer or a smartphone to handle their money simultaneously.
Still, mobile banking applications aren’t a brand-new market trend. They are already used by the vast majority of well-known, well-established banks throughout the world. Fintech, as expected, acted as a spur for conventional banks to innovate along this trajectory.
5. Blockchain Technology
Blockchain technology is the most significant potential disruptor of conventional financial institutions and the most promising prospect. You have probably already heard of blockchain, which is the technology that enables the existence of cryptocurrencies.
Blockchain is a digital distributed ledger system that, in certain instances, is immutable. This distributed system organizes data into “blocks” that may be processed and dispatched in a couple of seconds. Additionally, on a blockchain network, almost anything of value may be recorded and exchanged. Further, the blockchain can improve the accuracy and transparency of the financial services ecosystem by allowing new methods of checking systems and verifying transactions. It has also provided a feasible substitute for conventional financial transactions.
6. QR Codes Rising in Popularity
QR codes that use the Open Banking infrastructure are becoming more popular as viable alternatives to traditional digital payment methods. They are simple and straightforward. More importantly, they are convenient and align with what consumers are already accustomed to in the digital era.
7. Mobile Payments Using NFC
NFC is an acronym for near field communication. It enables devices in a specific region to communicate and share data (approximately 2-4 inches apart). Card terminals, mobile phones, contactless cards, and other payment devices all use NFC technology. Several large companies already utilize contactless payments based on NFC, including Samsung, Google, and Apple (Apple Pay).
Several banking and Fintech firms are investigating various methods to use the blockchain that underpins cryptocurrencies like Bitcoin, Cardano, and Ethereum. The reduced risk of fraud due to the system’s famously tough hackability, speed, and absence of intermediate stages between transaction participants are some of the advantages of blockchain technology that render it appealing to Fintech firms and other prominent organizations.
9. Outsourcing of Financial Technology
Fintech outsourcing enables even tiny financial services companies to quickly grow their operations with the assistance of a third party. How does outsourcing apply here? Well, financial technology firms utilize outsourcing as a business strategy. Hence, an organization outsources some of its operations to a third-party service provider. This eliminates the monotony around some of their team members’ duties and allows the business to concentrate on its primary functions. Outsourcing is also trending because it allows Fintech companies to scale operations and capabilities without needing to hire a new in-house team.
Fintech is an industry in constant metamorphosis. It links capital and technology inextricably. Further, the broad use of mobile technology, the availability of internet access, and the upheaval created by the COVID-19 pandemic, in addition to big data and the Internet of Things, have helped push the adoption of innovative Fintech solutions to adapt to shifting global demographics.
If you’re seeking a partner for your next project, be sure to check out our blog post, “Fintech Development Outsourcing – 10 Questions to Ask Your Vendor.”