Five Key Fintech Trends

The ongoing intake by consumers of new means to access and use financial services needs a complete rethink from conventional financial providers. Consumers are bringing change on an unprecedented scale because of new technology and broader societal trends.

The pandemic has modified the way we live, work and buy. This, in turn, is influencing traditional banks and fintechs alike, who need to identify new solutions to deliver a competitive advantage.

We see five core trends:

1. The rise of digital/neo banks.

Banking has conventionally been a monopoly with high barriers to market entry. But the easing of regulations in countries around the world has set the stage for neobanks to take the initiative and captivate customers with the word of lower fees, appropriate mobile banking, and improved customer experience that eliminates in-store banking.

 The neobank sector was valued at USD 30+ billion last time and is projected to rise at a CAGR of 47.7% over the following eight years. Neobanks are also alluring unbanked customers with a blended purchasing power of USD 1.2 trillion. As greater of the world’s population gets online, expect digital banking to move ahead of in-store services.

2. Real-time cross-border payments.

About 40% of large enterprises in the US have previously adopted real-time payments, and this portion is set to rise. About 50 real-time payment schemes are now running in other countries and regions.

 Demand is high for the instancy of payment settlement that delivers a competitive advantage for businesses, reduces the risk of payment failure, and improves cash flow efficiency. As domestic schemes become more standardized and widespread, expect real-time facilities to expand to cross-border payments.

3. Open banking.

Through the pandemic, our reliance on digital payments and self-service banking affirmed the necessity for banks to become more digital. Open banking is an API-enabled, technology-driven method that allows banks and other providers to deliver financial services through aggregated and authenticated customer data perfectly. Before, several countries have introduced regulations that have compelled banks to provide open banking in response to customer demands. Fintechs all over are integrating open banking standards into their products and services. Banks that don’t embrace open banking will restrict their capabilities to service their clients better than already determined their growth opportunities.

4. Artificial Intelligence (AI) and Machine Learning (ML):

Machine learning applications allow the processing of large amounts of data sets, reaching valuable conclusions that can drive effectiveness and provide time-saving opportunities by using its algorithms. Moreover, it analyses patterns in real-time, enabling quick decisioning.

Several financial services applications have used AI/ML today for its entirety, from fraud spotting, lending approvals, and AML covering to risk monitoring and investment predictions. Machine Learning is continuously evolving, and Fintech will proceed to be one of the leading industries to profit from the power of AI/ML.

5. The emergence of Banking-as-a-Services.

Over the years, Banking-as-a-Service (BaaS) platforms and services have emerged as a cost-effective way of delivering financial services. Banks must adjust to a service-oriented and modular architectural approach to provide new services.

BaaS is critical for traditional banks and financial institutions on their digital conversion roadmap. Expect many more legacy financial institutions to cooperate with fintechs using BaaS services to bring innovative tech in-house and enhance their offerings.

As technologies and markets grow over the next 12 months, these core trends will create an environment for advanced innovation and the emergence of new business models in financial services. They develop global possibilities for banks and fintechs to collaborate and extend their contribution worldwide in payments, digital banking, instant credit, lending, and more.