5 FinTech Trends Shaping the Future
The past decade has seen a huge surge in FinTech innovations. The way we interact with our personal finances and banks, how we shop and purchase items in store and online, has all changed drastically. Year on year, FinTech continues to send shockwaves through the financial world with the launch of better technology that’s getting more efficient and more intuitive.
The FinTech boom only appears to be in its infancy. Analysts are proclaiming that we’re on the cusp of a game-changing, second wave of major disruption. If the last few years are anything to go by, then we’re in for even greater radical transformations in the decade to come.
Let’s delve into five FinTech trends that will be shaping our lives in 2021 and beyond.
Digital-only banks have continued to rise in popularity, especially among internet-savvy Gen Z-ers looking to simplify their financial life. In recent years, new-generation digital-only banks like Revolut, Moven, HelloBank, Monese, FirstDirect have completely revolutionised banking, by placing control firmly in the consumer’s hands. Digital-only banks bypass tomes of tiresome paperwork. They’ve done away with the need to visit brick-and-mortar banks operating within strict business hours. Furthermore, they offer a range of innovative services, including the opportunity to buy and exchange cryptocurrencies, at lesser rates than traditional banks. No wonder reports are predicting consumer visits to bank branches will drop by almost 40% in 2022.
As digital-only banks continue to rise in prevalence, traditional banks need to innovate in order to thrive and remain relevant in a swiftly changing modern world. Thanks to their vast financial resources, many legacy player banks are turning to Artificial Intelligence (AI) solutions to drive their business into the future. It’s projected that AI solutions could slash bank operating costs by 22%, equivalent to $1 trillion, by the end of the decade. AI customer service applications like chatbots and smart systems have already proven to speed up transactions, streamline customer queries and complaints, and improve brand loyalty. Going forward, innovations in AI will assist banks in countering cybercrime attacks, money laundering, and financial fraud.
Ever since Bitcoin rose to prominence in the early 2010s, many global banks have continued to downplay the benefits and innovations of cryptocurrencies, insisting that they are just a fad, and an extremely volatile one at that. Unfortunately for the traditional banks, the COVID-19 pandemic has only accelerated interest and adoption of crypto around the globe. This has led to Bitcoin overtaking gold as the best performing asset of 2020. Furthermore, as the crypto market continues to gather steam, it is also beginning to attract interest from institutional investors and big-name public companies, like Grayscale Investments and Square Inc. Forward-looking banks like SEBA and Wirex have already begun developing products that bridge the gap between fiat finance and the crypto ecosystem. It feels like it’ll only be a matter of time until the legacy players follow suit.
A cash-free future is getting closer and, once again, we have COVID-19 to thank. More and more people are turning to contactless payments in order to avoid handling cash and touching keypads. Contactless payments had already doubled in Nordic countries and risen by 11% in the US by April 2020. This trend is set to continue post-COVID through a variety of payment innovations. Mobile wallets and payment solutions such as Samsung Pay, Google Pay, and Apple Pay have continued to grow in popularity. According to Statista.com, the mobile payments market is expected to surge past the $190 billion mark in 2021. Voice-enabled financial transactions are also on an upward trajectory, expecting to increase by as much as 95% in 2022.
Embedded finance, or embedded banking, arguably poses the biggest threat to traditional banking. While it can take many forms, embedded finance is essentially the merging of financial services into a non-financial app or website. For example, Tesla offers their customers the option to purchase insurance directly through its car sales program rather than going through a third-party broker. Amazon offers a “Buy Now, Pay Later” option whereby customers take an automatic loan from the online store itself, rather than from a bank. In essence, embedded finance is empowering businesses to open up new revenue streams and rethink how they interact with their customers. Greater innovations are still to come as more businesses get to grips with the endless possibilities embedded banking offers them.