With the Covid-19 pandemic that shook the world to its core, financial technology has gained much more importance. Traditional banking became secondary (because of the avoided human interaction) and both businesses and individuals preferred the services that the fintech innovations provide.
A survey conducted by Lightico shows that 82% of consumers are concerned about going to their bank, 63% are more inclined to try a mobile app, and 55% of U.S. consumers are concerned about using cash due to worries about COVID-19 related contamination. Therefore, the banking industry has an interest in future fintech trends, now more than ever. Find out about the future fintech trends and stay ahead of the game.
Fintech Trends Speed Up Adoption of Technology
In the past, businesses in the financial industry evolved slower in the light of adoption to technology. Nowadays, these business organizations gained speed in forming workflows and systems that provide upgraded consumer behavior and regulations. This stems from a severe need to adapt while competing with non-traditional businesses.
To be able to serve customers as required, a total digital transformation in the industry is a must. Hereby, consumers benefit from the improved user experience, while institutions realize the advantages of Fintech innovations such as cost savings and improved customer services.
Fintech and Big Data
Big data includes all the structured and unstructured information that is later processed with particular analysis techniques and algorithms. It is one of the most effective tools that fintechs use. Here are some of the main uses of big data.
Customer segmentation: Big data allows you to meet your consumers. It defines their spending habits by analyzing their age, gender, location, economic status and so much more, allowing you to profile them and offer them specialized financial services and products.
Fraud detection: Banking is a matter of trust and in the past, some technology-driven non-human banking didn’t seem so reliable to some businesses and individuals. Now, security will be one of the biggest fintech trends in the banking industry. With the profile of the consumers that the big data will provide, it will be easy to detect and prevent fraud and any other suspicious activity faster and more accurately.
Risk management: A powerful tool that helps with risk management and prevents companies from making poor debt expenses is predictive analytics. Fintechs create risk profiles by mining data, presenting reports and analyses on customers who apply for financing and are bad payers. They also create risk profiles for poor investments.
To sum up, big data relies on analysis. Fintechs mine data to create risk profiles. The predictions that come out of these analyses will prevent consumers/companies from making poor debt expenses or help make them better credit decisions.
Big data and the analytics that goes with it allow fintech companies to offer a more specialized and safe product or service to both B2C and B2B clients.
Fintech AI Assistants
Chatbots is one of the most popular fintech trends and since 2019, AI services have been steadily improving. Conversational banking was adopted by the Bank of America, Morgan Stanley, HSBC, JPMorgan, and many others. Businesses use AI tech for improved customer service, optimized back-office operations and to prevent fraud and promote financial literacy among consumers. It is estimated that by 2025, the smart visual assistant market will reach up to $19B globally.
Talking about fintech trends in 2020, conversational banking will mature and continue its pervasive integration within the industry. In fact, Artificial Intelligence and Machine Learning are expected to lower operational expenses in the banking sector by 20 percent. This dynamic even resulted in the rise of new terms, such as Machine Intelligence and Augmented Finance.
AI makes a significant impact on the banking and financial services industry, while the future seems to have even more to offer. Considering the fact that intelligent technologies are not easy to implement, and the ‘one-size-fits-all’ approach doesn’t work here, fintech consulting companies with AI expertise will soon meet a ready market.
In the following years, companies will have to learn to collaborate with AI assistants and control their power. By 2022, businesses will have to invest in the development of in-house AI experts because over 133 million roles will open. Even today, over 51 percent of US and UK companies experience the lack of specialists to benefit from new AI technologies.
Fintech Blockchain and Cryptocurrency
Digital money has already been introduced to us in the past years. The crypto revolution has been relevant for more than a decade, but how will it proceed in 2020 and after?
Facebook’s ambitious crypto project Libra is expected to be launched in the coming years. Unlike other systems such as Venmo or Apple Pay, Libra will be a P2P platform that will enable quick mobile transfers with a low- or no cost at all. It also won’t require any banking accounts or credit cards which will make it a more accessible platform. Facebook also plans to launch a special digital wallet, Calibra, that will be accessible through WhatsApp or Messenger.
An open blockchain project from Binance called Venus, the largest cryptocurrency exchange globally, is also expected to enter the market in the foreseeable future. The company partners with governments to prevent any regulatory concerns and to focus on smaller locations with unbanked economies.
The popularity of blockchain will continue to grow within the fintech market. Even today the expansion is too large to be ignored with all the payments with digital money around the world. In the future, we will experience new digital currencies emerging everywhere. Whether regulators like it or not, cryptocurrencies are the new future and businesses should be ready to keep up with the developments.
Mobile apps can be considered the future of fintech and banking while traditional banking fades more and more into history. CACI states that the popularity of digital solutions will continue its growth, and the proportion of online users will reach 71 percent by 2024.
The main factor that caused the rapid growth of Fintech is mobilization, which provides convenience, easy access and lower costs for the consumers. With the younger generation who prefer to have all the essential services on mobile devices and on the go, we will witness a rapid increase in the number of digital banks as of 2020.
Fintech mobile wallets, mobile banking, easy online global transfers and AI financial assistance are the keys to the digital revolution of banks. To maintain their customers, financial institutions have no other option but to leverage the latest fintech innovations. In addition, targeting the young generations, understanding their needs and helping them achieve their goals can help companies to stand out.
In line with the aforementioned trends, customers are desiring solutions and answers at their fingertips, and this means a need for banking to offer services in the most accessible manner – in the form of self-service.
Beyond contactless payments, customers want to see innovative banking tools for transferring money abroad, paying to other accounts, accessing digital currencies and more, without the need to deal with an agent, let alone going to a branch.
Technologies that empower banking customers to complete tasks on their own will continue to grow in value.
More Fintechs Cater to Millennials
Millennials (now 23-38 years old) are the largest generation within the U.S. workforce. With the struggle between student loans and the high cost of living, they’re not buying homes at the rates previous generations did. Banks should look for new ways to serve younger customers’ needs, which are markedly different from older generations. Helping millennials finance their goals will yield dividends in customer loyalty and increased revenue.
Regulators Adapt to Fintech
The use of technology and its implications are not limited to financial institutions. Regulators are rapidly adopting a wide range of data gathering and analytical tools, too. They are trying to learn more about individual institutions’ activities and overall system activity. They also hope to monitor the industry more effectively and to predict potential problems instead of regulating after the fact. Examples of this include the supervisory procedures and data requests tied to ‘stress tests’, asset quality reviews and enhanced reporting requirements coming out of Washington, London, and Basel. Using sophisticated analytical tools on large volumes of data, regulators can compare scenarios and address potential issues before they become full-scale market problems.
As in everything, technology is shaping the future of finance. Today, only 18% of customers go to a bank branch while the major 78% access their bank accounts online/mobile. With AI assistances and cryptocurrencies on the rise, the transparency they have to offer and the strengthened security measures and regulations that are sculpted specifically for the needs of consumers, fintech is paving its way into traditional banking. The new generation is on the hunt for easy banking, the needs of businesses are shifting and fintech carries the banking industry into a new future.