Despite an impending recession, fintech (financial technology) innovation shows no signs of slowing down. New players continue to emerge with ground-breaking products, services, and initiatives. The future looks turbulent for many countries and industries, but there are still great opportunities for companies operating in fintech.

First, what is fintech? Financial technology broadly refers to any technology aimed at facilitating and streamlining digital transactions. Fintech has been adopted by countless businesses to improve their financial services and make their products more accessible. Examples of fintech applications include robot-advisors, payment apps, peer-to-peer (P2P) lending apps, investment apps, and crypto apps, among others.

Over the next 2 years, we’ll see even more change, as innovations such as all-in-one expense management software, regulations and business models continue to transform the financial services landscape.

So here’s what we think will be the biggest Fintech trends next year:

With fintech trends growing, consumers will continue to demand customized solutions

Fintech companies have been working hard to make their services more personalized and relevant to their clients. This trend will continue in 2024, as they offer more personalized experiences thanks to artificial intelligence (AI) and machine learning (ML). AI can enhance the client experience in several ways, processing data faster than humans, for example, but also enabling personalization.

Hyperpersonalization and artificial intelligence (AI)

Key global trends in the fintech sector include hyper-personalization and AI. Customers have become increasingly demanding and want personalized products and services that meet their needs. For example, many banks offer basic banking services but fail to meet the needs of Millennials and Gen Z. These younger people are looking for more than just money transfer and investment options.

Clients want their financial products and services to be tailored to their needs. So, how are fintechs going to meet them? Often by using AI-based algorithms to become more efficient in how they interact with each customer and handle their requests. This means offering advice only if it’s relevant. This means tailoring offers based on previous purchases. And this means providing notifications when a customer has reached a certain amount on their account, and more.

Thanks to the systematic use of AI, it will be easier than ever for companies to tailor their offerings to individual needs and preferences. And companies will be able to create personalized products and services on a massive scale. The challenge will be to understand who their clients are, so they can deliver relevant offers across all channels and devices.

Embedded finance will continue to dominate the Fintech sector

As the various digital forms of finance become more integrated into everyday life, integrated finance will continue to dominate the fintech landscape. We’re already seeing this fintech trend with Apple Pay, Samsung Pay and Google Pay, for example. These solutions enable clients to use their phones as a means of payment in stores, restaurants and more, even if they don’t necessarily pay with their phone operator’s digital wallet.

Embedded finance (powered by AI) will also become increasingly important for wealth management and investment advice. AI has already proven itself as an investment advisor, outperforming human traders in many areas of finance, including stock and bond trading. In fact, AI is expected to account for 35% of all transactions by 2025, even if it can only partially replace human investment advisors.

Financial management gets smarter

The field of AI-driven (ML-powered) financial management has been around for some time. The idea is to automate manual tasks usually performed by people while making processes more efficient.

ML refers to a set of algorithms that can be trained on historical data to produce tangible results for future cases. ML uses algorithms to automate financial decisions such as asset allocation and rebalancing.

Artificial intelligence is a system that exhibits human-like behavior thanks to its self-learning capabilities. Indeed, it does not follow specific instructions. AI-enabled financial advisors, for example, can take into account your personal preferences, risk tolerance, income levels, etc. before recommending suitable investment products based on historical data and market trends.

There are many advantages to the intelligent application of money management through software solutions.

Advantages of having software solutions

1) Increased transparency – You’ll know exactly what went into each spending decision, and why. This information can help you identify areas where your strategy needs improvement. It also gives you the ability to anticipate potential financial management risks before they occur.

2) Reduce human error – Human error can lead to costly mistakes when manually managing your company’s expenses. You can mitigate this risk by using all-in-one expense management solutions like Quickbooks. Some companies provide solutions including Visa corporate cards, OCR technology and more. They can save you hours of manual administration and reduce countless errors with features. For example, it will highlight any data errors when submitting receipts and flag for costly duplicate subscriptions.

3) Lower costs – By automating a large proportion of the tasks involved in managing your finances, you no longer need to increase staff numbers to check your financial processes and close the month.

In addition to tangible efficiency gains, companies can also benefit from complete visibility of expenses in real time. You can turn huge amounts of data into valuable information that CFOs and finance managers can use to set better budgets. They’ll be able to identify opportunities for savings and make better spending decisions.

The rise of cybersecurity 2.0

Cybersecurity is a hot topic right now, but it’s not a new one. It has been around since the dawn of the Internet. Many of the techniques used today to protect online data are based on decades-old systems. Cybersecurity 2.0, however, is a movement that aims to improve security through technological innovation, using processes such as :

Data security and confidentiality

As more and more companies adopt technologies such as cloud computing as part of their business strategy, they need to focus on data security. Cloud computing involves storing data in remote servers rather than on your own computer. That makes it vulnerable to external threats, so you don’t lose valuable customer data or sensitive information about employees and partners. In addition, companies must also protect customer data and ensure they comply with all GDPR provisions (General Data Protection Regulation).

Biometrics

Biometrics will also become an increasing necessity. It can be used as an additional layer of protection against unauthorized access to sensitive information. This fairly new technology includes unique physical characteristics that you cannot alter if compromised, such as your fingerprint or voiceprint, or in today’s world even eyeprint! This makes biometrics more secure than traditional passwords or PIN codes. Many companies are investing more time and resources in strengthening their security systems. This investment will enable them to protect their customers’ data against growing cyber threats, including ransomware attacks, phishing scams and malware infections.

The emergence of challenger banks

A challenger bank is a financial institution that offers traditional banking services but does not use a branch network. Instead, it uses technology to deliver its services. These are generally online-only banks, like Tangerine or EQ, offering banking products and services such as loans and deposits. They are aimed at customers who want more choice in how they interact with their bank, and prefer digital channels to branches or phone calls.

Challenger banks are also known as digital banks, fintechs (financial technology companies) or challenger institutions. Since the advent of the pandemic in 2020, challenger banks have become a more reliable banking provider for many people. They have become an integral part of the financial landscape, not least thanks to the billions of dollars in venture capital invested over the last decade alone.

However, it’s not just startups that are taking part in this revolution. Existing banks are also stepping up a notch by adopting new technologies to better serve their customers. In the years to come, we will see more traditional banking institutions embracing fintech innovations and creating new verticals or divisions within their organizations to better serve their customers.

Decentralized finance continues to reach out to the general public

In 2018, blockchain was one of the most talked-about topics among investors and companies alike. Blockchain technology is defined as a decentralized database that maintains a continuously growing list of records (blocks), linked together and secured by cryptography. In other words, it’s a new type of Internet database that enables data to be stored securely without relying on third parties such as banks or governments. Hence it reduces enormously the potential to disrupt many other sectors, such as healthcare or insurance.

Blockchain offers a decentralized ledger system with no single point of failure, making it difficult for hackers to break into your system. Furthermore, any information stored on a blockchain cannot be easily altered, as all nodes on the network must approve any changes made beforehand, providing even greater protection.

Blockchain technology is already being used to streamline transactions in many sectors. It is expected to have a considerable impact on the financial sector, particularly regarding payments and fraud prevention. By 2025, many countries will have implemented a digital currency backed by a central bank and will be using blockchain to facilitate cross-border transactions between countries around the world.

More ESG initiatives in the fintech landscape

The ESG (environmental, social, governance) landscape for the Fintech industry is still relatively new. Hence many measures are being launched to help drive these initiatives forward.

What are ESG initiatives?

ESG initiatives are environmental, social and governance activities in which companies can participate to ensure that their business practices are in line with their values and beliefs. These initiatives also help companies gain visibility in their sector and stand out from their competitors. It makes them more attractive to potential customers who want to know that your company is ethical and responsible.

What do ESGs look like in practice?

There are many different types of ESG initiatives you can start participating in if you want to make your business more sustainable. Here are just a few:

Sustainable infrastructure projects :

As the world’s population continues to grow, so will energy demand. This means a growing need for sustainable, efficient, and clean energy sources.

Governments around the world are focusing on renewable energy sources such as wind and solar power to meet this demand. They are also developing infrastructure projects focusing on water management, waste management and recycling strategies.

A growing number of companies are also adopting sustainable business practices. Many emerging financial institutions have been at the forefront of this movement, but other sectors have also begun to take an interest.

Financial inclusiveness:

Financial inclusiveness aims to ensure that everyone has access to financial services, regardless of their income level or geographical location. These services include savings accounts, credit cards, loans and insurance products. Millions of people do not have access to these basic financial services, such as savings accounts or loans that can help them build wealth over time or develop their businesses.

Several banks have teamed up with fintech startups to help provide affordable mobile solutions for digital banking services such as payments and money transfers to solve this problem. These solutions should continue to be effective in the future.

Conclusion

According to PR Newswire, the global fintech sector is growing exponentially and is expected to be worth $305 billion USD by 2025.

The Fintech sector remains strong despite the uncertainties ahead. And it’s likely to continue to change the way we travel, bank, pay bills, manage funds and more. These trends should offer a better value proposition than the traditional systems and solutions many are used to.

So, which fintech trend are you most excited about?

 

SOURCE: www.payhawk.com