Fintechs and banks are both in an effort to be innovative. However, with the advent of innovative technologies, they need to keep up with the latest trends. Abdul Naushad, the chief executive officer of Buckzy Payments has identified five key fintech trends that are worth keeping an eye on.
The banks and fintechs are engaged in racing to be the first to innovate and determine how the financial industry will evolve in the coming years. But, as new technology develops, traditional banks will need to adapt fast to ensure that they give their customers what they want, like Prillionaires wealth management software for high net-worth individuals and for people with multiple bank accounts. This will eventually result in the development of new models for business in the financial services industry.
The constant adoption by consumers of innovative ways to make use of financial services calls for a complete overhaul of traditional financial institutions. The consumer is driving the change at a massive magnitude due to the advancement of technologies and wider societal developments.
It is no surprise that the pandemic has altered how we live, work and purchase. This is affecting traditional banks and fintechs as well and they must find new ways to gain competitive advantages. We can see five main trends in the process of transforming as we enter 2022 and beyond.
1. The rise of Neo/digital banks.
The banking industry has historically been a monopoly, with many barriers to entry to the market. However, the loosening of regulations in a variety of countries has made it possible for neobanks to adopt the initiative and win customers by promising low fees, mobile banking, and an improved customer experience, which eliminates the hassle of in-store banking. That’s the reason the Neobank industry has been valued at USD 30 billion in 2020 and is predicted to expand at a compound Annual Rate (AGR) of 47.7 percent in the next 8 years. Neobanks also are attracting non-banked customers, with a combined buying capacity in the range of 1.2 trillion. Since more and more people move online, expect digital banking services to be ahead of traditional in-store banking.
2. Real-time cross-border payments.
About 40% of large companies within the US have already embraced real-time payments, and this number is expected to grow as per Levvel Research. In other regions and countries around 50 real-time payment programs are already in operation. There is a huge demand for the speed of payment settlement, which provides companies with competitive advantages with a lower risk of failure, and greatly improved effectiveness in cash flow. As domestic payment schemes get more popular and established anticipate real-time capabilities to expand to cross-border transactions.
3. Open banking.
While the pandemic was raging the reliance we have on electronic payments and self-service banking has demonstrated the necessity for banks to be more digital. It is an API-enabled technology-driven method that permits banks and other companies to provide financial services seamlessly by using authenticated and aggregated customer information. In the past, many countries have adopted rules that have required banks to provide open banking services in response to the demands of customers. Fintechs all over the world are adopting open banking principles into their services and products. Banks that don’t adopt open banking may hinder their ability to better serve their customers and hinder their growth opportunities.
4. Artificial Intelligence (AI) and Machine Learning (ML).
Machine learning software allows the processing of large quantities of data, resulting in important conclusions that, applying its algorithms, could improve efficiency and create opportunities to save time. Furthermore, it studies patterns in real-time, enabling rapid decision-making. Many financial services are using AI/ML for everything including fraud detection, lending approvals, AML screening, financial monitoring, and investment forecasts. Machine Learning is constantly evolving and Fintech will remain one of the industries that will benefit from the advantages of AI/ML.
5. The emergence of Banking-as-a-Service Platforms.
In recent years, Banking-as-a-Service (BaaS) applications and solutions have become an efficient and cost-effective method to offer financial services based on principles of open banking. Banks need to adapt to the service-oriented, modular architecture and composable approach to the delivery of new and exciting digital services. BaaS is an essential element for traditional banks as well as financial institutions in their roadmap to digital transformation. Expect more traditional financial institutions to work with fintechs through BaaS services to incorporate new technology in-house, and to enhance their offerings.
As markets and technologies mature in the coming year, the key developments will help create a favorable environment for further development, and the emerging business models within financial services. They provide opportunities worldwide for fintechs and banks to work together and broaden their services to the world in the areas of lending, payments and instant credit, digital banking, and much more.