Fintech is one of the most exciting sectors in business. As the world was thrown into turmoil over the last 18 months, specific tech emerged from the chaos to establish itself as a mainstay.
Fintech adoption has been growing incrementally since around 2015. But the sector’s role in rapidly helping retailers create the payment processing infrastructure that meant they survived the pandemic has further cemented fintech’s importance in an increasingly digital world.
Much of fintech adoption during 2020 and 2021 was about businesses getting up to speed with a new world. However, the future of fintech promises to be more customer-focused.
Below are some of the trends to watch in the fintech industry over the coming years.
#1. Improved Digital Platforms
Pandemic lockdowns have accelerated existing trends toward remote working and virtual platforms. The capacity and potential of digital solutions have been tested extensively, and many adherents will continue to choose virtual over physical.
This scenario has led many banks to see the benefits of getting their customers to adopt digital platforms. However, to achieve this transformation, financial institutions will need to develop better platforms for their employees and customers.
Cybersecurity, document management, and robust data security are all elements of consumer finance that will benefit from innovative approaches.
As more work and banking go online, financial institutions will need to evolve or die. Expect to see significant further investment in fintech apps and platforms.
#2. Sustainable Investment
Several recent trends are converging together to suggest that sustainable investing will become a significant trend in the future. Millennials are beginning to assert a more considerable influence in the financial space, and their preference for companies and brands who share their values is clear.
Additionally, since the pandemic, many private investors that have entered the space are interested in Environmental, Social, and Governance (ESG) investing. Fintech companies are focusing on sustainable investments across a broad range of services, including pensions.
With banks and financial institutions slow to respond to this change in consumer sentiment, innovative fintech companies have an opportunity to serve a more environmentally conscious audience.
#3. Personal Loan Services
Fintech is transforming personal loan services. Terms and interest rates vary between banks and financial institutions, which means consumers often miss out on the best deals. But startups like Axo Finans are disrupting the lending industry by driving a more transparent and efficient approach.
Axo allows consumers to fill out one application but apply for several loans. The application takes just a minute, and then it is forwarded to Axo’s banking partners. The customer receives a quick decision and can take advantage of very favourable interest rates.
The legacy lending process is out-of-date. Modern lenders want quicker loan processing and a more personalized experience. Additionally, by using a mix of lenders, fintech loan services keep offers competitive. These savings are then passed down to the consumer.
#4. AI and Machine Learning
AI and machine learning have perhaps not reached their potential yet. A decade ago, AI was being touted as the revolutionary answer to all the world’s problems. While things haven’t worked out exactly as the experts predicted, AI has made steady, incremental improvements across many sectors.
Healthcare, retail, and marketing have all benefited from embracing AI, and perhaps now it’s fintech’s turn.
There are several applications of machine learning with the fintech space that can disrupt traditional banking. Regulatory compliance is a growing concern for financial institutions. It’s time-consuming work that doesn’t add to the ledger. Automated or intelligent processes would solve this headache.
Additional applications like robot advisers could be used to drive costs down. At the same time, AI-based AML and fraud detection would meet regulatory compliance and help scrutinize documents and loans.
Another exciting area that AI could improve is algorithmic trading. These advances could be automated, but perhaps the best application is a hybrid human-machine model that could make the most of general and specialist intelligence.
#5. Payroll Fintech
As fintech companies compete for customers’ money, the focus has been mainly on payments. This has taken the form of either challenger bank accounts or mobile or online payments. However, there are other areas of the value chain that have been left relatively untapped.
Lately, interest in payroll fintech is increasing. There are several benefits that this approach can offer to both employers and employees. For employees, there are various benefits such as getting money earlier, eliminating banking fees and allowing more flexibility to move money around.
For employers, a reduction in fees could prove attractive. However, one of the most significant changes could be the ability to offer enhanced employee benefits like microloans and so on. Many workers live paycheck to paycheck, and payroll fintech could take the place of high-interest payday loans by providing loans secured by the employer.
#6. Decentralized Finance
Bitcoin has had its usual up and down, volatile year. As it rose to $60,000 per coin in April, evangelists were out in force, declaring it “the future of money”. While cryptocurrency does offer some exciting possibilities, it has many issues. Global governance and market manipulation are just the beginning. Its incredible consumption of energy is another problem.
However, blockchain itself might offer some compelling opportunities. True disruption of the financial institutions could involve operating outside the current system. With governments working to find ways to regulate digital currencies, fintech has an opportunity to find legitimate spaces that traditional institutions might not be able to see.
If fintech startups embrace blockchain, financial institutions’ role as an intermediary could be eliminated. Smart contracts or tokens could instead be used for trading finance.
Some of the other industries that could be disrupted by blockchain in similar ways are insurance, asset management and lending.
The Future Looks Bright
Fintech is set for an exciting future. By embracing other nascent tech like AI, fintech can make a vast impact in the financial world by building software and apps for both consumers and businesses.
Additionally, a greater focus on disrupting the traditional banking sector to make finance work more favourably for consumers is likely to come. Personal loan services and decentralized insurance are just some of the examples of changes that could work for citizens by enforcing transparency upon the industries.