Monday, September 26, 2022

The Fintech market is changing: here’s a look at how

As with everything in the newly-minted digital era, Fintech is rapidly evolving. Here’s what you should know to stay on top of current trends.

What is Fintech?

Fintech, a portmanteau for Financial Technology, is a surprisingly old genre. While you’d be tempted to see it as a result of the IT boom, it actually traces its roots to 1886. As soon as we got the ability to transmit financial data fast via telegraphs, the seeds for the fintech market were sown.

When the first credit cards joined the pack in 1950, this accelerated, followed by the shift to digital from analog in the 1950s. Obviously, as bank mainframes, and then personal computers, developed, so did the financial markets.

The market truly changed after the 2008 financial crisis. Since then we’ve seen the expansion and growth of new markets, the evolution of cryptocurrencies, and the ease of access to the internet through the booming smartphone market. Surprisingly, many modern fintech innovations are driven by non-Western markets such as India and China, where lack of access to traditional physical banking means seeking out smarter solutions is a necessity, not a convenience.

Modern Fintech in a nutshell

So, what does modern Fintech look like on the ground? Even withdrawing cash from an ATM strictly counts as fintech in operation. More cutting-edge examples include transferring money through mobile options, making online payments using digital wallets, and other ways that make banking smarter, not harder.

We saw an accelerated push in the fintech space during the COVID-19 pandemic, where contactless payment methods, and easier ways of accessing cash than queueing in banks, became a critical focus. In fact, it was one of the few business sectors to see meaningful growth in 2020. Research by the deVere group suggests that the use of Fintech apps in the EU boomed by 72% in the pandemic period. Now that users have become acclimatized to these easier methods of dealing with money, there’s no sign of going back, either, despite the reopening of many places.

So, what upcoming changes can we predict for the fintech market? While nothing is set in stone in finance, let’s take a look at some likely growth sectors.

All-digital banks

Many consumers are turning away from brick-and-mortar banks entirely. Digital banks have been performing strongly in many economically underdeveloped markets for several years. Now the whole world is taking note. From contactless MasterCard solutions to international remittance, digital-only banks have overcome trust issues and become a meaningful part of the fintech sphere quickly.

Most users like the lack of tedious paperwork, the removal of the need to wait in queues, and the convenience of accessing banking infrastructure at times that suit them.

Broader options

Moving away from bank-only solutions, however, we also see the widening of Fintech resources into other markets. These new options in Fintech are notable in the Foreign Exchange industry, but we’re also seeing it with mass-market access to stock investing and crypto-investment through apps.

Blockchain

While cryptocurrencies are still a hard sell for many people, we would be remiss to not add the wider implications of blockchain technology to the developing fintech world. Offering a different way to secure and manage digital transactions, many expect the blockchain concept, possibly reworked, to continue to impact the fintech arena over the coming decades. While decentralized finance has its own risks, it’s an idea that’s become popular with many people. Provided regulation can keep up, it may be a key part of the fintech future, especially for cross-border payments. Peer-to-peer financial platforms are another growth area.

Machine learning

Many fintech operations are also looking to AI-based technology to shape the future. These are expected to cut banking operational expenses, as well as reduce the risk from cybercrime in the digital market. Its biggest value lies in allowing effective customer service, while still accurately recording every aspect of a digital transaction. We can add biometric security solutions to this avenue of the fintech world. While biometrics is seen with some skepticism in a world also becoming more aware of misuse of gathered data, it’s definitely an interesting field, and one with growth potential.

Open banking and reg-tech

Lastly, we’re seeing an interesting dichotomy brewing. Open banking forces financial institutions to use secured, standardized data and share information between authorized organizations. This makes financial monitoring easier, as well as making it simpler for clients to access the support they need across a wealth of organizations. However, Regulatory Technology, or Reg-Tech, covers the idea of better managing regulatory processes throughout the financial industry through the introduction of software-based technologies. This tightens the compliance and reporting nets and is also hoped to better tackle issues like money laundering, hacking, and data breaches.

The fintech world is an ever-evolving space, and one with great potential for the wider digital sphere, too. Where to from here? Many of these developing technologies are likely to set the future of fintech, so keep your eye on them.

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