Financial Technology, or FinTech, has changed the way people do business transactions today. Now, they won’t have to physically go to the bank to open an account, deposit their money, or even apply for a working capital loan if they need one for their growing company. People can now do it all conveniently with just one tap.
During the COVID-19 pandemic, the heavy reliance of the majority of the people on Fintech led to a significant increase in demand. In a report done by Statista in 2020, Japan and South Korea experienced a 55% increase in finance app usage. This is then followed by the United States (20%) and China (20%), Germany (15%), and Italy (15%).
It’s safe to say that the Fintech industry is reshaping the business world today. That said, if you own a Fintech company, working for one, or are just generally interested in the topic, here are the top five trends currently shaping the Fintech industry right now:
1. Artificial Intelligence and Predictive Analysis
The eCommerce industry isn’t the only one taking advantage of the benefits of Artificial Intelligence (AI). Fintech companies are also embracing AI and even have become an integral part of every business campaign. In fact, 45% of Fintech companies in the country are already incorporating artificial intelligence into their operations.
With the help of AI technology, Fintech firms, can collect big data produced by the internet each day. With carefully constructed algorithms and data analysis tools, data is translated into useful information. Finance firms then use this information to predict financial forecasts, rising stocks, and even up and coming trends. With this information, finance experts and professionals can make better and more informed decisions, thus leading to an increased ROI for their company.
Not only that, but AI can also help with the following:
- Detect fraudulent activities
- Collect customer data to help build a smart client profile
- Risk management to help with risk diversification and detect possible patterns of threat
2. Open Banking
Perhaps the most obvious benefit of financial technology is in banking. Many predict that open banking will become the new norm in the near future.
Open banking is the process wherein third-party financial services gains access to consumer banking, business transactions, and other financial data with the consent of the account holders. This is made possible through APIs, or application programming interfaces.
The primary purpose of online banking is to allow consumers to manage all their banking accounts on one platform. This makes it easier for consumers to handle their bank accounts and help enhance decision-making and long-term wealth accumulation.
According to Globnewswire.com– one of the largest newswire distribution networks, the open banking market generated approximately $7.29 billion in 2018. Moreover, the forecast expects that open banking will generate at least $43.15 billion by 2026. If anything, it indicates that open banking will continue to influence the Fintech landscape these days and, therefore, should be a major consideration for Fintech companies and other consumers.
3. Digital Banking
The emergence of the Fintech industry also brought about another convenient banking method: digital banking. Now, consumers won’t have to go to the bank to handle banking transactions personally as all these services are now available digitally. Not only that, but they can send money to others, pay goods straight from their account, and receive money everywhere using only their phones or computers.
Simply put, digital banking is revolutionizing the way clients access their finances. Here’s how they do it:
- Electronic Wallets (E-wallets). E-wallets like Apple Pay, Samsung Pay, Paypal, and others make it convenient for consumers to pay for goods and services. You simply have to link your debit or credit card, and you can then use these to buy food, clothes, tickets, or pay for utilities and phone bills.
- Smart Chip Technology. The Smart Chip Technology was designed with the consumer’s security in mind. That said, any ATM card that uses the technology will be assured of top-notch protection when conducting businesses using their cards. This includes one-time pins (OTPs) sent to a customer’s email or phone number during a transaction. The main purpose of this is to confirm the identity of the person behind the transaction.
- Mobile Banking. With people converting to smartphones, the demand for mobile banking is also driving banks and other financial service providers to launch a mobile banking app. This would allow consumers to manage their accounts through their phones. With mobile banking, they can deposit, send, and check their account balances with just a few taps on their phone.
Digitally linked transactions also help companies collect big data, which businesses can use in creating and offering new services, thus opening new revenue streams.
4. Biometric Security Systems
The rise of mobile banking and other digital financial services, though convenient, also raises many security-related concerns among consumers. That said, Fintech companies need to take precautionary measures to ensure the safety of their clients’ information. One way to do that is through biometric security systems.
As the name implies, biometric security systems use the person’s unique fingerprints or facial features to gain access to their accounts. Currently, contactless solutions are starting to take over the market, especially with the increasing health concerns in this pandemic-hit economy. That means that fingerprint scanning or any security system that uses physical contact will slowly drop in popularity.
5. Blockchain Technology
Blockchain is a type of database that contains transactions done over the internet. This digital ledger is then duplicated and distributed across a network of computers. Simply put, it’s another type of recording system that stores information in impenetrable blocks. These blocks are then chained together, thus creating the blockchain.
The most popular use for blockchain is cryptocurrencies. With the technology, two parties can do business over the internet and pay one another without the interference of a third-party company. Blockchain encrypts each transaction, making it impossible for outsiders to penetrate it.
Furthermore, the absence of these third-party financing companies also makes it possible for consumers to enjoy fast transactions without worrying about fees or geographical limitations.
Wrapping Up
The trends listed above are among the hottest in the Fintech industry right now. It’s no doubt that the Fintech revolution will even become stronger in the future, especially with the everchanging customer demands.
That said, if you’re planning on investing in Fintech or building a start-up related to Fintech, you surely don’t want to be behind the latest innovations. Start with the ones mentioned above and continue exploring to keep up with this growing industry.