The FinTech landscape has been actively leveraging cutting-edge technology to identify gaps and rightly turn them into lucrative opportunities. As the total value of the global FinTech market is expected to hit $699.50 billion by 2030, at a CAGR of 20.5%, let us look at ten exciting trends that will significantly influence the way we interact with financial services and technology in the near future.
The push for sustainability is steering banks and fintech companies towards more eco-conscious solutions. Ushering in a new era of green finance, the European Commission’s Corporate Sustainability Reporting directive requires banks and companies to be more transparent in their processes and consider social, governance, and environmental factors in their investment decisions. This approach will promote long-term investments in sustainable economic activities, projects, and more.
In 2024, AI is set to be more powerful than ever - and it’s about to play a pivotal role in the financial technology space, focusing on revolutionizing customer support and assistance.
By combining artificial intelligence and intelligent automation (IA), this dynamo will help with business process management and improve efficiencies in operations.
Furthermore, AI and IA will simplify operations, free up resources, and even make data-driven predictions.
After Facebook’s blunder with their crypto project Diem in 2022, much was up regarding Big Tech’s role in the fintech space. This year, Google, Amazon, Facebook, and Apple are expected to expand their footprint in the payment sector, using their large user bases and tech capabilities to rival traditional banks.
With the goal to further modernize services in anticipation of the coming years, digital banking services will be more advanced than ever in 2024 – and with this comes the role of cloud-based banking.
While it may sound complicated to the general public, cloud computing is just the concept of offering data storage, networking, apps, analytics, and more in a single platform – making it simpler and more convenient for users. However, it also has its risks in the banking sector - especially when it comes to security when fraud attacks are frequent. This is where advanced cybersecurity comes in.
Cybersecurity technology may be getting more secure, but at the same time, fraudsters are getting increasingly devious by using social engineering, often evading secure walls that companies and organizations put up.
To secure the future of financial services, fintech companies, businesses, and traditional banks are doubling down on sophisticated cybersecurity investments, especially now in the age of advanced cyber threats.
This year, Generative AI will play an important role in the fintech space to personalize financial services through customer guidance, VAs (virtual assistants), chatbots, and more. Through machine learning, generative AI will also analyze consumer data to provide advice and recommendations for clients' and users’ financial goals.
Other advantages of this technology include forecasting financial trends, data augmentation, fraud detection and risk assessment, and credit scoring refinement.
An emerging technology that could greatly impact the banking sector is in the works. Quantum computing, when combined with blockchain tech, can process extensive quantities of data and perform calculations at the speed of light - something that ordinary computers cannot achieve.
To keep up with advanced technology, banks are eyeing quantum computing to perform multidimensional algorithms in real time while ensuring a counterfeit-resistant system.
As artificial intelligence evolves, so do cybercriminal tactics. Financial fraud is becoming more sophisticated via personalized chatbots, AI-generated deepfakes, and even realistic voice clones that are designed to impersonate real people.
However, artificial intelligence is also helping banks detect fraud through behavioral analysis, pattern recognition, real-time transaction monitoring, and more. Blockchain technology will also play an important role in ensuring added security.
In the world of global finance, The expansion of SWIFT GPI (Global Payments Innovation) worldwide can allow users and clients to track their cross-border transactions end-to-end – ensuring that there’s transparency in the process.
An added feature of SWIFT GPI is its increased payment speed, which is more enhanced and has a quicker processing speed than the standard SWIFT.
Digital currencies are becoming increasingly more valuable as time passes, and Stablecoins, operating on blockchain technology, offers cheaper, faster, and more transparent transactions - giving it an edge over traditional banks.
A natural extension of any non-financial experienceEmbedded finance, or the integration of financial services into non-financial services, has created many opportunities for financial and non-financial companies. The most common offerings from embedded finance include banking, lending, insurance payments, and bank credit cards. A study by Plaid has reported that 88% of companies that implement embedded finance reports increased customer engagement. Customers prefer embedded finance as it offers an impressive combination of enhanced user experience, cost savings, and financial accessibility for customers who might find themselves underserved by traditional financial institutions. Convenience is one of the main reasons that draw customers to embedded finance. Shopify Pay, for instance, makes the checkout process up to four times faster, increasing checkout-to-order rates by 1.7 times.
With numerous possibilities to reach end customers daily through anything from customer loyalty apps and digital wallets to accounting apps and shopping cart platforms, embedded finance is a powerful tool that can easily integrate financial tools into routine digital interfaces. According to McKinsey’s market-sizing model, embedded finance in 2021 reached $20 billion in revenue in the United States alone. The market is estimated to double in size within the next three to five years, with ample white space for new entrants. Bain & Company estimates transactions to $7 trillion (over 10% of total US transaction value) by 2026 for financial services embedded into e-commerce and other software platforms.
RPA can hugely benefit the finance landscape by facilitating scalability, innovation, efficiency, and compliance. By automating mundane, repetitive, rule-based tasks, RPA has enabled organizations to focus on higher-value work. It reduces the likelihood of errors, an inevitability of manual entry, by scanning the data, identifying issues, and bringing them to the user’s attention for review, after which the data can be programmatically corrected across all impacted systems. This way, inconsistencies between systems can be easily identified by ascertaining the source of the inconsistency.
RPA creates programmable bots to deal with a range of processes, from administrative tasks such as sending payment notifications to payment approvals, processing workflows, and handling orders. Besides boosting efficiency at minimal costs, RPA also helps institutions mitigate the scarcity of skilled resources. The global RPA market size is projected to reach $43.52 billion in 2029 at a CAGR of 23.4% during 2022-2029.
Crypto traders and investors most often find themselves in transient periods of volatility. However, recent survey findings indicate that 52% of consumers consider cryptocurrency a valid alternative for making overseas fund transfers, and 45% are already doing the same.
More fintech companies are incorporating blockchain technology into their financial systems, given the level of transparency and security provided by this ledger system. Take the case of crypto payout for instance. Many cross-border companies working with a diverse network of freelancers scattered across different locations are issuing their own tokens and are willing to use them for salary payouts.
Similarly, with the increasing applications of De-fi, companies are overcoming the challenges posed by the shortcoming of traditional finance structures by disintermediating institutions, which creates an inherently open, public, transparent, neutral, and neutral financial infrastructure censorship-resistant and borderless. The World Economic Forum describes decentralized finance as a “leapfrog technology for the 1.1 billion unbanked people”. All anyone needs to access it is a smartphone with an internet connection. With a market valued at an all-time high of more than $180 billion, the number of users on DeFi has increased from about 91,000 to almost five million during the period from January 2020.
According to Thomson Reuters’ Fintech, RegTech, and the Role of Compliance Report 2022, 49% of respondents consider using regulatory technology solutions to manage compliance. Powered by emerging technologies, cloud-based RegTech solutions will continue contributing to areas beyond automation and offer advanced cognitive computing capabilities, adaptive algorithms, and predictive analytics with deep machine learning. This makes it possible to interpret new regulations in real time.
Technological intervention in today’s surveillance and regulatory landscape has made it possible to integrate numerous applications of artificial intelligence, like machine learning, natural language processing (NLP), and robotic process automation (RPA), into existing compliance mechanisms. This enables better data sharing and timely communication among different systems to help firms identify patterns and relationships between trading activity and e-commerce data, for instance, that could indicate potential misconduct. Technological interventions to maintain compliance are also a competitive advantage for businesses, allowing them to scale up and expand without compliance issues. Insider trading and market abuse remain top focus areas for regulators for the immediate future. RegTech is expected to have a valuation of $28.33 billion by 2027.
Neobanks are predominantly tech-driven digital banking platforms that have increasingly become popular among modern users, a.k.a young digital natives with evolving requirements. Through innovative and low-cost digital channels, they provide a comprehensive suite of banking services not restricted to just payments or personal financial management. According to research firm Grand View Research, the global market for neobanking is expected to be worth $722 billion by 2028.
The customer-centricity of these banks makes them highly responsive to customer preferences and tendencies. Intelligent use of data keeps them on top of customer activity through monitoring and analysis, enabling them to provide hyper-personalized customer experiences. The use of AI through chatbots, for instance, plays an essential role in customer communication to address their unique requests and queries. By combining the customer’s context and intent using natural-language processing, banks can deliver superior engagement with cost efficiency. The pandemic accelerated this trend, particularly successful in markets where most people never had a bank account. By skipping developed economies, some neo-banks focus on emerging markets to revolutionize the remittance industry. For instance, TymeBank, a South African neobank, raised $110m to fund expansion into Southeast Asia.
Fintechs and banks, each with their own unique set of advantages are increasingly joining forces to create frictionless customer experiences. These collaborations mean that banks, with the help of BaaS, can generate more revenue by charging fees for the use of their payment infrastructure by fintech as the latter continues to rely on traditional banking infrastructure to build financial products. This arrangement allows banks and fintechs to leverage each other’s assets, making it important to acknowledge Application Programming Interfaces (APIs) that facilitate this symbiotic relationship.
By making necessary customer data accessible for fintechs and non-banks more than ever, open banking is transforming the way institutions interact with each other in the modern world. According to research, the global open API technology movement is currently estimated to be worth $2.48 million and is expected to grow at a CAGR of 24.81% to over $14 million by 2030.
Super apps offer an ecosystem of fully integrated third-party services facilitated by a payment system by aggregating multiple applications into a single interface. Digital-native fintechs such as Revolut and Square are in the running to become “super apps,” branching out to bundle a broad range of functionalities. Revolut, for instance, has announced expansion into decentralized cryptocurrency wallets, mortgage, and expense management. The fintech sector has seen mass adoption of such apps, which translates to seamless experiences for their customers as they are offered the power to do everything they want quickly and efficiently.
According to the Super App Shift survey launched by PYMNTS in collaboration with PayPal, 3 out of 4 customers want to use feature-rich apps in place of multiple, separately installed services. According to Gartner, by 2027, more than 50% of the global population will be daily active users of multiple super apps. The concept will expand to include enterprise mobile and desktop experiences such as workflow, collaboration, and messaging platforms.
It is not surprising that contactless payments have tremendously risen in popularity since the pandemic. As convenient as they are, contactless payment options are not without drawbacks. Customers are worried about touching PIN-pads as much as they are about cash transactions when it comes to matters of hygiene. Many customers are worried about the lack of security of their cards if lost or stolen, and many are confused about spending limits- especially in the UK, where the contactless payment limit has been increased from £45 to £100, making it the highest in Europe. This is where biometric payment cards allow users to experience the convenience of contactless payments while at the same time protecting them against misuse, as only the authorized user can make payments.
According to research, 51% of surveyed consumers are willing to switch banks to receive a biometric payment card, and 43% are willing to pay to receive one. Additionally, biometric authentication is extremely useful for storing and accessing cryptocurrency as it can provide an additional layer of security to authenticate transactions using cryptocurrencies.
Consumers’ need for flexibility, accelerated by the uncertainty caused by the pandemic and inflation, are possible growth drivers of this trend. The reason for the immense popularity of BNPL in Brazil, the largest single market for this arrangement, is interesting too - here, BNPL works as a way to avoid the exorbitant interest rates charged on credit cards in the country, which can exceed 400%! Interestingly, BNPL is significantly stronger in markets that founded major fintech companies like Klarna (Sweden) and Afterpay(Australia).
Regardless of why different customers prefer BNPL as their preferred payment method, impressive growth potential exists for it in relatively new areas such as B2B payments and travel. This would make luxury experiences more accessible to customers and free up cash flow. There are challenges that lay ahead for BNPL, such as impending government regulations and rising interest rates as a result of inflation. Nevertheless, it has revolutionized the way people make purchase decisions. According to Euromonitor research of 47 markets, BNPL transactions are forecasted to reach $156 billion, which is comparable to all personal transactions in Denmark or Norway. Between 2017 and 2022, BNPL transactions increased by 304% within these 47 markets.
Financial inclusion is identified as an enabler for seven of the seventeen United Nations Sustainable development Goals. It is recognized as a priority by public agencies, private entities, and financial institutions worldwide. The global pandemic undoubtedly supersized this expansion of financial inclusion - 71% of people worldwide now have a bank account or mobile account in 2021, a remarkable increase from 51% in 2011.
In their financial inclusion framework, Deloitte provides a comprehensive framework to enable leaders to approach their inclusion efforts holistically- across four dimensions: organization, offerings, community, and the broader ecosystem. The idea is to uncover unique competitive advantages by considering issues broadly while addressing them specifically. With many fintech startups created specifically to ensure equitable access to payments, remittances, loans, and investments, this area is bound to make great strides in the next few years.
From neobanking and embedded finance to robotic automation and De-Fi, the FinTech landscape’s wide spectrum of innovations touch upon how individuals and institutions interact with financial services for the simplest of things. For instance, AI offers limitless opportunities to revolutionize every aspect of the industry and is likely to continue leading the technological revolution in the market through 2025 to redefine customer service. An AI-oriented fintech market is expected to grow at an impressive rate throughout 2025. The volatility of the financial sector makes it a challenging time for fintech to quickly rise to the uncertainties and on the other hand opens doors for exciting breakthroughs. In this regard, 2024 sure has a lot to offer the world.
