Fintech Trends that Will Transform Banking and Financial Services

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Fintech is an industry with its own specific corporate rules that include constant meetings, networking, etc. At the beginning of 2020, there was an unexpected and rapid transition to digital engagement, which as we all know, happened due to pandemics.

So, face-to-face meetings became online, the popularity of mobile banking increased significantly, trading apps put records on transactions, etc.

Fintech was able to adjust to the new conditions. We can state the fact that the world’s healthcare crisis made a significant impact on trends in the industry. So let’s proceed to the details to discover what these trends are and how they can transform banking and financial services.

BIG DATA IN FINTECH

Big Data changed the course of how financial institutions are performing their daily operations by processing, analyzing, and leveraging the information. The aim of these processes is to get insights from the information and use it to strengthen the businesses. So, how Big Data can impact Fintech? It simplifies everything: from filtering the necessary information based on the client’s name to predicting possible risks. Other benefits include:

  • Real-time data collection enhances security, detects frauds, and prevents potential money theft.
  • Data analytics provide valuable insights that help organizations in decision-making, risk management, optimization, etc.
  • The ability to analyze vast amounts of data let financial services improve customer service, targeting, and improve channel performance.
  • Ability to revisit past performances, optimize ongoing processes, and get predictions of future trends.
  • Personalization provides a high-quality user experience and attracts loyal clients which is a key to success in a competitive marketplace.

AI

Lots of companies that are involved in the financial sector working on implementing Artificial Intelligence to manage risks, detect frauds, identify patterns and make data-driven decisions.  According to Medium,  AI will reduce bank operating costs by up to 22% around 2030. Another research states that in a few years machines will perform up to 25% of bank functions, which will increase capacity and give the opportunity to employees to focus on core tasks.

According to finance journal Finextra some of the most frequent usages of AI and ML are:

  • 38 % – Сosts reduction
  • 27 % – Fraud detection
  • 37 % – Customer insights
  • 34 % – Customer experience
  • 30 % – Internal process automation
  • 26 % – Client satisfaction

RPA

RPA or Robotic Process Automation is an example of an AI solution. It is a relatively new technology that impacts fintech by increasing its efficiency and effectiveness. Usually, it works as a software bot that can be programmed to identify and minimize human interactions (errors) with a digital system. This process of automation includes security checks, risk assessments, data analysis, reporting, compliance processes, and other repetitive administrative activities. This gives financial institutions more time and workforce to perform their core responsibilities.

According to research, Robotic Process Automation in Fintech is expected to reach $1 Billion in revenue by 2023. The numbers tell us that the usage of technology is becoming popular as 50% of controllers have already implemented RPA and the number is going to increase to 88% over the next two years.

How does it work in financial institutions?

  • Bots keep customers’ information updated (names, addresses, credit scores, etc) which leads to performance optimization.
  • It can serve as a financial advisor that tracks investment values, access the stock market, and minimize the risks. Bancolombia has launched InvesBot and by sending updated information about the stock position, price changes, market conditions, economic events help clients with investment recommendations.
  • RPA bots can gather data, calculate the tax payable, and submit financial reports to make the process of settling tax-related data less stressful.

Predictive Analytics

Predictive analytics play an important role in strengthening cybersecurity and preventing fraud. It uses machine learning and big data and based on past behavior forecasts things that will happen in the future. Also, predictive analytics improve customer experiences by monitoring and measuring customer behavior, interactions with the company (or bank).

Mobile Banking

One of the latest trends in Fintech is the digitalization of the banking industry, especially mobile banking. This industry will increasingly become a full-fledged channel of access to all banking products, operations, and services with different roles that are necessary to conduct all operational activities without being tied to an office, using a smartphone or tablet. According to the analysis, 97% of millennials use mobile banking daily.

Features of the mobile banking app

  • 24/7 customer support and access to the personal account and
  • Possibility of money transfers
  • Cashback
  • Bills/ Loans payment alerts
  • Fraud alerts
  • Other convenient services (tickets in public transportation, etc)

CONTACTLESS PAYMENT

Another trend that impacts Fintech is the appearance of different digital payment options. Since the beginning of 2020 users’ habits has changed completely. The popularity of different payment methods such as contactless payments, e-wallets, and voice payments has increased significantly. This massive switch to non-cash payment existence happened as an attempt to avoid the spread of the coronavirus.

The global contactless transaction cost would rise from $2 trillion in 2020 to $6 trillion by 2024. In the United States alone, the revenue from transactions would grow to $1.5 trillion by 2024. According to the National Retail Federation (NRF), 19% of people made their first contactless payment in May 2020, 57% thinking they would continue to use digital payments after the pandemic.

According to a report, there was $8.9 billion worth of transactions from mobile wallets in 2020. This is expected to reach nearly $14 billion by 2022.

Mobile Payment Apps Types:

  • Mobile banking apps
  • Payment systems (Apple Pay, Google Pay, PhonePe, Amazon Pay, Samsung Pay)
  • eCommerce Platforms (Shopify, EKM, BigCommerce)

Social Commerce

Back in 2019, Instagram launched checkout which enables users to tap on a product from the brand shopping post and buy it without leaving the app. Next year Facebook launched a new feature called shops which enables businesses to display and sell their products on a particular platform. Tick-tock started beta tests allowing their influencers to embed social commerce links in videos on the app.  With the increasing popularity of social media among huge active user bases (nearly 1 billion in Instagram, 800 million in Tick Tock, and more than 300 million in Snapchat) in 2021 we’re really going to see this trend taking off. It is an $89.4 billion market and it is going to grow to $604.5 billion in the next couple of years.

So, social commerce is the process of purchasing any goods or services within a social media platform.

Who will benefit from this?

  • Sellers, because social commerce can boost sales, especially among the younger generation.
  • Buyers (who are usually tech-savvy users) as the whole shopping process is quick and convenient.

Blockchain

Blockchain was created to secure cryptocurrency transactions from hacking attempts. Let’s discover together how it works. There is a chain of transactions that consists of blocks. Each of them is united with the next and previous one, so, to do any changes to the transaction you need the approval of all the stakeholders in the chain.

Blockchain provides unbeatable security which has been a top priority for a while. So, banks and other fintech institutions are implementing this technology.

The global blockchain market size is going to expand from $3.0 billion in 2020 to $39.7 billion by 2025. 

Use Cases of Blockchain Smart Contract in the Real World

Benefits of blockchain include

  • Secure payment processing
  • Protection by strong and complex encryption algorithms
  • Increased transparency between parties involved in a transaction
  • Fraud reduction

Final Thoughts

The future is now! The speed at which Fintech transformed to serve its customers and adapted to the new pandemic reality is amazing! To follow trends, reach new customers, engage with loyal ones,  financial institutions are partnering with software developing companies and creating together useful products. Try it yourself!

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By Sidharth

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