FINTECH TRENDS: The Epicenter of Reinvention for Financial Sector

Soniya Khanna

06 Jul, 2023

The term Fintech is the acronym form for the word Financial Technology. It refers to the amalgamation of software and other advanced technologies used by businesses that offer automated and improved financial services. The fast and innovative advancements such as the Mobile Payments have revolutionized the way we manage our finances. Further, the IT skilled customers want ease and security in the process of money transfer, loan management, lending, and investing and that too without the assistance of a person or the visit of a bank. Some of the leading Fintech companies that are performing remarkably well in the Indian markets are PhonePe, Paytm, PayPal, Google Pay, etc.

On the other hand, some of the stock trading companies that are continuously increasing their presence in the market are Money Control, Share Khan Etc. Also, the insurance companies such as the Policy Bazaar cannot be excluded from this list. Also, as per the leading news portal, the Fintech market in India is expected to exceed the threshold of $31 billion in 2020.

Further, the Established bank services find themselves increasingly displaced and for both customers and businesses, banking has mostly become more convenient, efficient and easily accessible. On the contrary to the traditional banks, Fintech startups operate more flexibly and fast when it comes to executing new services based on dynamic demands. Hence, the Fintech can also be considered as the Epicenter of reinvention of the Banking sector.

Further, the year 2020 is predicted to showcase an even stronger collision of two worlds, i.e. the technology and financial services. As the term Fintech stands for a powerful synergy of these industries and also promises to show up modern banking to a new level.

The most famous examples of Fintech in our day to day life are Mobile Payment applications, Cryptocurrency, and Blockchain technology like the Bitcoin and Gemini. Further, in the future, the range of Fintech services are expected to transform the market even more with AI (Artificial Intelligence) and machine learning and will also make Fintech products an integral part of our digitalized life. Here, in this article, we will be talking about the global trends that will revolutionize the face of the financial sector in the coming years.

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FINTECH: Trends to Lead in 2020

1. Evolution of Artificial Intelligence – The concept of Artificial Intelligence (AI) is already being used by the financial service providers in the form of chatbots that answer not only customer queries but also gives additional information about the services and products being offered. Moreover, with improved Artificial Intelligence (AI) capabilities, most of the effort that an individual used to do at the backend will be automated. Also, the other uses of Artificial Intelligence will be in the area of analyzing data by using enhanced analytics. Artificial Intelligence promises to provide a new source of information about the customers and data collection structure. For Example – it will assist in analyzing customer’s data on the basis of social media history in order to deliver personalized financial solutions. Hence, in the coming time, the Fintech industry will combine all three – Alternative Data Sources, Enhanced, and their already prevailing business approaches.
2. Blockchain going Mainstream – Blockchain, a unique immutable computer file that is decentralized and distributed, and is disrupting the financial institutions. Further, whenever the concept of Fintech is in question, one cannot forget to mention Blockchain and how it has the capability to transform our financial lives. Blockchain though is one of the most complicated and least understood technologies, but has the ability to make the financial services industry more secure and efficient and also helps in preventing the industry significantly form fraud and identity theft. Hence, there is an expectation to see how the concept of Blockchain is used in smart contacts, digital payments, and a variety of other sectors. Also, there is a prediction that the Blockchain in the Fintech industry will reach $6,700 million by 2023.
3. Focus on Collaborations – With the evolution of Fintech start-ups, the financial banks, institutions and other established players used to consider them as a threat initially. Now, with the passage of time, the threat has been substituted by the desire to collaborate with these start-ups in order to bring Fintech innovations and advancements to its customers. Hence, many established financial brands and institutions are looking forward to investing in Fintech start-ups too and also to partner with them.
4. Robo-Advisory to play a significant role – The concept of Robo-Advisory is in its initial stage. Still, we may expect it to rise and become a significant part of financial offerings. Filled with data, the Robo advisors can provide customers with customized portfolios at a fraction of cost. Further, the concept of Robo-advisory will soon substitute the traditional advisors, and due to this, the companies would be able to serve better to their customers by offering blended solutions as per their needs. Moreover, this will also help the concerned company to stay ahead in the competition. Also, the concept of Robo-Advisory will play a significant role in personal finance management.
5. Tech-Enabled Financial Regulations – The financial sector is one of the majorly and closely administered industries in the world. Technological innovations are not restricted only to financial institutions. This means that due to the rapid evolution in the financial sector, the financial regulators are also required to become tech-savvy in order to regulate better. Further, with the availability of a wide range of data gathering, and analytical tools, the financial regulators now possess a better knowledge about the individual institutions, activities and their overall systematic transactions. Also, these regulators now have the capability to monitor the industry in a more effective manner and can also predict potential difficulties in time rather than acting post-facto. For Example – Data requests concerning “stress test”, asset quality reviews, sophisticated supervisory procedures, and improved reporting requirements from global regulators. Moreover, the use of sophisticated analytical techniques on a large amount of data can enable regulators to easily analyze the situation and caters issues before they get out of hand.
6. Cyber Threats and Cyber Security – In today’s era, the problem related to cyber threats and crimes are increasing at a mounting rate. Moreover, modern society is unaware of the importance of cybersecurity. While nowadays, many companies pay particular attention to data protection, they are still susceptible to issues concerning cybersecurity. On the other hand, when it comes to ensuring cybersecurity, organizations face many challenges, such as the breach of customer data, security automation, lack of professional cybersecurity staff, and integration. Since the financial sector is moving towards the digital era, hence, it often needs stronger and effective data protection in comparison to others. Thus, improved online security will act as one of the most significant Fintech trends in 2020.
7. Voice Revolution – Nowadays, devices having an inbuilt feature of voice control are growing at a rapid rate. Moreover, these types of devices are more often bought and used, as everyone wants to do more of voice searches. According to Comscore, by the end of the year 2020, half of all the online searches will be voice-based. On the other hand, the rapidly evolving technologies concerning AI (Artificial Intelligence) and machine learning have also significantly influenced the way people interact with their smart devices. All of the factors stated above constitute the new requirements of the digital transformation era, where all the products and services are adjusted to voice-enabled devices.
8. Mobile Payment Innovations – One of the latest “big things” in the Fintech industry is the growth of digital mobile payments. Nowadays, consumers want payments to be invisible, instant, and free. Moreover, Mobile payment innovations might even replace our traditional or physical wallets, as global consumers are less dependent on hard cash. On the other hand, Business Tycoons like Google, Alibaba, Apple, and Tencent, already have their own payment platforms and continue to roll out new features such as the inducing fingerprint, biometric access control, and face recognition. Further at a global level, the number of people using online or digital or cashless payments, stood at 440 million in 2018, whereas the same is expected to cross the threshold of 760 million in 2020.
9. Fintech Consulting – In today’s highly competitive era, entering a new market, or releasing a new product or service involves huge risk. Often Fintech executives take market competition for granted, and shortly after launch, they are surrounded by a tough opponent. This is one of the reasons that drive the popularity of the Fintech advisory services and transform it into the main B2B Fintech trend of the coming years.
10. Innovation in Cloud – The number of Fintech companies going for the option of a cloud services provider is increasing at a steady pace. Although today, only 22 percent of all the applications run on the cloud, the year 2020 can become a changing point for the financial services sector. Moreover, according to the estimates of International Data Corporation (IDC), global spending on the public cloud services and infrastructure is expected to grow at a CAGR (Compound Annual Growth Rate) of 22.5 percent during the period from 2017–2022 to reach $370 billion in 2022.

Conclusion

Fintech has significantly evolved during recent years and has continued to develop fast. The ten trends mentioned above showcases the most significant and vital movements and changes that are forecasted to occur soon and revolutionize the future of the financial sector in the upcoming years.