Fintech is a rapidly growing change that can shake up many parts of the financial world. The increase in financial technology companies has been amazing in recent years.
Now, there are over 26,000 fintech companies worldwide, and they together provide jobs for about 500,000 people. Almost 30% of bank customers use at least one service from a non-traditional provider.
In banking, everyone talks about fintech. It has changed a lot of things in finance, from how we make payments to getting advice. To keep you updated on the newest trends in the fintech revolution, we’ve made a list of seventeen technologies that are transforming the industry.
#1 Blockchain
Distributed ledger technology is becoming the backbone of the digital world. It’s the tech behind Bitcoin and other digital currencies, but it can do a lot more.
Blockchain has a lot of potential that we haven’t fully explored yet. There could be some really exciting developments in the next few years.
Things like Decentralised Finance (DeFi) and Non-Fungible Tokens (NFTs) are just a couple of examples of how blockchain could change finance. There are many other ways people can use this technology, and it’s hard to predict what new things will come up in the next few years.
Blockchain has a lot of room to grow, but there are also some challenges that need to be worked out before it becomes more common.
#2 Sensors & Internet of Things (IoT)
The Internet of Things (IoT) is changing how financial services work and how we understand data. Sensors play a big role in the fintech revolution, and they are becoming more common. These sensors help companies gather data in new ways.
Harvard University’s research says, “Putting affordable sensors to watch temperature, location, and stress of almost any moving part gives us many options to monitor distant operations, whether it’s simple household devices or big capital equipment.”
In the financial services industry, sensors are used in ATM machines. They can tell how many people are waiting to use them. Sensors are also used in small payments, like in contactless payments, where users don’t need to enter credit card details for tiny transactions.
#3 Mobile Payments & Digital Banking Services
Neobanks are a trendy fintech service shaking up traditional banking. Unlike regular banks, neobanks operate exclusively online, focusing on mobile-friendly designs.
With neobanks, customers can open accounts using smartphone apps, skipping the need for physical branches or mountains of paperwork. These apps are user-friendly and offer a variety of banking features, including savings accounts, car or mortgage loans, and easy payments.
Examples like Monzo and Starling Bank in the UK, and Number26 in Germany, have gained popularity in Europe, often outperforming traditional banks. Forbes reports that banks worldwide have invested $1 trillion in digital banking to stay competitive.
#4 Augmented Reality / Virtual Reality (AR/VR)
The use of virtual reality (VR) in financial technology is slowly gaining ground. People can now use VR to invest in stocks or trade currencies, creating an immersive experience for monitoring real-time market movements and making quick investment decisions. It’s a great example of how consumers can leverage fintech and modern technology for their investments.
Although experts believe it will take some time for VR to have additional practical uses, companies are already testing the technology to unlock its potential. According to Heather Bellini, an expert from Goldman Sachs Research, virtual and augmented reality is projected to become an industry exceeding $80 billion by 2025.
In 2021, a substantial $10 billion investment in VR was made through Meta (formerly known as Facebook), the company behind VR-headset producer Oculus. Meta plans to hire 10,000 people to build a ‘metaverse,’ and there’s a strong likelihood that fintech will play a crucial role in such a large-scale simulation.
#5 Smart Contracts
Smart contracts, although not fully explored, offer numerous benefits to the financial services industry. These include enhanced security by removing third parties, increased efficiency with faster transactions and lower fees, improved transparency leading to greater accountability, and reduced costs by eliminating overhead expenses.
In financial services, smart contracts are already in use. For instance, Compound Finance utilises smart contracts to enable users to secure short-term loans using Ether as collateral. Another example is Agrello, a startup developing smart contracts for enterprise customers that execute when specific conditions are met.
While most people link smart contracts with blockchain technology, they merit their own category. Older examples, like automated clearinghouses (ACHs) and central securities depositories (CSDs) for bond issuance, also fall under the umbrella of smart contracts.
#6 Robotic Process Automation (RPA)
RPA, or Robotic Process Automation, uses digital robots or programs (bots) to handle routine and repetitive tasks that were traditionally done by humans. It differs from artificial intelligence as it doesn’t require human-like intelligence.
Many businesses have adopted RPA to improve efficiency and accuracy by automating routine activities such as data entry and information processing.
For fintech businesses, RPA is a valuable tool to reduce operating costs without sacrificing quality or productivity. By automating back-office functions, it frees up resources, allowing individuals to focus on more innovative and value-adding tasks.
#7 Voice-Enabled Payments
The older generation once considered futuristic ideas like those in Star Trek as mere fiction from the 60s. Today, these concepts have become reality, with voice-enabled smartphones being a prime example.
Voice-enabled technology allows individuals to use their smartphone’s voice recognition, along with digital assistants like Siri, Google Assistant, or Amazon Alexa, to check their balance and perform tasks such as making payments or transferring money.
For fintech startups working on proof of concept (POC) projects with limited budgets, voice-enabled payments offer a viable option. This technology could be applied for payments in retail stores without contactless terminals, presenting an opportunity.
Additionally, it serves as a helpful tool for individuals with visual impairments, providing them access to the cashless economy.
#8 Virtual Cards
Virtual cards, based on VISA or Mastercard, provide a digital alternative to physical cards for online transactions. These cards don’t involve plastic; instead, users have a sixteen-digit card number, CVV code, and expiration date.
Beyond just online spending, some virtual cards support storing loyalty programs and enable users to manage both fiat and crypto transactions from a single account. This consolidation simplifies fund management, providing one balance across all accounts.
Additionally, virtual cards can serve as a backup payment method when physical cards face issues like decline or misplacement.
Setting up virtual card accounts is easy through mobile apps like Zumo and iCard. However, it’s worth noting that virtual cards may not be universally accepted by all retailers, posing a potential drawback.
#9 Autonomous Finance
Automating finance, or autonomous finance, is when machines and devices handle financial transactions on their own, without needing humans to do it.
For instance, you can set up automatic payments for things like insurance premiums. It means your payments happen without you actively doing anything. Another example is using robo-advisers like Wealthfront or Betterment, which automatically manage your investments.
Blockchain-based smart contracts can also play a role in autonomous finance. For instance, Etherisc lets you create “flight-delay” insurance policies using smart contracts.
If your flight is delayed by two hours or more, the insurance pays out automatically, without you having to go through the process of filing a claim manually. This takes away the hassle of dealing with paperwork after something happens.
#10 Biometric Security
Fancy technology called biometrics is getting really important in finance tech. It helps check who you are, like using your face or voice instead of passwords.
In the future, we might use things like face pictures, voice sounds, and finger scans more to make sure banking is super safe.
Some extra special biometrics include looking at the veins in your palm, checking your eye patterns, and scanning the back of your eyeball. These high-tech ways help banks be safer without needing old-fashioned passwords or PINs.
#11 Artificial Intelligence (AI) & Machine Learning (ML)
Artificial intelligence (AI) is used in many ways in finance, and there’s ongoing research for more uses. It helps with things like predicting risks, managing data, and automating tasks.
Robo-advisors are a cool example in finance technology. These online platforms can manage investments all by themselves, creating personalised plans based on what each person likes. They use smart computing and big data to figure out the best investment strategy.
AI also shows up in finance through chatbots that banks use to help with simple questions and tools like IBM Watson for financial analysis. When AI is part of these tools, they can learn from talking to people and get better at helping customers.
FinTech companies use machine learning, which is a part of AI, to make bots learn and predict what customers might do next, using past and current information.
Machine learning in finance is seen in things like catching fraud, checking if things follow the rules, and using algorithms to trade stocks, proving how it can learn and get better at solving tricky problems from data.
#12 Open Banking
Open banking allows banks to use third-party tools in their systems. This means customers can share their financial information with other companies to get new services or make their current services better.
For example, you can let a utility company app take money from your bank to pay bills. This makes it easier without needing another login or payment method.
Open banking has many uses. It can help third parties suggest payments based on what you’ve done before, offer better loan options, and give investment advice through things like robo-advisors.
A study by PwC says open banking could change how we see banking, especially for small businesses. It makes us think about who should give us banking services, who will guide us, and when and why we let other companies see our money info. Open banking might shake things up in the finance world.
#13 Cybersecurity
As hackers keep finding new ways to break into systems, experts have to come up with smart strategies to keep sensitive data safe. Even when there are strong measures in place, hackers can find new ways to get in, like what happened with Equifax when attackers used a known issue that the company hadn’t fixed.
Fintech startups are using innovative cybersecurity technologies, like blockchain, to make sure information is safe. Other important improvements in fintech cybersecurity include storing data in multiple clouds, using secure access service edge (SASE), and decentralisation.
Because cyber threats are increasing, especially with more online transactions and digital processes, businesses in fintech are working hard to protect against these threats.
They’re dealing with challenges like managing fraud, knowing their customers (KYC), fighting against money laundering (AML), and trying out solutions that don’t need passwords to make things even more secure.
#14 Big Data
In today’s world, both businesses and individuals need a lot of information about markets and details to make predictions, forecasts, and trade throughout the day.
Big data has become even more important with the rise of IoT devices. Even the usual data systems are changing, adding sensors to handle the increasing amount of data.
In this fast-paced environment, traditional ways of managing data don’t fit well. Data that doesn’t have a set structure, created on the go and hard to handle and record, means companies have to change their usual data solutions to work on mobile apps, tablets, and smartphones to stay competitive.
Rules, like the EU’s General Data Protection Regulation (GDPR), are making it harder to make solutions that work everywhere. Keeping data private and analysing it is now really important.
Teams in charge of following rules face the task of making their big data plans bigger while making sure customers stay loyal, especially with more competition from companies around the world using global trade agreements.
#15 RegTech (Regulatory Technology)
Regtech refers to using technology to monitor and make sure that businesses follow rules and regulations. Solutions in regulatory technology automate the tracking and reporting of data, able to handle large sets of data or information that doesn’t have a clear structure. These tools are made to help financial institutions keep up with changing rules in different parts of the world.
The importance of regtech grows, especially in keeping fintech operations safe when there are changes in government leadership and when governments focus more on laws about keeping things secure online. These tools are crucial in handling big data transfers to meet the rules that are set.
Thomson Reuters research shows that “Regtech applications continued to provide popular, embedded solutions for firms in areas such as compliance monitoring, financial crime, AML/CTF, sanctions, and regulatory reporting.”
#16 Gamification
Financial institutions are starting to use gamification in their products and services. Gamification means designing solutions with game elements, like personal scorecards or badges, to get users involved in specific tasks.
These games aim to get customers to keep an eye on their spending habits using events or progress bars. This gives positive reinforcement for making good financial choices.
For example, Acorns is a mobile investment app that rounds up transactions made with a linked credit or debit card and invests the spare change into ETFs (exchange-traded funds). Since it started in 2012, over 8.2 million people have invested $2 billion through its system.
Flourish Savings, another fintech startup using gamification, rewards users with incentives that they can get as cash later. A study by Apis Partners says, “Gamification is about customer centricity: it helps customers achieve their goals in a way that emotionally engages them.”
#17 Quantum Computing
The use of quantum computing in the financial industry is not just a futuristic idea; it’s already happening. Many banks are actively using quantum computing technology.
As computing speeds get faster, financial companies find it easier to predict market movements and understand patterns in financial data.
Besides predicting market trends, financial technology companies are looking into using quantum computing for faster issuance and verification of digital signatures.
Quantum computing can also make security and privacy measures stronger, speed up trading algorithms, and reduce the time it takes to settle transactions.
According to Infosys research, “In financial services, quantum computing would make transactions powered by algorithms much faster.
It would give a big advantage in areas like cybersecurity, trading, asset management, AI, risk analytics, and predictive capabilities, helping to scale up with much lower cost and resources.”
Final Words
Staying ahead in the rapidly changing fintech industry means keeping an eye on emerging trends. Exploring these top seventeen fintech trends can provide valuable insights, empowering you to make informed business decisions. This helps position your organisation for future growth and maintain a competitive edge in the market.
