Financial technology is experiencing the acceleration of positive change these days. Advancements in this industry are meant to help financial services companies and their clients who use those services to navigate risks, avoid overspending, and generally better manage their finances.
According to a recent report, global growth in finance app usage during COVID-19 has been the most dramatic in Japan and equaled 55%. South Korea (35%), United States (20%), China (20%), Germany, and Italy (15%) followed the lead. Even before the pandemic, global investment in financial technology had been increasing. Though with a slight drop in investments in 2019 with $137.5 billion compared to $141 billion in 2018, fintech has experienced positive growth in most of its sectors.
One way or another, the average usage of fintech apps worldwide is anticipated to only keep going up. Therefore, it’s high time companies operating in the financial technology sector and developing innovative technological solutions picked up momentum, found their niche, and empowered their business with one or a number of the fintech trends we’re about to discuss.
1. Biometric security systems
Although mobile banking and other financial services becoming widely available is in itself an unbelievable achievement, it also raises lots of security-related questions. Meanwhile, cybercrime increases day by day.
Therefore, it is essential for organizations operating in the fintech industry to take all the available security measures. And biometrics is the best way to bring security to the next level, providing users with the confidence that their data is protected. Currently, however, the biometrics market is witnessing major shifts under the pressure of the circumstances. Biometric sensors that involve physical contact are forecast to drop in popularity. Despite the overall growth in the usage of biometric technology for identity verification, contactless solutions are going to take over the touch-based fingerprint reader market.
Reportedly, as it is highly recommended now to avoid using cash, the COVID-19 pandemic keeps fueling the growth of the biometric payment cards market. Public health concerns have created more interest in contactless biometric identification solutions. Contactless financial cards had become commonplace before the crisis, but even more changes towards contactless smart access systems are to come.
2. Open banking
Open banking is a revolutionizing technology that brings fintech and banks together, enabling data networking across institutions. Directly related to PSD2 (Second Payment Services Directive), it forces banks to release their data in a secure, standardized form for information to be shared more easily between authorized organizations online. It allows controlling consumers’ banking and other financial information by third-party applications through data sharing with the help of APIs and AI.
Many industry players now predict open banking will reshape the banking sector as we know it; and not without reason. Open banking is reported to have generated $7.29 billion in 2018 and is expected to reach $43.15 billion by 2026. Financial institutions need fintech, and fintech requires community banks and credit unions. And emerging from this demand, open banking partnerships can provide customers with a truly consolidated view of their financial accounts so that they could be easier to manage. As a result, access to open banking products and services is expected to promote better financial decision making, lower debt, and improved long-term wealth generation, thus benefiting the banking institutions, fintech workers, consumers, API industry figures, and even underserved communities.
Although it allows banks to open up, open banking also raises some unresolved issues like data security and management of security threats. But awareness and collaboration across the institutions can help avoid trouble and create value-added services for people.
3. Digital-only banks
The growth of digital-only or fintech banks is one of the biggest most recent trends. Banks that provide all their banking facilities online without having a physical branch or premise do not have to bear with long lines or excruciating paperwork. At the same time, clients will only need a PC or a smartphone to manage their finances.
Mobile banking apps are not new to the market. Most well-known, established banks around the world have them. Not surprisingly, it was fintech that had traditional banks to innovate in this way. However, there are counterparts in the market capable of maintaining adequate competition. The digital-only approach is the innovation that is being actively and successfully promoted by new-generation financial start-ups.
Digital-only banks have the advantage of flexibility, and what is more, they normally offer innovative services at much lower rates than legacy players. In fact, it is reported that consumer visits to banks are to drop 36% from 2017 to 2022, and mobile transactions are to rise by 121% within the same timeframe. That is a rather favorable prognosis for digital-only banking. It will be no exaggeration to say that digital-only banks pose a true threat to traditional banks, as they attract younger, internet-savvy customers who need simpler ways to manage their finances. And the news is good not only for fintech companies but in the first place for customers who should expect fierce competition for the attention of the clientele and the resulting rise in the service quality.
4. Regtech in financial services
Regtech stands for regulatory technology. It is predicted to change the regulatory landscape by offering technological advancements to the highly regulated financial industry. Regulatory oversight is everything for this sector of the economy, which is why businesses spend huge funds on it in order not to pay even more if or when a breach happens.
Regtech basically enables companies to leverage advanced software that will simplify the compliance process with the existing laws and regulations. All regtech solutions can be divided into identity management, regulatory reporting, transaction monitoring, risk management, and compliance software. With the help of regtech banks and other financial institutions can dramatically reduce administrative overhead, protect customers, and ensure financial stability for everyone. On top of that, the technology is praised for the speed, agility, integrative power, and analytical capabilities it ensures.
Technically speaking, the enormous volumes of regulation requirements are handled using automation, powered by big data and machine learning. These automated regtech software solutions are programmed to examine and learn from the patterns found in large pools of historical data. Thus, it becomes easier to pinpoint problematic cases or even reveal fraud.
The financial services industry development is accelerating. The fintech trends we’ve discussed above have emerged in response to customers’ demand. They actually help providers deliver better services that allow for increased access to financial information, improved transparency, quicker transaction processing, more secure identity authentication, and better support for the customer lifecycle.
The fintech revolution is picking up momentum. So, in order to not be left behind, listen to your clients, earn their trust by creating transparent and seamless experiences, respect them and their privacy, look out for industry trends and always choose to make tech investments aimed to align the recent technological developments with what people want.
DYCSI can help you become a digital financial institution. Contact us to learn more about how we can take you through your digital transformation.source