Fintech, a combination of finance & technology, embodies the synergy of the two worlds—and the growth of the use of progressive technologies in the financial services.
Financial Institutions are engaging with the fintech companies rapidly both as investors and as partners in order to benefit from the growing scope of financial services technology. A recent report by PwC – ‘Financial services technology 2020 and beyond: Embracing disruption‘– found that global investments in fintech have more than tripled since 2014 to over $12 billion. Clearly, fintech disruptors are transforming the face of financial services.
It is important for fintech companies to stay abreast of the leading fintech trends and embrace advanced technologies in order to stay ahead in this fast-paced marketplace. Let’s take a glimpse of some of the trends and technologies driving the fintech industry.
1. Blockchain Secured Fintech
Blockchain is one of the most disruptive technologies in every industry and fintech is no exception. According to Markets and Markets, the fintech blockchain market is expected to grow from $230.0 million in 2017 to $6,288.2 million by 2023, at a compound annual growth rate (CAGR) of 75.9% during the forecast period. Hence, fintech companies looking to be leaders in the market simply can’t afford to miss this technology.
The key advantage of blockchain technology is the distributed infrastructure’s capability to share data which is secure and unalterable, guaranteeing data security & integrity. Data security still remains a major concern in the financial services industry, with a majority of financial institutions (FIs) suffering innumerable illegal intrusions per year. Fintech companies that can provide blockchain based secure financial solutions will thereby be real game changers in the near future.
Blockchain can have another vital application in financial services – financial inclusion. Blockchain, by providing the unbanked individuals a verifiable, easily creatable online identity, can allow more individuals to be financially included than ever before. There are massive markets globally waiting to be financially included. The fintech companies that tap such unbanked markets with their blockchain based solutions can reap enormous profits.
2. Artificial Intelligence Powered with Fintech Trends
Artificial intelligence, with the help of machine learning, provides superpower to financial institutions to study and interpret enormous amounts of unorganized data. This is affecting the way the industry functions profoundly.
According to Research and Markets, AI in the fintech market is valued at $6.84 billion in 2019 and is expected to reach as high as $ 26.92 billion by 2024 registering a CAGR of 31.5% during the forecast period (2019 – 2024).
There are abundant applications of artificial intelligence in fintech; however, the fastest growing application area is the Chatbot—an automated program that simulates human-like conversations, or chats, through artificial intelligence. A rapid rise in the customer base and a demand for real-time customer assistance is fueling the massive adoption of AI-based chatbot technology by increasing number of financial institutions.
Robotic Process Automation (RPA) is another unavoidable application of AI in financial services. RPA is AI-based automation of repetitive human processes for impeccable operational efficiencies. FIs using RPA typically churn out manifolds of ROI within months of implementation! Fintech companies providing AI-based RPA solutions will thus soon be in high demand.
Financial institutions are increasingly demanding innovative AI-based solutions and fintech companies globally are progressively looking to provide the same.
3. Regtech & Fintech
Regtech is one of the vibrant upcoming fintech trends, hard to miss by any financial service institution or a fintech company. Regtech, short for Regulatory Technology, is basically the use of technology to manage regulatory processes in the financial services industry.
Financial services spend billions every year as they try to stay within regulations. Regtech lets financial services warrant regulatory compliance easily and quickly. Unsurprisingly, it is sltated to become an essential part of the financial services industry by 2020.
Financial services are on course to make huge investments in Regtech in the near future. According to Reuters, globally, financial services’ investments in Regtech is expected to grow up to as much as $120 billion by 2020.
Key application areas of Regtech in financial services includes tracking financial transactions in real time to create accurate financial reports, plunging the risk of money laundering, cutting costs allied to manual data management, enhancing data protection, etc.
Many fintech companies are therefore coming up with Regtech solutions which will be a ready pick for the FSIs. The fintech startups that fail to acknowledge & adjust their solutions around this trend do so at grave risk of losing the competitive battle.
4. Quantum Computing in Fintech
Quantum Computing will soon start to redefine the entire fintech arena. Quantum computers are basically computers that carry out tasks that are impossible for standard machines. Quantum Computing technology, enables financial service institutions to deliver their services and products at an astonishing speed.
According to Market Research Future, the global quantum computing market is expected to witness a CAGR of 34% during the forecast period (2018-2023), reaching a size as humongous as $ 2.82 billion!
Fintech companies that provide quantum computing technology are bound to grow manifolds. Fintech startups like Rigetti Computing and D-Wave have already established a foothold in the quantum computing space with multiple contracts to implement their innovative solutions. Many others should definitely follow the league.
The Way Ahead for the Fintech Industry
The Fintech market is leapfrogging in a way that the traditional financial service players could only dream of but could never do in reality. Fintech startups are such a connecting bridge between the leading technologies and the traditional banking service providers that they are hard to be missed by any FSI.
Fintech companies that continue to innovate and stay abreast with the latest fintech trends will be the real game changers and will define the pace of revolutionizing the growth and development in the financial services industry!