As we enter the digital era, fintech is becoming a bigger and bigger part of our lives. Here are some new growth areas to watch over the coming years. Which interests you the most?
What is Fintech, anyway?
Fintech is not a new concept. The portmanteau of the words ‘technology’ and ‘finance’, it is used to represent the growth of financial services in the digital space. We’ve seen some form of fintech around since the late 1800s, believe it or not. As soon as stock market prices and other matters could be sent by telegraph, the market started to grow.
In a way, one of the largest fintech innovations of the 1900s was the introduction of credit cards in the 50s. Banks also onboarded mainframes and servers to store financial information, over ledgers and paper-based solutions.
However, the biggest recent growth in fintech products was seen after the 2008 financial crisis. Not only did we see unregulated products like crypto start to hit the markets (alongside a loss of confidence in the place of traditional banking in daily life), we also saw more people demand easier access to, and control over, their financial products. This has been a key touchstone in the developing world, where the rural poor have always struggled to access banking facilities and finance outside of urban cities. As smartphones have become embedded in daily life, the demand for ‘on the go’ access to banking and financial products has only grown more.
Do I Use Fintech?
Yes, you do! Even getting cash from an ATM strictly counts as a fintech innovation. However, modern banking apps, platforms like Robinhood that allow you to enter the stock market with smaller amounts and less ‘fuss’, owning crypto wallets, buying from e-commerce stores, and much more all fall under the wider fintech banner.
This means that the pandemic became a big driver in fintech innovations, too. No longer could you ‘just’ head to the bank to deposit a cheque or initiate a payment. People wanted safer, contactless, solutions they could use at times that suited them. The deVere group showed compelling evidence that the EU’s use of fintech apps and products grew by 72% over the lockdowns. Needless to say, once customers have experienced financial convenience, there’s little urge to go back to brick-and-mortar solutions. Here are just a few ways the fintech model is likely to grow in the coming years.
Obviously, one of the biggest ways the fintech space is altering is through the range of financial products, with most of them going to apps. People no longer want to spend their whole lunch break hoping to ‘catch the bank’ just to perform routine financial transactions. They want to be able to pay for products online, and access e-commerce platforms across international borders without endless issues with currency conversions.
This means the growth of digital-only banks has seen a surge, passing cost savings to consumers through their lack of physical infrastructure. Even traditional banking has opened itself to the app world, allowing customers to access banking facilities at times that suit them, automate payments, and add or remove products at their convenience.
Different Financial Products
Along with this diversification of app-based banking, of course, comes access to wider product ranges. Fintech innovations in the FX market are heating up. Easy investment platforms are opening the stock market and related products to new audiences. And investing in ‘alternative currencies’, or crypto-currencies, is booming.
This also comes as part of the wider ‘Web3’ concept, which goes hand-in-hand with a desire for Defi, or decentralized finance. This means that many people want to use new technology- especially the blockchain- to make the control of digital goods easier, as well as to take some of the financial power out of the hands of traditional financial institutions like banks. Instead, peer-to-peer finance platforms and other solutions are on the rise.
While not everyone is happy with complete deregulation, it’s a space that’s going to grow and be tested over time, and cannot be ignored in the wider fintech space.
Regulation, Reg-Tech, Open Banking, and Cybercrime
One of the primary risks of operating finances outside of regulated structures is the rise of cybercrime and the data leaks that come with it. Cybercrime solutions are becoming more and more critical to the wider fintech market.
Alongside this, we see a growing reluctance from customers to be continually ‘harvested’ as data sources for any company that wants. Apple, via iOS updates, has become one of the first to give people greater control over how their personal data is shared, followed by changing EU regulations, but it’s far from the last we’ll hear on the issue.
Open Banking, as something of another face of this trend, wants to see standardized (and secured) data and information-share between financial organizations. This helps the customer by cutting down on the amount of repetitive paperwork submittal and conflicting financial data on them in the wider market, making access to finance easier and simpler.
Likewise, Reg-tech, or Regulatory Technology, wants to see a wider overhaul of the regulatory process for the financial industry, using software to ensure better compliance, make reporting nets more efficient, and curb worries around hacking, data breaches, and money laundering.
AI is Growing
As part of these trends, expect to see machine learning and AI play a more dominant role in the fintech industry in years to come. These technologies promise to reduce cybercrime risks in the wider digital world, as well as cut banking costs and staffing. Innovations like biometric security raise some important issues around privacy but also promise to make mass-finance solutions easier and safer to use.
Fintech is always poised on the cutting edge of the digital space. With a changing world environment, borders becoming more administrative than anything else, and wider demand for simple, easy-to-use, and safe financial products accessed through the internet and mobile phones, we’ll see a lot of growth here in the coming years. What interests you most?