The fintech industry is a major disruptor. Each year, it impacts how consumers interact with financial companies and brings new and innovative means to meet ever-growing customer expectations and occupy market space.
As a business owner or executive in this space, you have no choice but to stay on top of your game to increase efficiency.
In simpler terms, if your business doesn’t scale, it could fail.
That might sound a tad extreme, but you’re dealing in a market that is set to be worth $698.48 billion by 2030. Understanding the trends and focuses of the time helps you know where you’re headed in order to remain competitive.
So let’s talk about these trends that drive the market.
The embedded finance market is expected to see massive growth this year. The market has been growing at a rapid pace since 2020. Fintech companies have been steadily outpacing traditional banking services when it comes to gaining the trust of consumers.
According to our latest report, searches for the term have increased by a staggering 488% in the last five years.
Embedded finance solutions can make up 50% of total banking revenue streams in the near future. There is also a significant market for embedded financial products in the areas of deposit accounts, payments, insurance, and lending.
Source: Mckinsey analysis
Arguably the greatest benefit to embedding finance is that under the direction of inclusive fintech startups, it has the potential to empower potential customers who were previously excluded from the conventional financial industry. Similarly, emerging markets can provide a less stifling environment with lower prices and a larger customer base, which would further encourage innovation.
We’re also likely to see traditional financial services and fintech firms, such as banks and payment processors, collaborating more closely to adopt embedded finance. This could result in payment fintechs providing more inclusive services tailored to various business models, leasing more potential while banks provide fundamental infrastructure.
Embedded finance solutions will place much greater emphasis on technological advantages and operational capability to address your business’s current issues. Think risk and compliance management. Innovations like distributed computing and artificial intelligence (AI) will have multiple effects across all businesses, strengthening their ability to embrace embedded finance.
Financial institutions are continuing to adopt AI and machine learning, the industry is set to see a projected savings of up to 22% by the year 2030.
How is this possible? AI-driven chatbots and assistants can make the customer experience very efficient. They can answer customer questions, monitor spending and tailor product recommendations based directly on customer preferences.
While chatbots do not quite replicate the human experience, their growth across the market this year means we can expect more of them in 2023.
Think about your price comparison sites when looking for insurance, or travel rates. These services have been made possible through the application of Natural Language Processing (NLP), which allows the ability to make payments and offer personalised service at any given time.
A key element of AI technology is its ability to predict human interactions, combining the best of two words, intelligence and behavioural finance. What is Behavioural Finance? It focuses on human psychology to influence economic markets which in turn, impacts market outcomes. It is considered the future of fintech, as supported by the development of data analytics and large amounts of consumer data. This data, combined with AI algorithms, creates the ability to provide such personalised services.
The industry is starting to recognize the goldmine that is AI. It doesn’t just drive efficiency but also makes allows businesses to be smarter in their approach to interacting with customers in the market.
Blockchain is one of the most exciting trends in Fintech today. It addresses the problem of unsecured, expensive fund transfer processes, with high-speed transactions at a much lower cost.
It works as a digital ledger that verifies, records, and facilitates various types of transactions. Its major selling point is security and autonomy for customers, as businesses and individuals can safely transfer digital assets without relying on a central authority or financial institutions.
But this isn’t just the only thing that appeals to users.
Blockchain is used in various fintech applications, such as:
- Decentralised finance (DeFi): Creates decentralised financial services- for example borrowing, health insurance, lending services etc
- Digital assets: Provides a secure, transparent method of storing and trading digital assets- got example, NFTs and cryptocurrencies.
- Cross-border payment services: Enable secure and fast cross-border payments
- Supply chain management: Provides transparent and secure methods of tracking goods and assets within supply chain networks.
- Identity management- Creates decentralised identity systems, offering increased security and privacy.
As blockchain eliminates the need for traditional banking, it now makes it easier for customers to utilise these financial offerings. This is particularly significant for third-world and developing countries, where access to traditional banks can sometimes be challenging.
We’ve spoken a lot about customer experience expectations already, but it is integral to the future of fintech services. After all, the focus will always be on the people your business serves.
Banks that consistently optimise the customer experience are set to grow 3.2x faster than their competitors.
It’s up to businesses to provide seamless, user-friendly experiences to attract and retain their customers. This means focusing investment on user-centred design, more personalised services and omnichannel support.
Put yourselves in your customer’s shoes to understand their pain points, and use that data to create customised solutions that far exceed expectations.
Sustainability and ESG
Any forward-thinking businesses will have Environmental, Social and Corporate Governance (ESG) and sustainability at the heart of their plans this year.
Customers, investors and employees alike are keen to see businesses contribute to making society more sustainable. And with a net-zero goal to be met by 2050 (in the UK), organisations across the globe are under much greater scrutiny to implement supporting policies.
According to FIS Global, “ESG is top of mind for financial services firms globally, with 60% of executives saying they are developing new ESG products and services.”
So if your business isn’t environmentally friendly, it might have an impact on your customer base. Brands that care about the planet and show strategic planning are the ones set to thrive. If you don’t care, expect your customers to find a business that does.
This increased sustainability interest has led to a lot of financial institutions offering a diverse portfolio of sustainable options, such as loans backed by environmental enterprises, such as investment into wind or solar farms. ESG bonds are also rising in popularity.
A trend we’ll see this year will be sustainable (green) financing. This is another way that financial regulations and products are orchestrated to meet environmentally sustainable outcomes.
Green Financing will be a key Fintech trend that will aid the private sector in doing positive work for the environment. It will also encourage private-public alliances on financial mechanisms like green bonds.
With the ongoing development of the Fintech industry, technological innovation must work in tandem with the economy’s call for greater financial inclusion.
As firms across the globe embrace the potential of tech to champion the future, consider these trends and how (or if) your business is incorporating them.
Want a more in-depth look into fintech themes and how they should inform your tech strategy and decision-making? You can download our latest whitepaper to hear from the experts.
Our team are also on hand if you’d like a chat about your fintech project or any projects you might have. Don’t hesitate to contact us.