It’s evident that technology is advancing rapidly, changing the world as we know it. Almost everything is moving towards digitization, with approximately 4.88 billion mobile phone users globally as of January 2021. Mobile devices are now commonly used for financial transactions, especially since the onset of the pandemic.
Fintech Trends to Look Out for in 2021 and Beyond
The pandemic has accelerated the shift towards mobile payments and digital transactions, with over 69 million people using mobile payment services. In the United States alone, in-store mobile payments are projected to reach $128 billion in 2021.
Financial technology is gaining traction worldwide as it replaces traditional financial services in various sectors including payments, wealth management, banking, e-commerce, social commerce, and more.
Technological advancements like application programming interfaces (APIs) and open platforms are reshaping the financial services industry. Technologies such as robotic process automation (RPA), distributed ledger technology (DLT), and chatbots are enhancing precision, efficiency, and agility in operations.
Innovative AI/ML algorithms and blockchain technology are driving changes in the fintech industry. Let’s explore some of the emerging fintech trends that are influencing financial ecosystems globally.
Autonomous Finance
Autonomous finance leverages artificial intelligence algorithms to automate financial decision-making processes for customers. This technology enables customers to make instant decisions on financial matters such as investments, account management, and loan approvals with favorable terms.
Originally focused on robo-advisors for mutual fund management and financial planning software, autonomous finance is expected to enhance customer experiences and promote financial wellness through proactive service.
Studies suggest that as high as 68% of customers have increased expectations for digital capabilities from companies post-pandemic, with only 27% effectively utilizing autonomous finance functionalities.
Analysts anticipate further advancements in autonomous finance driven by cognitive technologies in the future.
Voice Technology
AI-powered voice technology has evolved beyond basic functions like playing music or providing weather forecasts. It now plays a crucial role in streamlining finance-related tasks.
The advancement in voice technology allows users to execute various financial transactions through platforms like Monzo, PayPal, Pingit, and Square Cash. By 2022, voice technology adoption is expected to increase from 8% to 31%, with robo-advisors potentially managing up to $2 trillion in assets.
Embeddable Infrastructure
Embedded finance is quickly emerging as companies integrate pre-built fintech solutions into their software using the latest APIs. This innovative approach transforms financial services into non-financial services, enabling businesses to offer financial services seamlessly through online platforms.
By expanding into MSME, B2C, and B2B segments, embedded finance infrastructure enhances customer acquisition, strengthens customer relationships, and supports product scaling. It’s estimated to be over a $7 trillion market and projected to generate $230 billion in revenue in the U.S. by 2025.
Open Banking
Open banking bridges traditional banks and fintech companies, facilitating data sharing across financial systems. Mandated by regulations like the second Payment Services Directive (PSD2), open banking ensures secure and standardized sharing of financial information.
The open banking sector quadrupled in value in just one year, generating $7.29 billion in revenue in 2019. By 2026, it’s forecasted to surpass $43.15 billion, providing customers with a unified view of their bank accounts for seamless management.
Machine Learning and Artificial Intelligence
Public and private sector initiatives have granted user-permitted access to financial data, allowing organizations to leverage AI algorithms and machine learning techniques for data analysis. These technologies provide deep insights into business metrics and customer behavior.
Predictive capabilities driven by machine learning and AI play a critical role in enhancing security protocols in financial infrastructure. The fintech AI/ML market was valued at nearly $8 billion in 2020, with projections to exceed $26 billion by 2026.
Conclusion: What Lies Ahead?
The evolution of financial technology, or fintech, shows no signs of slowing down. It will continue to integrate seamlessly into our digital tools and daily lives, making financial services more precise and accessible.
With the rapid advancement in the fintech industry, the global fintech market is forecasted to reach nearly $324 billion by 2026, growing at a CAGR of 23.41% from 2021. The development of embedded infrastructure and the adoption of AI and ML algorithms will drive further fintech evolution and innovation, offering enhanced financial access and services to users worldwide.
Image Credit: burak kebapci; pexels; thank you!
