The Fintech industry is seeing continued growth in new technologies, solutions, and innovations. Key Fintech trends include digital payments, blockchain, artificial intelligence, and cryptocurrency. Fintech is changing the way we handle money, making financial services faster, more efficient, and more accessible in the changing world of finance.
From mobile banking to cryptocurrency, there are many innovative financial products and services that are changing the financial landscape. Today, there is a dynamic growth of financial technologies and fintech startups. According to business analysts, the global Fintech industry market will reach $305 billion in 2025.
This forecast, based on current trends and market analysis, highlights the rapid growth and significant potential of the fintech industry. Fintech has experienced rapid development in recent years, and analysts predict that this trend will continue in the next few years. The global fintech market will grow by $277 billion from 2022 to 2027 at a compound annual growth rate (CAGR) of 20.5%.
There are 15 fintech trends to watch this year, including the rise of decentralized finance, the adoption of AI in financial services, and the rise of digital wallets and contactless payments.
An overview of the 15 main trends in the fintech industry:
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Artificial Intelligence (AI) in Financial Services
The FinTech industry is built on innovation and disruption. FinTech companies have always strived to use new technologies to make financial services more accessible, efficient, and convenient for customers. AI is at the forefront of this innovation, helping companies take their services to the next level.
One of the most significant benefits of AI in fintech is that it allows companies to make more informed decisions. AI-powered algorithms can process huge amounts of data and identify trends and patterns that humans cannot detect. This allows financial institutions to make more accurate predictions and improve their risk management strategies.
AI is increasingly being used in financial services to improve efficiency, reduce costs, and enhance customer service. Some examples include AI-powered chatbots, robo-advisors, and fraud detection tools. Chatbots simultaneously address two needs: contactless service and online communication. With artificial intelligence and natural language processing, they are transformed into intelligent digital assistants.
While AI has the potential to be used almost anywhere in the financial sector, research suggests that the biggest benefits that artificial intelligence can bring are:
- Conversational banking and customer interaction;
- Fraud detection;
- Risk management.
The use of AI in the fintech industry also offers significant opportunities for financial institutions to improve their operations and better serve their customers. Some of the key opportunities include:
— Improved customer experience
AI-powered systems can help financial institutions better understand their customers and their needs. By using AI to analyze customer data, companies can provide personalized services and tailored financial products that better meet the needs of individual customers.
— Increased efficiency
AI can automate repetitive and time-consuming tasks such as data entry and fraud detection, freeing up employees to focus on more complex and valuable activities. This can lead to increased productivity, reduced costs, and faster response times.
— Better risk management
AI can help financial institutions identify and mitigate potential risks such as fraud and cyber threats. By analyzing large amounts of data, AI can detect unusual patterns and suspicious activity, allowing companies to take proactive measures to prevent or minimize risks.
— Improved decision making
AI-powered systems can provide financial institutions with more accurate and timely information, allowing them to make more informed decisions. By using AI to analyze data from multiple sources, companies can better understand market trends, customer preferences, and potential risks.
— New business opportunities
AI can enable financial institutions to develop new products and services, such as robo-advisors and algorithmic trading. These innovations can help companies expand their offerings and reach new customer segments.
RPA — Robotic Process Automation in Fintech
Robotic process automation, or RPA, is the automation of back-office tasks that saves time on manual, repetitive, rule-based actions. For example, moving data, filling out forms, etc. These trends have affected all industries, but due to the large volume of paperwork in the financial and banking niche, RPA has taken a special place in fintech.
With the complexity of integrating innovative systems into legacy banking and financial solutions, RPA banking has become a real lifesaver due to its isolation, independence, and ease of integration. RPA is also becoming inclusive due to the adoption of open banking.
Buy Now Pay Later (BNPL) and PoS terminals
BNPL and point-of-sale (PoS) lending can help people access goods and services even if they don’t have all the money they need at the time. BNPL has increased in use on e-commerce platforms over the past five years, with the rise of fintech unicorns in the space, such as Klarna or Afterpay. In the B2B space, the growing availability of BNPL for businesses purchasing materials and other inputs has opened up more opportunities for mutually beneficial business relationships.
According to a recent study, the global buy now, pay later transaction volume will reach $265 billion by 2026, generating $4 billion in revenue for fintechs and banks. The same is happening with PoS. The mobile POS payment segment is projected to grow by 13.92% worldwide.
PoS terminals have become available on consumers’ phones, bypassing waiters, store personnel, distributors, etc. Having a mobile point of sale (PoS) system as part of an overall technology strategy is a great way to ensure that businesses can remain competitive in today’s fast-paced marketplace.
Regulatory Technologies (RegTech) in the FinTech Industry
Regtech is an abbreviation for “regulatory technology.” It refers to the use of technology to help companies comply with regulations more effectively and efficiently.
Regtech is revolutionizing fintech by offering innovative solutions for regulatory compliance. These solutions help financial institutions and fintechs comply with regulations while reducing the burden and cost of compliance.
As the FinTech industry grows, there is a growing need for regulation to ensure it remains safe and secure for consumers. This includes rules around data privacy, cybersecurity and financial stability.
RegTech covers a range of procedures such as risk management, regulatory reporting, identity management, compliance and transaction monitoring. Technologies such as big data, cloud computing and machine learning algorithms enable automation and improvement of KYC (know your customer) and reporting processes, greater accuracy and speed, identification of hidden risks and threats, obtaining compliance information, forecasting market changes and performing anti-money laundering analysis.
Digital wallets and contactless payments
Digital wallets such as Apple Pay, Google Pay and Samsung Pay are becoming increasingly popular for contactless payments, in-store purchases and online transactions.
Contactless payments are becoming the norm as consumers prefer the convenience of using their phones or cards to make payments. Contactless means making electronic transactions from mobile devices through an app or wallet and a wearable device. Contactless payments allow you to pay bills, make purchases, and send money, all while keeping your data stored directly on your mobile device and protected from unauthorized access.
Each transaction generates a one-time transaction-specific code as a fraud protection. Payments are based on near-field wireless technology and the availability of NFC (near field communication), MST (magnetic secure transmission) and POS terminals with contactless support.
Blockchain technology and cryptocurrencies
Despite the significant decline, blockchain still holds the lead in the fintech industry. Blockchain solves the problem of insecure and expensive money transfer processes due to high transaction speed and significantly lower cost. In 2024, blockchain technology will continue to play an important role in the financial world.
Cryptocurrencies are becoming increasingly popular, with growing acceptance from traditional financial institutions and retailers. Blockchain technology is not just used for cryptocurrencies. It is also used for supply chain management, identity verification, and more.
The decentralized and secure nature of blockchain will be used in various fintech applications such as:
- Smart contracts are a self-executing transaction protocol that helps regulate the relationships of parties. Using smart contract technology for peer-to-peer transactions allows for secure transactions to be carried out without the involvement of third parties.
- Cross-border payment services: Blockchain can enable faster and more secure cross-border payments.
- Decentralized finance (DeFi).
- Digital assets: Blockchain provides a secure and transparent way to store and trade digital assets such as cryptocurrencies and digital collectibles.
- Identity Management: Create decentralized identity systems that provide increased privacy and security.
- Supply Chain Management: Provides a transparent and secure way to track the flow of goods and assets across supply chain networks.
Decentralized Finance (DeFi)
Blockchain technology enables the creation of decentralized financial services (DeFi) such as lending, loans, and health insurance.
Decentralized finance, or DeFi, allows users to access financial products and services without relying on traditional financial institutions. This includes peer-to-peer lending, decentralized exchanges, and other blockchain-based financial products.
Digital wallets, digital assets, distributed data storage and sharing, zero-knowledge proof of identity, and smart contracts are just some of the technologies that are supporting this DeFi trend in financial technology.
Neobanking
A neobank is a fintech company that offers traditional banking services such as payments, money transfers, and lending through web or mobile platforms. They are not regulated in the same way as traditional banks and do not have a physical location.
Neobanking offers convenience, low fees, and a personalized approach to customers. Customers benefit from simplicity, speed, and security. In turn, financial institutions reduce labor costs and process large numbers of transactions quickly and automatically.
Neobanking includes a variety of services such as digital banking and several types of money transfers, as well as investments. Neobanks make it easier for customers to access their accounts from anywhere with an internet connection, making it more convenient than traditional banking methods.
Additionally, neobanks typically offer lower fees than traditional banks, which can help customers save money on transactions. Finally, many neobanks are designed with customer convenience in mind, so they provide a simpler user interface that allows users to easily manage their finances without any prior knowledge or experience in finance or technology.
Biometrics in Fintech
Fintech is leading the adoption of innovative technologies such as biometrics to improve the customer experience compared to traditional banks. Biometric authentication is becoming increasingly common in financial services, with features such as facial recognition and fingerprint scanning being used to improve security and reduce fraud.
What could be easier for a user than confirming a transaction with a fingerprint or a selfie? Current biometric identification options:
- Retinal scanning;
- Fingerprints or Touch ID;
- Keystroke dynamics;
- Face recognition;
- Voice samples;
- Geometry of the palm.
Naturally, these methods should only be used as part of two-factor authentication or for whitelisted transactions. Combining several of them will provide much stronger protection than simple passwords, which is why biometrics will likely remain one of the notable fintech trends in 2023.
Fintech Needs More Cybersecurity
More financial transactions require higher levels of security. As fintech becomes the primary platform for global financial transactions, we can certainly expect the cybersecurity bar to rise.
In fact, it’s not that hard to see that software developers need to know more about the fintech services their customers use. The more money that goes online, the more scammers and thieves can use it.
Cyber hygiene is something that needs to be taken care of in 2023. It is not even a trend, but a necessity for a successful launch of a fintech expansion program.
Gamification in Fintech
Finance is serious enough, but gamification in fintech is becoming one of the important modern trends. Gamification in fintech has its roots in bonus and loyalty programs that appeared several decades ago.
Implementing various gamification techniques helps a fintech app stand out from its competitors, gain loyalty, customer engagement, and achieve success. Gamification in fintech and banking will remain an important trend in the fintech industry in 2023.
Open banking
Open banking (or BaaS, banking as a service) has already established itself as one of the cornerstones of fintech, as it allows third parties to use banking infrastructure through APIs. Following the principles of open banking when developing a fintech product ensures ease of customer acquisition, data exchange between applications, analytics, user authentication, and communication.
Open Banking is changing the traditional financial landscape by giving consumers more control over their financial data and giving them access to new financial products and services that better meet their needs. It also helps banks improve customer service, streamline operations, and reduce costs.
Open banking allows third-party providers to access customers’ financial data through APIs (application programming interfaces). This enables innovation in financial services and the creation of more personalized products for customers.
Detecting Fraud in Fintech with AI and Machine Learning
AI and ML algorithms analyze large amounts of data and detect patterns that may indicate fraudulent activity. This helps financial institutions quickly identify and prevent fraudulent transactions, reducing the risk of loss and improving overall security.
Implementing AI and machine learning for fraud detection testing, which can not only detect but also study the accuracy of such fraudulent transactions, will save costs and time for customers and staff and make the banking system more secure.
For example, a bank would normally check transactions of people on sanction lists. But a misspelling of just one letter in a name can bypass the system and allow transactions. There are many other ways to correctly identify and verify sanctioned individuals, such as date of birth, address, history of personal data changes, analysis of chains of previous transactions, and the participation of this account in payments related to sanctioned individuals.
This means that dozens of massive databases must be assessed and analyzed in seconds, which is beyond the capabilities of humans. Thus, AI-based algorithms can detect and prevent such cases.
Embedded Finance as a Fintech Innovation
Embedded finance remains a hot trend in the fintech industry in 2024. It is a broad term that essentially means the inclusion of a financial service within another product or service. What is becoming increasingly common is how deeply embedded the financial product is, to the point that the customer is unaware that there is a partnership at play.
Embedded finance is a new concept that combines traditional financial services with digital products and platforms. It is a way to make financial services, such as payments and loans, available to users in a more streamlined and accessible way.
Embedded finance is also called “fintech-in-a-box” because it is designed to be quickly and easily integrated into existing digital products, such as apps or websites. According to research, a third of consumers spend more money on a brand if the brand offers embedded finance services. This leads to the fair claim that embedded finance has become an expected feature for users.
While the concept of embedded finance is nothing new, it could be the next revolution in payments. Non-financial institutions are now offering traditional banking services through Open Banking APIs. Tesla offering car insurance for every Tesla purchased is just one example of the opportunities opening up for customer engagement.
Embedded finance example:
Fintech Klarna has introduced BNPL lending, Lyft direct debit cards for drivers, and embedded Google Pay and Apple Pay payments.
Alternative lending (P2P lending)
Alternative lending, also known as P2P lending, is another disruptive fintech trend set to emerge in 2022. These are lending services provided through online platforms that connect borrowers underserved by traditional lenders with investors looking to tap into alternative markets.
Alternative lending is particularly popular in Southeast Asia as the region recovers from the losses caused by the pandemic and begins to grow using domestic resources rather than international loans.
There are several types of P2P lending:
- Direct lending: bank-type loans, but without the bank.
- Venture debt: An alternative to venture capital for businesses that don’t want to lose capital through funding rounds.
- Structured equity products: Ready-made investment options that typically involve the issuance of bonds or other debt securities by the borrowing company.
- Debt finance: non-bank cash flow lending, home equity loans, fixed income lending, etc.
