Fintech is a rapidly developing industry at the intersection of financial services and (as its name suggests) technologies. In the increasingly cashless world, fintech companies are the most powerful driver of technological progress that only expands its influence. For instance, according to the Boku report, as much as half of the global population will use mobile wallets by 2025.
Facts and Figures
Before we dig into trends, let’s check some numbers, shall we? The Dealroom research claims that in the first half of 2021, European fintech companies have attracted 10.4 billion euros in investments, setting a new historical record. The study reveals that there are now more than 30 fintech unicorns in Europe, and several more companies will soon reach a $1billion valuation.
Earlier this year, a mobile marketing company Liftoff partnered with analytics platform App Annie to release its annual Mobile Finance Apps Report. According to the report, financial apps were downloaded 4.6 billion times globally, 15% more than in 2019. Users spent 16.3 billion hours in apps, a whopping 45% increase over the last year.
The figures above are self-explanatory and prove that fintech directly influences the way people interact with money. The rise of fintech services made a difference in consumer services, banking, insurance, asset, and capital management, among others.
Customer-Centricity and Ecosystems
The first trend that comes to mind when describing the state of fintech is customer-centricity. Nowadays, none other than customers influence product development like big businesses used to. With that new paradigm in mind, fintech companies create entire departments that deal with demand research and customer experience design.
Ecosystems come in a close second. Bank institutions create their ecosystems to meet various client needs, which now extend beyond financial services. In other words, banks must aim at becoming fintech companies in their own right, combining the reliability of a financial institution with startups’ flexibility and technical prowess.
As the world is moving towards complicated systems, the boundaries between the industries become thinner and thinner. The thing is that it's not just the fintech industry that is moving far beyond. For instance, retail is actively expanding its boundaries by launching its own banking products and creating fintech startups.
Traditional Banks vs. Neobanks
Modern bank institutions are trying to keep up with digitalization trends in the financial services industry. Meanwhile, the market share of fintech startups is exponentially growing. They can adapt to new reality faster, and their products are easier to integrate and customize according to various business goals. Therefore, young market players attract more and more attention from investors.
If banks do not promptly respond to the game's new rules, their share will gradually be taken by fast-growing international startups with no problems with capital access. In 2021, we've already seen collaborations between traditional banks and startups. Interesting transformations began in early 2020 when fintech startups began buying up small banks. For example, the American loan service Lending Club acquired the Boston-based Radius Bank, a relatively young bank founded in the late 1980s.
Fintech startups are gaining more and more leverage in the market. The development of open APIs, beneficial regulatory changes, and the spread of financial marketplaces all contribute to such growth. Two or three years ago, there was speculation that traditional banks would fall into oblivion, and neobanks would take their place with their undoubtedly effective business models. But traditional banks are adapting well to changes. They add non-banking options to their applications, build up partnerships with other market participants and offer new services to their customers in collaboration with them.
More Online Transactions
Surely, this trend isn't entirely new as it’s been around for years. However, the pandemic and lockdown have drastically accelerated its growth. It's especially true when we talk about mobile payments providers such as Google Pay, Apple Pay, Samsung Pay, etc. In addition, during such hard times, many people have tried stock trading. As a result, the number of IIS and brokerage accounts opened through banks has sharply increased. The number of mortgage and consumer loans, guarantees, and letters of credit issued online also went up.
More Payment Options
Not so long ago, businesses providing services online had no choice but to conclude agreements with banks to deal with receiving payments. Now everything is way more simple. A growing number of different financial services such as CardConnect, Stripe, and Amazon Pay allow users to accept and transfer payments no matter what the currency or platform is.
In addition, fintech enables non-financial organizations to expand their offerings, services, and clientele. The technology enables sending money from banking cards directly, so there's no need for a mobile terminal. It's even possible to pay for goods or services with a smartphone or a smartwatch: as soon as you bring your device closer to the wireless terminal, the payment is ready to proceed.
Some ten years ago, dealing with international transfers was a big challenge for online entrepreneurs and their customers. Now services such as PayPal, TransferWise, and PaySend allow transferring large amounts of money internationally in a matter of minutes.
New Banking Services
Empowered by fintech technologies, bank institutions expand their services, create virtual service channels, and introduce new ways of interacting with their clients. For instance, it’s possible to open an account without visiting a brick-and-mortar bank branch which comes in handy regarding the COVID-19 pandemic. The graph below shows a tangible increase in the use of fintech products and services since the virus outbreak.
The financial realm has changed for good, and modern customers pay exactly for what they want and get eventually. In general, the BaaS (bank as a service) market is currently on the rise. The demand for such services is exceptionally high among companies operating online. Banks en masse are slowly drifting away from brick-and-mortar interaction channels. Now it's getting more and more obvious that the future of customer service lies in digital and mobile services via banking platforms.
The modern bank-client interaction represents a whole range of communication products that take root in call centers operated by human personnel. Nowadays, it is a universal communication environment where you can access banking services and operations via the Internet, from a telephone call to instant messengers empowered with speech recognition systems based on biometric authorization. All these novelties aim at simplifying access to financial services for a wider audience.
These measures result in a better quality of service and more opportunities for the general public. Banking organizations are increasingly using data analysis to understand clients' needs better, predict future market demand, and prepare services that may attract new clientele based on those findings.
As new opportunities in the digital space pose new risks, fintechs and banks are strengthening cybersecurity practices. As a direct consequence, the fintech cybersecurity market is predicted to grow at a CAGR of 15% in 2018-2023. A report from McAfee indicates that cybercriminals will cause global economic losses in the amount of $6 trillion by 2021.
However, introducing proper security measures is a matter of available resources. While big banks can bring custom cyber defense infrastructure into play, this process is way more challenging for less resourceful businesses. No wonder that the market for information security technologies is actively developing so that businesses can painlessly integrate ready-made solutions into their infrastructure.
Big Data, machine learning (ML), and predictive analytics-based tools have the potential to change the whole anti-fraud scene. An average information security expert simply can’t analyze all the incoming transactions, but machines can. Identification systems can provide robust protection for financial, insurance, and other organizations. This market is also actively developing, and its volume by 2024 may exceed $50 billion.
What’s more, in the near future, financial technology will penetrate even deeper into other industries, allowing them to evolve and expand. One thing is dead certain: fintech companies that do not provide the proper data security protection of clients' assets won't simply remain competitive.
To Sum Up
Financial businesses understand that it’s high time to devise a digital transformation strategy. Today's development of fintech tools may become an essential competitive advantage and a guaranteed way to beat the competition. What’s more, financial technology will penetrate deeper into other industries as well, allowing them to evolve and expand.
Businesses, including banks, insurance, and retail companies, generally realize that fintech is the key to future success, and it looks bright for those who embrace it as soon as possible. As they say, if you don't want to play catchup, don't ignore technology advances. The development of fintech tools and adopted digital strategy are guaranteed ways to enter new markets.
P.S. Do you have a fintech solution’s idea? Our team of dedicated specialists can assist you at every step of development, from an MVP creation to the final release. Check out our fintech case study and contact us to discuss your project.
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