From the invention of the abacus to simplify financial calculations to the enormous supercomputers that power complex financial models today, technology and finance have always been intertwined. This merger gave rise to the fintech industry, and as a result, most financial transactions are now made on mobile devices, giving more people access to financial services.
Technology has not only made financial systems more accessible, but it has also caused a number of drastic changes, including the upending of entire industries in the case of stockbrokers and mobile investment apps. The fintech revolution is ongoing, though, and the following are some of the most important trends that will influence the direction of finance in the future, led by astute businesspeople.
Security has been one of the main issues that all stakeholders have had to deal with as financial services have transitioned from in-person interactions to remote ones. An alarming increase in cybercrime has been observed, and many businesses are now gradually adding ransomware payments to their regular operating costs.
Due to the difficulty of duplicating or hacking biometric markers, there is a growing emphasis on biometric solutions as a means of achieving the highest levels of security. Although fingerprints have traditionally been the preferred form of identification, contactless biometrics solutions are also receiving attention due to public health concerns.
Financial institutions have historically jealously guarded customer data to maintain their competitive edge. In order to accomplish this, banks frequently restrict access to data while also frequently denying customers full control over their data. With more data protection laws allowing customers to access and move their data as they please as well as increased collaboration between fintech companies and traditional banks, the open banking idea has recently experienced a resurgence.
According to reports, open banking brought in $7.29 billion in 2018 and is predicted to bring in $43.15 billion by 2026. With the help of open banking, emerging fintech firms can use big data to deliver better, more individualized services that aid consumers in reducing debt, increasing income, and making more profitable investment decisions.
Governments and their regulatory agencies around the world have been playing catch-up with new rules and regulations to cover each new advancement as fintech companies have continued to build solutions on new technology. As a result, the countries in which fintech companies operate now have a patchwork of regulations to deal with.
Identity management, risk monitoring for transactions, and regulatory reporting are the three main categories of regtech solutions. Simplifying the process of finding and adhering to pertinent regulations is the aim of all regtech solutions. Market size for regtech is anticipated to increase by 16.0 billion by 2025, at a Compound Annual Growth Rate (CAGR) of 20.3%, from 6.3 billion in 2020.
In contrast to the early days when cryptocurrencies were only used occasionally, mainstream financial services firms began adopting cryptocurrencies more frequently in 2020. For instance, PayPal declared in November that all Americans would soon be able to purchase, store, and trade cryptocurrencies on its platform.
More companies will start accepting cryptocurrencies the more people start using them. Since there are some drawbacks to cryptocurrencies (such as security and volatility), the market will reward businesses that can offer solutions.
Cash is still alive. Yet. However, it is undeniably on the decline as society moves away from face-to-face interactions and as mobile payment options become more prevalent. Mobile payments are now a top priority for the financial services sector, from tiny startups to industry behemoths like Apple and Google.
Money transfer solutions are widespread, but difficulties with international transfers still exist. While other fintech companies have raised significant sums of money and Transferwise raised $319 million at a valuation of $5.5 billion, there is still a long way to go before international transactions are as straightforward as domestic ones. The opportunity in mobile payments is growing along with the size of the remittances market.