Dawid Przespolewski, Head of Business Development at Future Processing
Recent years have seen major disruption, business challenges and digital transformation. And the impact on the financial services sector was no different. Driven by fintech innovations, businesses were opened up to a wide range of services that were more accessible than those offered by traditional banking institutions. While dealing with digitally-savvy consumers, who demand quick global payments at their fingertips, organisations soon realised that they must leverage fintech trends in order to meet their customers’ needs and create a profit in the longer term.
Join me for the rest of the article as we demystify the top five fintech trends of 2022 so far and the implications these will have on the wider industry.
The Rise in Decentralised Finance
The emergence of decentralised finance (DeFi) – also known as the Open Finance movement – is separate from the control of a single entity such as the central bank or government agencies. It is a concept that defines financial services that are created in public blockchains, similarly to Bitcoin and Ethereum.
Although financial services companies (centralised systems) have been efficient for years, they offer much less transparency to their customers on how the money is used compared to the open-source and decentralised DeFi applications. That is where DeFi has an advantage, without intermediaries such as brokers, exchanges, or banks to manage settlements of transactions payments happen in real-time. And this seems to be what the financial market needs, taking power away from the institutions that manage money behind the scenes and giving it back to the customers.
Currently, one of the main disadvantages of DeFi is that it is not immune to risks of fraud and theft. Technical issues associated with the protocols can make assets vulnerable to cyber criminals, which is the main reason some may be extra cautious when investing their capital. Additionally recent fluctuations on cryptocurrency market shown how unpredictable DeFi still is and requires much more maturing before becoming a real competition to centralised banking. Nevertheless it is an area to keep an eye on.
Invisible Forms of Identification
Traditional financial institutions often use Know Your Customer (KYC) standards for verification, which protects them against fraud, corruption, money laundering and terrorist financing. Fintech tools will now allow users to create bank accounts without the need for those forms of identification, with all necessary information stored virtually in the cloud.
In particular, fintech will help many companies in opening bank accounts without the need for KYC verification using identification documents. Supplying more individuals with financial services is likely to render far greater access to financial services such as borrowing and even the investment tools that could become a crucial step in financial security, better debt management and the creation of businesses.
Exploring Artificial Intelligence Capabilities
Artificial Intelligence (AI)-powered finance assistants have drastically risen in popularity during and following the pandemic. As data gets systematically stored in the cloud, it allows for AI to step in to solve problems regarding frequent issues, which allows for quicker response. The human touch is reserved for more personal matters like advising or supporting clients’ understanding of their financial situation.
But AI can be serving a much wider purpose than just customer assistance. AI-powered analytics are highly efficient when applied to data-based procedures. AI systems can now be utilised in fraud detection, lending decision-making, credit risk assessment, insurance, wealth management and more. Precision levels and high-speed query resolution of AI systems are showing results unmatched by any other system. It is safe to say that in the next few years, we will be able to observe many more processes using AI in the fintech industry.
Cloud Technology Continues to Thrive
The emergence of hybrid cloud solutions has allowed for real-time data integration which opens services to share information between different applications, bringing the benefits of scalability and security to the rapidly growing platforms.
Cloud enables the management of financial processes from afar. Self-service applications based on cloud technology allow businesses to deliver at a fast pace. Also, businesses can utilise cloud technology to collect and store large amounts of data securely and accessible at any time. Especially for fintech which utilises data from onboarding and identity verification procedures to account management, balance checking, and analysis of spending patterns. Beyond day-to-day processes, the cloud allows the creation of a recovery plan for any digital infrastructure in case of a disaster, which would save any business but is simply necessary for financial technology.
Over the last decade, the cloud has become the foundation of many business operations. The financial industry in particular will continue adopting the solution across many platforms, as it shows how big an impact cloud computing has on making the financial world more accessible.
Sustainability
Sustainability is a growing trend reflected in the fintech sector, which can be observed in product design, tracking carbon footprints, or providing accessibility and financial inclusion.
This trend is showing a real need for a shift in the economy. As sustainability becomes a huge part of all industries, consumers are more conscious and demand from brands they choose to share their values. Lately, the introduction of regulations demanding that organisations implement ESG in their operations makes sustainability more than just leverage, but a requirement. Additionally, as communities expect more action toward sustainability, financing those startups that aim to aid environmental issues become an area that fintech can support.
Fintech is a growing force in the financial market and has already shown to be a great driver in shaping a better future. As more organisations trust new ways of managing their finances, it paths the way for technological innovation in the financial world. Over the next few years, we will be able to see further applications and developments of the above-mentioned trends and as 15 years ago no one knew that banking could evolve into a service that is widely available to almost anyone and any business, certainly we can expect more improvement in this area in the future.
