Today's technological innovations continue to change the way we work. Consider healthcare, where life-saving medical intervention is delivered with cutting-edge medical instruments, or gaming, which is highly reliant on tech from production to consumption.
Another industry that is greatly helped by tech is finance. With the sheer volume of transactions and amount of capital that exchanges hands, lightning-speed computing power helps everything run smoothly. The global market for financial technology (fintech) is so lucrative, in fact, that it was worth USD5504.13 billion in 2019 alone.
And as technology grows more sophisticated, so do the innovations in fintech. Here are a few to watch out for this year.
Financial literacy solutions
Many people see the world of finance as one that is difficult to navigate. That's why many businesses today are investing more in financial literacy solutions.
By increasing consumer awareness, they hope to spur more demand for various financial services. Some are integrating coaching solutions into their primary mobile apps. Other apps, like top Indian fintech influencer Ishan Bansal's Groww, act as dedicated educational resources targeting various age groups.
To encourage more people to avail of advanced financial services, the finance industry has embraced open banking. This involves using open source technology to create networks that transfer data securely between consumers, financial institutions, and authorised third-party financial service providers.
By exchanging all data in a standardised, encrypted format, open banking gives consumers more options for financial transparency and promotes better financial decision-making. The decentralisation of multiple financial services with the use of apps makes them more convenient to use, as well. As a result, open banking is expected to be worth USD43.15 billion by 2026.
In fact, some banks have shifted to digital-only operations. These 'neobanks' have no physical locations, cutting out the need for the long lines, waiting times, and tedious paperwork that come part and parcel with traditional banking. And since most neobanks come in app form, physical bank visits may become less frequent in the coming years.
Innovative payment options
Another exciting innovation in fintech is the vast array of payment options now available to consumers. Aside from the classic cash, debit, and credit payments, people can now use mobile wallets. With PayTM, for instance, users can do everything from paying bills and booking flights to investing in the stock market and shopping online. Such headway in contactless payment is becoming increasingly crucial, especially in light of ongoing COVID-19 surges.
AI in fintech
However, the introduction of AI to fintech is arguably the one move that will change the face of finance as we know it. In lending alone, the Finflux Lending Cloud uses AI and machine learning to extend data analytics to service providers, helping appraise potential borrowers better. For consumers, meanwhile, AI-powered fintech can make for more personalised user experiences, voice-powered banking, and even completely autonomous financial services.
Hand-in-hand with the increasing digitalisation of financial services is the risk of cybercrime. In response, firms have come up with solutions to up fintech's security game. One way they have done so is by adopting blockchain, the technology that's helped cryptocurrency surge in popularity over the past decade.
In fact, despite COVID-19 disrupting economies worldwide, cryptocurrencies have had their best performance on the market since 2017. For instance, while the value of Bitcoin was predicted to increase by 200% before the pandemic surged, it still managed to hold on, growing by 159% instead at a time when most other industries suffered. It's no wonder that industries like fintech are keen to adopt blockchain for the security, transparency, and decentralisation it provides. Among other things, it's resulted in decentralised finance (DeFi), which most commonly uses the Ethereum blockchain to cut out the middle man and enact smart contracts between parties.
Finally, regulatory technology (RegTech) is becoming better at ensuring that financial institutions and third-party service providers comply with current financial law. Existing software helps with regulatory reporting, transaction monitoring, and identity and risk management. Even home-grown startups like CogNext Analytics can now more efficiently protect consumers and maintain the financial stability of all parties involved, and are powerful enough to take on global financial institutions.