In the fluid world of finance, staying current with the trends should be the New Year’s resolution of every tech startup in this space come 2020.
It can be difficult to predict the future of financial technology since markets do not always respond to innovations and new business models as expected. But fintech founders must see the general direction where things are going to be competitive and stay relevant at the turn of the new decade.
Below are the eight trends that will shape the fintech landscape in the upcoming year.
- Digital-Only Banking
Online banking is becoming the norm, as evidenced by one estimation that says branch visits are set to fall by 36% between 2017 and 2022. Unsurprisingly, one of the catalysts for this phenomenon has been the advent of digital-only financial institutions.
It is still too early to declare that the days of brick-and-mortar banks and credit unions are numbered, for these so-called “neobanks” have problems of their own. What can’t be denied, however, is the success of the digital model of fintech unicorns like Revolut in terms of simplifying financial transactions and reducing overhead.
Our friends at Fortunly can attest that attractive rates and fees are the primary drivers of fintech adoption. Tech-driven financial services companies can afford not to charge customers so much because they do not worry about many of the usual operating costs, to begin with.
The biggest challenges digital-only banks are facing right now are: problem resolution and cybersecurity. Some things are just hard to iron out online, which is why some people still rely on offline solutions to address their unresolved banking concerns. Hackers and fraudsters are also constant threats, so explore every avenue to prevent data breaches at all times.
- Innovative Payment Methods
Cash, as well as debit cards and credit cards, are not going anywhere, but smart devices are quickly replacing them as payment tools.
More and more Gen Zers, in particular, are participating in the economy. As a result, expect more consumers to handle their finances using online bank accounts, mobile apps, digital wallets, and virtual assistants from here on out.
Moreover, the deployment of 5G mobile connectivity will make online banking more doable and convenient. Soon, more Internet-of-Things devices will also be used for financial transactions.
- Rising Blockchain-Wallet Adoption
It is only a matter of time before mass crypto adoption finally happens. And tens of millions of consumers worldwide are getting used to blockchain-powered digital wallets. This trend is an indication that blockchain is ready to take off, so you should consider the possible viable applications to take your financial services to the next level.
- Widespread Smart-Contract Usage
The use of smart contracts is expected to become more prevalent in the coming months. The growing popularity of blockchain naturally makes these digital contracts reliable and virtually tamperproof. Smart contracts help lay the groundwork for a “trustless” system necessary to pen and execute any financial agreements in the digital age.
- AI-Powered Customer Service
Artificial intelligence (AI) is key to scaling not just fintech startups but also traditional financial institutions. When it comes to basic customer service, human agents are now considered placeholders for chat bots. These computer programs are adept at analyzing unstructured data too, so they can be instrumental in combating hacking and fraud.
- Intensified Fintech Regulation
Regulation-technology adoption is a must for any financial services organizations looking to build and maintain a reputation for being a trustworthy custodian of treasure troves of sensitive data. Governments around the world could no longer ignore the impact of fintech on the lives of billions of people. That is why regulators have been actively addressing policy decay.
If you have not done so, use innovations like AI to comply with Know Your Customer and Anti-Money-laundering standards and tighten up your cybersecurity measures.
- Increased Collaboration
Incumbent financial services companies and fintech disruptors have matured enough to treat each other as friends rather than foes. This trend has been going on for a few years, and it will continue in 2020.
Both parties may not always see eye to eye with one another on business principles and strategies. But they know they have to join forces on some level to achieve strategic goals, and become a well-rounded financial health company.
- Elusive VC Funding
Venture capitalist money has been the lifeblood of the fintech boom, but it is no longer the low-hanging fruit that it used to be. Many VCs these days are more selective about which ventures to finance and are more interested in later-stage startups.
If you are planning to raise funds in the next 12 months, your pitch should include a feasible strategy and realistic timeline for revenue generation. Otherwise, you would lose out to other fledgling fintech companies with better vision.