Four Emerging Trends in the FinTech Sector

The FinTech sector is constantly evolving, driven by technological advancements and changing consumer demands. In this article, we explore four emerging trends that are reshaping the industry.

First, decentralized finance (DeFi) is gaining traction, offering innovative financial services through blockchain technology. Second, the integration of artificial intelligence (AI) and machine learning (ML) is revolutionizing risk assessment, fraud detection, and banking in general.

Third, gamification is changing how finance works for tech-savvy individuals, and, lastly, the Internet of Things (IoT) has finally arrived.  These trends are important for anyone hoping to keep their business on the front lines of innovation.

DeFi and Blockchain

Distributed Ledger Technology (DLT) enables the recording and sharing of data across multiple data stores, allowing transactions and data to be simultaneously recorded, shared, and synchronized across a distributed network of participants.

Essential technologies like smart contracts, zero-knowledge proofs, and distributed data storage and exchange will continue to play a vital role in existing fintech innovations such as digital wallets, digital assets, decentralized finance (DeFi), and non-fungible tokens (NFT).

DLT is set to become a foundational element in ecosystem financing, as it enables the storage of financial transactions across multiple locations simultaneously. Cross-chain technology will further facilitate blockchain interoperability, enabling different protocols to exchange data and value across various industries, including payment processing and supply chain management.

Hyper-Automatic Banking

Hyper-automated banking with Robotic Process Automation (RPA) is experiencing rapid growth and is considered a financial services trend for several reasons.

The primary drivers behind this growth are the potential for increased transaction speed, reduced operational expenses, and decreased human errors. Hyper-automation, similar to AI, ML, and open banking, has been utilized in the financial services industry for some time.

However, it is now being leveraged to enhance the speed of financial and banking transactions.

By automating processes with RPA and hyper-automation, financial institutions can free up staff time, allowing them to focus on core financial tasks. Additionally, the use of RPA and hyper-automation reduces the likelihood of human errors and enhances compliance.

The adoption of RPA tools in banking is also significant. Approximately 80% of banking customers have interacted with at least one RPA tool in the last 12 months, as reported by Deloitte on digital banking. However, the potential for hyper-automation goes beyond basic RPA tools. Institutions can leverage more sophisticated systems like IBM Watson, incorporating Big data analytics and gaining valuable insights from AI, ML, and RPA. This enables financial institutions to generate new revenue streams and make more informed decisions.

Gamification

Gamification of finance refers to the application of game elements and mechanics in financial contexts to enhance user engagement, education, and motivation. It involves incorporating elements such as points, levels, challenges, rewards, and competition into financial activities and platforms to make them more enjoyable and interactive.

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By gamifying finance, individuals can have a more immersive and entertaining experience while managing their finance. Gamification can be found in various financial applications, including budgeting apps, investment platforms, educational tools, and banking services.

The Internet of Things

IoT is maturing and has significant implications for financial systems. We can think of the Internet of things as consisting of three layers: perception and smart sensors, wireless communication networks, and application support.

RFID (radio frequency identification) labeling holds untapped potential for automating item identification and logistics. Communication solutions are expanding, enabling devices to communicate across various networks and technologies. Embedded-system and smart technologies are advancing, facilitating intelligent object communication.

In finance, ESG (environmental, social, and governance) considerations govern investments and regulations. Countries strive for carbon neutrality, requiring effective energy management. IoT can monitor and manage energy efficiency, offering opportunities in carbon trading.

Many of us might not see this explicitly in our day-to-day lives. Nonetheless, it is a growing sector and will be important for industry leaders in public and private fields.