By Maksim Bieliai, BA Team Leader, Fintech Market Analyst at MobiDev
The development of the fintech industry does not stand still. By adopting technologies such as Blockchain, Open APIs, Artificial intelligence and Machine Learning, fintech companies contribute to better security, improvement of efficiency, and merge of fintech solutions with traditional finances. All this leads to the emergence of new trends dictating higher standards for market players. Let’s dive into the hottest of them to find out what is the next big thing in the industry.
AI & ML Will Make Fintech Solutions Smarter
Deep learning has empowered computers to perform such tasks as object recognition, speech analysis, and face detection. The ability to analyze a large amount of data and recognize patterns forms the basis of AI decision-making solutions. Because of this, we can see how AI helps banks and financial institutions to optimize costs, personalize the banking experience, streamline workflows and improve the financial literacy of individual users and entire organizations.
However, despite all these advantages, AI has limitations and should comply with ethics, security, and privacy regulations. Fortunately, collaboration with an experienced fintech development team allows us to minimize these limitations and create software solutions that meet all regulatory and business requirements.
Considering these regulations, engineers can create fintech products like those listed below:
- Personal financial apps analyze spending, incomes, and debts to help users manage their money more effectively.
- Fintech apps to track customer-related data about cash and credit accounts. With such apps, financial organizations can provide clients with useful insights into their financial behavior.
- Apps for improving financial decision-making. AI & ML models assess a large amount of complex information, visualize data, and even make predictions to assist users in meeting their financial goals.
A great variety of fintech products with AI components derives from market growth. Mordor Intelligence reveals that AI in the global fintech market will reach $26.67B by 2026.
Blockchain Will Enhance Fintech Security
Blockchain has evolved over time because of the strong community that empowers fintech innovations. One of the main benefits of this technology is that blockchain can personalize user experience while sustaining a highly secure fintech infrastructure. For instance, it allows the processing of P2P payments without bank intermediaries. Nevertheless, banks and similar intermediary financial institutions exploit blockchain to lower the cost of payments.
For example, J.P. Morgan is using blockchain to improve money transfers. Sweden’s central bank is experimenting with issuing its own digital currency called e-krona, while HSBC is relying on blockchain to securely store digital assets. Protego Trust Bank is another example of a digital asset bank, built solely to help investors securely benefit from emerging digital asset offerings. The list of successful applications of blockchain in banking continues to grow.
With the help of blockchain, financial organizations can also minimize the probability of online frauds through the reinforcement of the systems via digital signature adoption, decentralization, and other blockchain capabilities. Similar technological solutions may help manage records for KYC and AML, build data repositories for capital markets, improve the processes of lending, and simplify regulatory reporting by providing quick access to data.
Crypto and Metaverse Will Shift Investment Trends
Cryptocurrencies are becoming recognized financial assets that attract investors from all across the globe and they still occupy a significant role in the fintech investment trends in 2022. It seems like resounding collapses in prices of cryptocurrencies and even the demise of the crypto coins won’t somehow change the situation. Moreover, companies are gladly adopting crypto, which has a positive impact on the market. For instance, PayPal has already become crypto-friendly and supports crypto transfers to improve the customer experience. Despite volatility throughout the year, the crypto coins like Bitcoin, Ethereum, Tether, etc. are considered to be promising investments.
Non-fungible tokens or NFTs also drive the investment market. With the ability to represent unique digital assets and securely verify ownership of them, NFTs are increasingly becoming part of financial investment and trading solutions. For example, the German fintech platform NAGA is developing its own NFT staking protocol for the NAGAX social trading app. Moreover, NAGA Group CEO expects the revenue from the social trading app to exceed the revenue from the brokerage business.
Cryptocurrencies and NFTs are assets linked to the metaverse. Investors investigate the digital world and consider these options while building their portfolios. These are new investment trends of the metaverse, which are taken into account by platforms for buying and holding assets. Coinbase, for instance, introduced the intention to develop a unique NFT that represents a username and allows users to keep their identity while switching between metaverse worlds.
Open APIs Will Connect Fintech and Traditional Finances
In 2022 and beyond, we will definitely see open banking growth. This implies the popularization of the approach in which banks and other financial institutions grant access to their data in a controlled setting via APIs, thus enabling fintech startups to build new applications and services. Instead of competing with fintech companies, banks partner with them by providing customer information through APIs and contributing to market development.
Open banking capabilities are used by fintech startups that provide cost tracking, budgeting, financial planning, lending, and other services. With this technology, they can easily set up application integration with user banks to improve the customer experience and ensure customer success. For example, the MoneyBox app uses open banking to help users improve their savings and investments by collecting data from all user accounts. The application connects to the bank account selected by the user and, with his consent, collects transaction data, which is then displayed in the Moneybox app.
Plaid is one of the most popular intermediaries between financial applications and banks. The platform allows application users to securely log in and share their data. The list of products relying on open APIs goes on and on. Prospects of this technology can be easily tracked through statistics. According to Business Wire, the global open banking market will reach $19.14B in 2022.
Wrapping Up – Global Vision for Fintech
The advancement of fintech is prompted by technological progress in such areas as Blockchain, AI, metaverse, and open APIs. Of course, this is not a complete list, as fintech is closely connected to the overall technology landscape and uses the latest advances to improve the efficiency of financial systems. That’s why a lot of banks establish partnerships with fintech startups to stay ahead of the curve of innovation and competitiveness.