The landscape of FinTech is changing at a lightning speed. With each passing day, we are encountering a radical change in the FinTech industry. These transformations are important as they impact everything related to payments, money, and banking.
We experience many of these FinTech transformations on the daily basis like when we withdraw money from ATM, use virtual cards, transfer money through mobile payment, make payments via digital wallets, and many more. Moreover, with the introduction of cutting-edge technologies, the horizon of FinTech is expanding more rapidly than ever.
When the COVID-19 pandemic hit the world, the majority of the businesses declined. There were only a few businesses which showed the upward trend and FinTech industry was one of them.
The pandemic caused a huge surge in the FinTech market as both businesses and consumers started to utilize contactless payment methods. Moreover, in the banking sector, agency banking became rampant during COVID-19.
As per the new research published by deVere Group, the COVID-19 pandemic has caused a massive rise of 72% in the use of FinTech apps in Europe.
Even in the United States, the situation is quite similar. According to a report, FinTech is now viewed as the new normal by almost 73% of the Americans. Furthermore, 67% have planned to continue using FinTech solutions to manage their finances even after the pandemic ends.
FinTech solutions and apps have received overwhelming support in the times of the pandemic. And it seems certain that this support will only increase from here given that FinTech industry continues to make finance simple, quick, convenient, and secure for the customers. And in the quest to do so, we might see many big changes in the year 2021.
Yes, 2021 can prove to be milestone year where we can witness path-breaking innovations in the field of FinTech. With so many people migrating towards using FinTech digital solutions for their finances, we may see a stiff competition among FinTech enterprises and startups to get the biggest slice of the cake.
In this article, we are going to discuss the biggest FinTech predictions and trends for the year 2021. So, without any further ado, let’s begin.
Top FinTech predictions & trends of 2021
The predictions or trends that we mention here might not necessarily new. However, their adoption rate is noticeable and we believe that their adoption rate will enhance rapidly in the year 2021.
Digital-only banks are those banks which provide various virtual banking services like P2P transfers, international remittance, contactless MasterCard with free transaction fees, and with ability to buy various cryptocurrencies like Bitcoin, Ethereum, and many more.
Digital-only banks have gained immense popularity in a short period. It’s majorly because it offers utmost convenience to the customers by eliminating tedious paperwork, waiting in long queues, and the need to visit a bank physically.
Digital-only banks will see a huge surge in the year 2021. And this surge will cause a significant drop in the number of people who visit the bank physically. As per a report, this drop will be of 36% from the year 2017 to 2022 and its main cause will be the rise of digital-only banks.
Read More: Impact of FinTech on banking.
Robotic process automation can be defined as the process automation technology which utilizes software robots or digital workers to automate the tasks which are usually performed humans. Financial service industry has already implemented RPA to cut costs and improve the overall organizational efficiencies.
Not only this, but financial institutions have also adopted RPA digital workers to automate various back-end office processes such as security checks, customer onboarding, account maintenance & closing, trial balancing, credit card and mortgage processing, and many more.
The major benefit of RPA is that the digital workers can finish these tasks more efficiently and quickly thus allowing financial institution personnel to focus on major areas like customer service.
Blockchain technology has completely transformed the modus operandi of the FinTech industry. With this cutting-edge technology, transactions can be done in a safe and secure manner. Due to this banks and financial institutions are readily adopting Blockchain technology to leverage its benefits.
As per a report by Business Insider Intelligence, around 48% of banking representatives think that Blockchain technology will have the biggest impact on banking in 2021 and beyond.
One critical thing about Blockchain is that it’s just not only cutting-edge technology but also a new philosophy of decentralized finance which focuses on minimizing centralized procedure. In Blockchain, once the data is recorded in the system then it becomes extremely difficult to modulate thus it remains protected.
Blockchain ensures that the information stored is secured end-to-end along with the minimum risk. Blockchain is also used to ensure secure cross-border payments.
Blockchain technology has also inspired the development of various P2P financial platforms that enable monetary interactions to take place in a decentralized manner. Banks and financial
institutions are already looking to increase their investments in the Blockchain technology to reduce expenses along with enhancing internal procedures.
Artificial Intelligence & Machine Learning
Banks across the world are now looking to incorporate AI in their operations. As per the Autonomous research, AI will reduce 22% of the bank’s operational expenses by the year 2030. In other words, banks can save as much as $ 1 trillion by employing AI.
AI can also be used to manage rising cybercrimes by identifying financial frauds and threats. It can also be more customer-centric as the algorithm of AI & ML can record all the interactions with the utmost accuracy and preciseness.
AI has already shown how useful it can be in managing customers via cutting-edge client service solutions like Chatbots. It’s only a matter of time that banks and financial institutions will adopt this technology for the same.
Acceleration in financial inclusion
According to the World Bank, there are almost 1.7 billion people in the world who are unbanked as they don’t have access to the banking facilities. Most of these people are from developing nations.
Although, the user penetration for mobile phones is quite high in these regions which makes it the perfect destination for FinTech apps and branchless banking. And this exactly, what’s happening, FinTech solutions like agency banking and mobile money are playing a crucial role in improving financial inclusion in these regions.
In the year 2021, this trend is set to rise as innovative technology of FinTech apps will offer banking facilities to the unbanked, weak, and illiterate section of the society. This trend will improve financial inclusion by making access to financial services easy, fast, and convenient for the unbanked.
Biometric security systems
FinTech and mobile banking services have brought banking at our fingertips. However, it’s also true that it has raised many security concerns as the cybercrimes related to banking are increasing day by day.
This calls for necessary security measures which FinTech companies must find. Biometric security systems have emerged as a reliable and foolproof measure that takes security to the next level. It provides users and institutions with the confidence that the data is safe and protected.
Currently, the biometric industry in its transformative stage as it’s witnessing some major shifts. According to reports, biometric sensors which involve physical touch are estimated to decline. In coming years, the contactless biometric solutions are all set to overtake the touch-based biometric solutions.
One major reason behind this shift is the COVID-19 pandemic. People are avoiding using cash and all other payment means which involves touch. That’s why contactless biometric identification solutions are witnessing higher adoption rate in the times of COVID-19.
Open banking another exciting and revolutionary technology. It brings both banks and FinTech together by facilitating data networking across institutions. Open banking is related to PSD2 (Second Payment Services Directive).
Open banking forces banks to release data in a standardized and secure form which makes the sharing of information easier between various authorized organizations online. Not only this, but it also enables to control consumers’ banking along with financial information via third-party applications by data sharing with the help of AI and APIs.
Many industry experts believe that open banking will transform the banking sector in the year 2021. And this is not a mindless prediction, there are numbers which support estimation. In the year 208, Open banking generated around $.29 billion and is expected to reach $43.15 billion by the year 2026 at a CAGR of 24.4%.
Open banking partnerships can enable customers to manage their financial accounts in an easy manner by providing them with a consolidated view of their accounts. This is the reason why access to open banking products will encourage improved long-term wealth generation, better financial decision making, and lower debt.
As a result, it will benefit many stakeholders like FinTech workers, banking institutions, API industry figures, consumers, and underserved communities.
Reg-Tech is an abbreviation of Regulatory Technology which can be defined as the management of the regulatory process in the financial industry via technology. The major functions of Reg-Tech involve reporting, monitoring, and compliance.
Reg-Tech empowers companies with the power of advanced software that can simplify the compliance process with existing regulations and laws.
The rise in digital products has also increased the cases of money laundering, fraudulent activities, cyber hacks, and data breaches.
Reg-Tech with the help of Big Data and Machine Learning technology can offer crucial data on money laundering activities thus reducing the risk associated with the company’s compliance department. Furthermore, Reg-Tech can also reduce administrative overhead, ensure financial stability, and protect customers.
As we move into the year 2021, we will see all the above mentioned Fintech trends and predictions making financial services better. These trends will result in better transparency, faster transaction processing, improved assistance to the client, and enhanced availability of financial data.
The FinTech revolution is gaining tremendous traction with each passing day and in 2021 it’s all set to further disrupt the banking and payments industry.
If you’re someone who wants to take advantage of this then you can create a top-notch FinTech solution that offers consumers with a secure, simple, and convenient way for managing finances. You can get started by contacting DigiPay.guru which is a leading FinTech solution provider.