We did research on future trends in the financial industry and hopefully a year from now these trends will stay and inspire more improvements in how we deal with money.
But first, let’s recollect the innovations that have emerged in the FinTech industry during the past 12 months.
Blockchain. This disruptive innovation has become mainstream, delivering greater transparency and decreasing the duration of financial transactions.
Next-gen banks. 2018 marked the appearance of digital-only financial intermediaries.
Mobile apps. FinTech has conquered the mobile realm by bringing user-oriented financial apps.
Cybersecurity. There is a strong trend toward developing sophisticated security systems to prevent cyber-attacks and data breaches.
Chatbots. Banks and other legal, financial institutions have taken notice and integrated virtual assistants into their apps.
Asian FinTech market. This year, new financial giants based in Asia have appeared, delivering groundbreaking solutions for the financial technology industry.
Big Data. A strong collaboration between traditional banks and FinTech companies has led to new forms of Big Data usage, such as personalised finance and advanced analytics.
ICOs. A significant trend is presented by many startups willing to enter the financial industry through blockchain-based fundraising.
10 FinTech trends to expect in 2020
Some of the above tendencies have demonstrated massive growth in 2019 and proved to be here for a couple of years. Now let’s look at the hottest technology trends in financial services that may change your FinTech business in the new year.
Disruptive innovations in payments
Paper money has been giving way to innovative payment solutions, whereas digital wallets and contactless payment tools have become the order of the day.
2020 is expected to transform our vision of digital transactions due to the rapid growth of cryptocurrency, the main driver of changes in the payment systems.
Changes have been affecting all the aspects of financial transactions:
- sending and receiving payments;
- enhancements in the infrastructure;
- advanced payment services;
- unconventional user experiences;
- brand-new forms of collaboration in the FinTech industry.
The most significant merit of using cryptocurrencies and tokens in payments is moving away from traditional banking and its inherent regulations. Individuals and companies prefer a more democratic way of managing funds, which has become a reality thanks to disruptive innovations in payments.
Moreover, the trend has gained support from the EU government. The EU Payment Services Directive adopted in 2015 allows companies to use outside payment service providers as an alternative to bank institutions.
Platforms as a service
One of the FinTech predictions for 2020 is the boost of PaaS (Platform as a Service) solutions that go beyond the cloud.
Old and good PaaS based on cloud computing technologies lets companies extend the ready-made solutions and add custom developments to satisfy their business needs.
Conventional PaaS worked great for the FinTech industry as providers took the job of configuring and maintaining applications freeing up developers’ time on coding tasks.
Today, PaaS vendors take even more responsibility offering solutions for team collaboration, tools for streamlining deployment, services on configuration and resource management.
With these core areas handed over to PaaS providers, other business processes in the financial sector like budget planning, credit risk management, payments processing, billings, and client service are going to be delegated as well.
The major benefits of using PaaS in the FinTech:
- quick product launch;
- post-paid service;
- environment’s adaptability;
- agile approach;
- standardised middleware and database management.
This year we at JustCoded released an alpha version of a PaaS for real estate crowdfunding called LenderKit. We described it in our previous articles and have a plan for developing it further in 2020 to offer startups and investment organisations faster and more reliable solutions.
Blockchain movement
Blockchain technology continues turning the financial world for the better. With a growing number of Asian companies focused on cryptocurrencies, the potential of blockchain is increasing on a daily basis. Due to the legal constraints, a lot of innovations in this field have to wait in the wings.
The millennials like the idea of virtual currencies and represent a large percentage of cryptocurrency owners as you can see in the graph below. It proves the willingness of young people to support forward-looking startups and ICOs.
A great number of banks and other financial middlemen consider implementing crypto technologies in their ecosystems for facilitating payments, money transfers, loan payoffs, investments, etc.
The crypto market is skyrocketing, and it’s likely to change the shape of the FinTech industry in the nearest future.
Digital assistants
Advanced AI technologies for voice have taken robotics to a new level.
Virtual assistants have already replaced humans in bank call centres responding to clients’ queries on getting loans, calculating future income from savings accounts, providing info on fees, assisting in non-traditional bank operations, etc.
And you must have heard of Google Assitant, right? Technology is evolving further and becoming more sophisticated.
Integrating chatbots into the customer service systems is to increase clients’ loyalty, reduce processing time, and cut administrative costs. Bank of America already nailed it with their Erica assistant that helps find transactions, send and receive money, lock and unlock your debit card and much more.
Besides, robots can be used in AML/KYC checks to define clients’ identities and prevent fraud.
The best practices of using virtual assistants in financial services demonstrate that smart features can fulfil more complex tasks such as credit scoring, planning budget, personal funds management, investment advice, etc.
Bots play a significant role in controversial banking that is becoming more and more popular among tech-savvy clients.
Total automation
One of the latest trends in the FinTech industry is the complete automation of key financial processes.
According to the Capgemini report, “intelligent automation is a combo of continuous innovations in AI, robotics (RPA) and financial business processes automation.
The company’s survey shows that the implementation of automated elements into the financial ecosystem brings a plethora of benefits:
- high returns;
- enhanced cross-selling;
- faster product and service delivery;
- higher customer satisfaction;
- stronger financial health in the short- and long-run.
Despite the obvious advantages of automation, few FinTech companies have been deploying automated aspects in their activity. The limiting factors are:
- difficulties in developing a comprehensive business case;
- the top management expressing the reluctance to automate the financial system;
- the lack of knowledgeable specialists and resources to deploy the automation;
- the sufficient amount of data needed for AI and ML operations.
- Hence, not so many companies are ready to transfer their activity to the automated base, which discourages plenty of enterprises from following this trend.
FinTech incubators
Startup incubators and accelerators hold pride of place in the list of top FinTech trends for 2020.
With the establishment of such networks and programmes as Startupbootcamp, Barclays Accelerator, FinLab, and other similar projects, enthusiasts, and creators all over the globe have received a chance to set in motion their business ideas.
The greatest thing about hubs and accelerators is that they provide early-stage companies with everything needed for a quick launch: seed capital, premises, utilities, mentoring, expert advice, etc.
In general, judges in FinTech evaluate business propositions and select startups that meet all the criteria to take part in programs. Creators and startup founders get a chance to expand their network, get feedback from focus groups, run pre-launch tests, take part in exhibitions, conferences, and related events during their participation in programs.
FinTech incubators cover a wide range of business fields:
- mobile technologies;
- IoT (Internet of Things);
- Big Data;
- cloud computing;
- advanced analytics;
- AR and VR;
- blockchain and cryptocurrency.
Digital-only banking
The new generation of virtual bank institutions has made a significant difference in the financial sector over the past few years.
Unlike high-street institutions, conversational banks exclusively operate in the digital realm and have no brick-and-mortar outlets.
Companies providing digital-only banking:
- Starling Bank – a mobile app for managing funds on current accounts, monitoring spending habits, keeping track on savings, etc.
- Curve – a tool for combining all cards into one single Curve Mastercard aimed at better money management.
- Loot – a combo of a digital current account and a card with a set of features to set financial goals, plan budgets, carry out financial transactions abroad, make money transactions;
- Revolut – a personalised bank account with embedded tools used for budgeting, monitoring savings, and controlling spending.
Why are digital-only banks attracting more and more clients?
They give more freedom, use a personalised approach, and deliver products and services at fast speeds.
Business alliances
A new wave in finance technology trends is about smart collaborations.
Competing for clients in the past, traditional banks and Fintech startups are now establishing a partnership.
A Start Path by Mastercard is a global project for Fintech startups from various parts of the world that helps innovators kickstart their projects.
Mastercard provides startups with access to their ecosystem and network. The program consists of two parts: half a year of online partnership and 2 weeks of working in different locations.
Start Path is open to bright ideas in banking, biometrics, wearables, AI, security, and logistics.
Another case study is ATB Financial, a Canadian bank, that two years ago used blockchain technology in collaboration with Ripple and ReiseBank AG to make a large international payment. As a result, the transaction that earlier would take several business days was fulfilled in a few seconds.
New forms of relationships between incumbents and FinTech companies bring amazing results regarding creating a unified cultural business society, delivering optimal customer experience, overcoming challenges, and enhancing security.
Advanced credit models
Incumbents used to apply basic social-demographic data for defining the credit rating of potential borrowers. Consequently, test results came with a high probability of error, which influenced the credit risk of the whole loan portfolio.
As PWC states, with the growth of alternative credit decisioning models (ACD) used by Fintech companies, the efficiency of credit risk assessment has exponentially increased.
ACD models are based on the use of additional resources of information such as:
- social media data for creating a clearer portrait of a customer and determining their behavioural patterns;
- location and transaction records that help to define customers’ buying habits;
- personal files access providing more info on clients’ preferences and wishes;
- ML used for improving existing credit models.
Machine Learning coupled with advanced data is to make credit models more intricate, and relevant, expand access to the credit market, and mitigate loan default risks.
Cyber-security
The last tendency in the set of financial services trends is cyber-security concern. Although FinTech provides financial players with more opportunities, it also makes them more vulnerable to cyber-attacks.
The major security-related issues are:
- data tampering;
- the loss and theft of financial records;
- hacking into personal accounts and profiles;
- malware intrusion;
- inadequate CDD and AML checks;
- the misuse of the cloud environment.
Biometric technologies aim to address some of these security and privacy issues with greater efficiency.
On the one hand, the development of biometrics contributes significantly to preventing fraud and money laundering. On the other hand, users find instant authentication based on the iris and fingertips scanning more beneficial as it eliminates the need for memorising complicated credentials.
Blockchain technology is also a great troubleshooter when it comes to cyber-security.
How can FinTech companies benefit from using blockchain?
The blockchain is a decentralised system with myriads of transactions recorded in a distributed database.
The data stored in blockchain can’t be altered due to the structure and nature of the system. Every single block has a description of the previous element presented in the form of a hash value. Since all the blocks are compiled into a chain, the attributes of transactions can’t be forged.
Implementing urgent measures and utilising the latest technologies in data protection, such as biometrics and blockchain, will help Fintech companies achieve higher cyber-security results.
Conclusion
Now you’re aware of the fintech trends 2020 that will change the shape of the industry soon. If you’re contemplating financial application development or adjustment of your corporate strategy to new moves, focus on the following:
- consider altering your business pattern to meet the constant changes of the digital;
- take advantage of AI and ML to cut operational costs;
- apply robotics to manage customer requests faster;
- be client-oriented and provide omnichannel services;
- put the spotlight on cyber-security;
- make sure that the level of expertise your team have complies with today’s demands.
