5 Fintech Payment Trends Business Leaders Need To Consider In 2021

The future of fintech will optimize the user experience with advances in a few key areas. In 2017, 77% of global financial services planned to adopt some sort of decentralized finance system . This was driven by the need to improve retention rate statistics, as the fintech industry’s convenience and speed attracted more and more customers. The joint results of traditional financial institutions adopting DeFi tools and the crypto boom from a few years ago have led to this incredible asset growth.

Blockchain has tremendous potential for growth and several challenges to be overcome before it becomes more widespread. Regardless of who ultimately wins and loses, open banking will be a headline trend in 2022—without any regulatory imperatives. A transition, that is, from internal capabilities to new business and revenue growth opportunities.

About 30% of all banking customers use at least one financial service offered by a non-traditional provider. In October, Plaid announced a new payments partner ecosystem that will attempt to make ACH bank transfers a more attractive alternative to credit card transactions. MX and Akoya will leverage their financial institution-friendlier business models to escalate the open banking war.

Digital payments adoption nears a tipping point

The list of the top fintech companies is crowned by GoTo, an Indonesian enterprise with a market capitalization of $2.846 trillion as of November 1, 2022. Coming in second is Visa Inc, with a market capitalization of $421.83 billion, followed by Mastercard, with a market capitalization of $306.71 billion. In the insurance industry, computers can automate post-incident data collection, analyze photos of accident scenes, and perform many other functions that reduce the time and money required for insurers to settle claims. Digital payments are, without a doubt, the main driving force behind the fintech sector. So far, payment value has surpassed the 12.8% projected CAGR from 2019 to 2023, as the original value expected for 2023 was $6.7 trillion, a goal already reached in 2022.

Although many retailers—particularly e-commerce giants—have made a head start on this trend, there’s more to come. Other non-financial companies like software and logistics providers now partner with Fintechs to create innovative payment methods and installment of financing services for their large customer base. With the opportunities this trend provides to Fintechs, seeking partnerships with non-financial companies can help them maintain a competitive advantage. Embedded finance offers Fintechs new digital opportunities worth over $7.2 trillion by 2030.

What Bank Branches Can Learn from Retailers

And it’s hard to match China’s leadership in almost all fintech categories right now, as the next figure shows. Investors have set the bar high for fintech, looking at the lines where returns are clearly outlined. AFI and CGAP, among others, are actively pushing measures to set the rules for fintech inclusion in this section.

The percentage of banks and credit unions that have invested in or developed APIs has grown from 35% in 2019 to 47% in 2021—and another 25% plan to invest in or develop APIs in 2022. Banks don’t “partner” with technology companies for digital account opening applications and capabilities—they buy technology as part of a vendor relationship. According to banks—per Cornerstone Advisor’s What’ Going On in Banking studies— digital account opening has been their most common type of fintech “partnership” initiative over the past few years. AI also saves time and effort for businesses by handling customer FAQs through chatbots, which frees up employee time to focus on higher-level tasks and customer service needs. The pandemic continued to create seismic changes in 2021, and those effects will likely be felt well into 2022, including how people shop.

Fintech is a portmanteau for “financial technology.” It’s a catch-all term for technology used to augment, streamline, digitize or disrupt traditional financial services. Now valued at $6.62 billion and growing at a CAGR of 6.3% from 2022 to 2028, the alternative financing sector has a promising outlook. As fintech firms strive to improve financial inclusion across the board, it’s also expected that alternative finance will play an increasingly prominent role in supporting the business ecosystem in the future. Some of the newest ways to pay in 2023 include tap-and-go credit card technology and digital check payments for rapid electronic bank transfers. Crypto payments at point-of-sale and cross-border payments have also become more common and will continue to increase in popularity as regulators introduce new guidelines in these areas. Many financial companies will partner with tech providers to develop and administer these embedded services.

Lending fintech Abound raises £500mn in largest round so far

As the four trends highlight, digital technology has become fundamental to payments models. These four trends are key drivers toward a “digital-first” reality that will be foundational to the future of payments. The current digital evolution brings a new reality—“digital as a foundation.” Digital technology is no longer just a component of the payments landscape as a channel or a feature—it’s an expectation. As fintech grows and changes more quickly than ever before, it’s easy to feel like your business could be left behind.

• By implementing strong security measures, businesses can help to protect their customers’ financial information and reduce the risk of fraud.
• The popularity of contactless and mobile payments requires increased attention to digital identity authentication.
• As we head into the second half of the year, this extraordinary momentum is expected to continue.
• Examples of sensors being used in the financial services industry include ATM machines, which can detect how many people are lined up to use them.
• Blockchain has the potential to boost the global economy to $1.76 trillion over the next decade.

Compliance departments are under pressure to expand their Big Data initiatives while maintaining client loyalty – particularly given increasing competition from international companies taking advantage of global trade agreements. Large market datasets and additional granularity are required to feed predictive models, forecasts, and trading for businesses and individuals throughout the day. Big data is also becoming increasingly important with the rise of IoT devices. Even traditional data warehouse systems are being rebuilt using sensors to accommodate the increasing resourcefulness of data. Another example of autonomous finance would be using blockchain-based smart contracts to automate fund management and insurance premiums. Mid-size financial institutions will jump on the real-time payments bandwagon in 2022.

BNPL proving effective; crypto growing rapidly

You deposited your paycheck by snapping a photo on your smartphone and uploading it using your bank’s mobile app. When it was time to head home, you hopped in an Uber and paid for the ride with a stored credit card—or even in Bitcoin. Recent survey findings revealed that more than half (52%) of consumers view cryptocurrency as a “valid alternative” for making overseas fund transfers, and 45% are already using it for this purpose. And if this is another dot-com bubble, the cloud surely has a silver lining. At present, the international fund transfer process tends to be protracted and expensive.

What’s more, most digital banking users (58%) also expect “big tech” to make further inroads into the banking market. The financial technology sector encompasses payment processing, banking, insurance, loans, and wealth management. Each of these fields is getting a digital facelift, and the latest fintech statistics tell us this venture has been largely successful. The use cases of VR in financial technology are hitting the market slowly, with people able to invest in stocks or trade currencies through virtual reality. It provides an immersive experience to monitor real-time movements on the market and make quick investment decisions. It is an excellent example of how consumers can use fintech and modern technology for their investments.

Stats About Different Fintech Areas

Similarly, I believe North American and European consumers will begin to embrace commerce super-apps that let them pay online, carry a driver’s license, etc., which will also likely bring more regulatory oversight to this space. Ultimately, the answer to the question of how fintech affects your life is a case-by-case matter. Outside of tasks like online account monitoring, which has become ingrained into day-to-day banking, the impact of fintech on your life is a personal issue dictated fintech trends by how many services you choose to interact with. Today’s consumers can bypass traditional bank branches for things like applying for a loan or even a mortgage . Casual investors no longer need to meet face-to-face with financial experts to painstakingly go over the ins and outs of their portfolios—they can peruse their options online or even enlist the help of chatbots to make decisions. The annual Forbes Fintech 50 spotlights the hottest and largest companies in the industry.

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To fulfil regulations, these tools are designed to manage large data transfers. Authentication methods like facial recognition software, voice analysis, or fingerprint scanners will play a more prominent role in the future of banking security. Decentralised finance and non-fungible tokens are only two examples of how blockchain might change the world of finance. There are countless other ways in which people can use this technology, and it is difficult to predict what new developments will appear within these areas over the next few years. Distributed ledger technology is increasingly acting as the infrastructure of the digital world. It is the technology behind Bitcoin and other cryptocurrencies, but it can be used for many more applications.

Simply put, embedded finance refers to the integration of financial tools or services within the offerings of nonfinancial institutions. It covers financial services such as banking, credit and investment and has extended its reach to adjacent areas like payment processing and insurance. While the COVID-19 pandemic slowed penetration of some forms of digital spending, the overall trend continues toward greater use of digital options. Innovations in digital payments, like BNPL and cryptocurrency, are also beginning to take root and show the potential for future growth. Consumers tell us that BNPL is enabling them to complete more purchases than they otherwise would. Despite cryptocurrency’s steep growth curve, a high percentage of non-users appear persuadable given further education—although interest to date has been driven by the instrument’s investment potential over its payments utility.

AI is already a hit with the best customer service softwareusing chatbots and other smart systems. Financial institutions will be no exception, allowing for faster transactions and giving customers the convenience they demand. In fact, many retailers now offer bank-based payments at their check-outs to make the process convenient and easy for the consumer. Moreover, they also offer “no-contact” delivery to take the convenience to the next level. Many small and large businesses who didn’t have any website or digital media took a hard hit due to that payment shift. There’s a whole month dedicated to cybersecurity then how it’s possible that this trend won’t make it to the top in 2023.

It can enable fintech companies to offer their customers a more comprehensive suite of financial services, which can increase customer loyalty and retention. Peer-to-peer payment apps allow users to transfer money to other users or pay for services. These apps can be standalone services, bank-centric services, social media-centric services, or mobile OS-centric systems. A recent survey by Vodeno revealed that retailers in Europe are embracing new embedded finance offerings, with 56% of vendors saying they will be launching new products in 2022. Looking at 2022, I believe digital transformation will play out in ways familiar and new for brands and consumers. For customers, digital experiences will become permanent fixtures across industries and buyer journeys.

There is an opportunity for the technology to be used for payments in retail stores with no contactless payment terminals. It also aids those with visual impairments in gaining access to the cashless economy. While many of the largest US banks are in TCH’s RTP network, the vast majority of small and mid-size banks and credit unions aren’t. Demand is already skyrocketing for payment settlement, which gives businesses a powerful advantage while also reducing the risk of payment failure. As this trend becomes more popular domestically, you can probably expect real-time payment capabilities in 2022.