By the first half of 2021, the fintech phenomenon would have swept the globe. Since then, this shift has accelerated and is expected to accelerate more as we deal with 2022. This incredible momentum has been fueled by a variety of factors. Specifically, it is the convergence of new-age technology, the power of data, and advanced analytics that has aided a slew of fintech startups in redefining the banking and finance industries this year.
Fintech has grown significantly during the COVID-19 epidemic. Also, the Fintech trends are transforming the Fintech service sector more than any other sector! Due to the simplicity of use and cheap transaction costs associated with fintech solutions, a rising number of customers are taking advantage of them.
According to the Global COVID-19 FinTech Market Rapid Assessment Study, the overall volume of digital transactions and new consumers rose by 17% and 21% year on year in the UK and Europe, respectively. Fintech firms appear to have a bright future ahead of them.
Let us discuss what are the trends in fintech sector that will be driving 2022 with a spin!
Fintech Trends to Keep an Eye on in 2022
Consider the following five trends that will determine the future of fintech.
1. Cashless transactions are king
According to UK Finance, cash payments currently account for fewer than one in every six payments. The epidemic hastened the already significant trend away from cash payments, which will result in a 35% decline in payments made with banknotes or coins in the future.
With the growth of non-cash merchants and the acceleration of digital transformation across sectors, including digital accounting and financial management operations, this trend is only expected to accelerate in 2022. Soon, it will be the standard to pay only with a debit or credit card, via smartphone apps such as Google Pay, or via other electronic payment methods.
2. Complete digitization
The most significant trend in fintech is end-to-end digitization. This transformation will assist financial institutions and banks in guaranteeing the smooth functioning of data collection, analysis, and administration activities. With increased company efficiency, the employees will also profit from automation. As digital lending platforms automate the whole loan servicing process, automated fintech platforms will offer credit approvals that are both trustworthy and timely.
3. The Blockchain Year
With a number of significant advancements, 2022 is shaping up to be a watershed year for blockchain technology.
Demand for Blockchain-as-a-Service (BaaS) solutions will continue to increase. With the expansion of cryptocurrency and, more broadly, digital transformation, fintechs that create products on the blockchain are projected to gain traction as businesses across industries search for methods to digitally transform and streamline all aspects of their operations. For instance, blockchain technologies are increasingly being utilized to manage business invoicing and cross-border payments.
Traditional banks have fully embraced blockchain technology. According to Deloitte’s 2021 Worldwide Blockchain Survey, 76% of global executives think “digital assets will serve as a strong alternative to, or outright replacement for, fiat currencies in the next 5–10 years.”
Corporations and traditional banks are becoming aware of the potential for blockchain to revolutionize society, which is no exaggeration, by providing a completely new method to transact and service clients. Thirteen of the world’s largest banks have invested a combined $3 billion in cryptocurrency development, either directly or indirectly through the investment of cryptocurrency firms.
Notably, investment banks have begun to diversify their portfolio offerings by including crypto assets or funds. JP Morgan is arguably the most well-known of these. Formerly a notable crypto sceptic, JP Morgan CEO Jamie Dimon has spearheaded the company’s embrace of cryptocurrency, establishing a bitcoin fund with the Securities and Exchange Commission and even releasing its own coin. In 2022, businesses may anticipate a significant growth in institutional banking interest in cryptocurrency.
4. A global crypto architecture will be established
Benoît Curé, executive director of the Bank of Worldwide Settlements (BIS), recently announced that authorities from across the globe have been in conversations about developing a unified international framework in response to the meteoric ascent of cryptocurrency and decentralised finance. The primary objective of such a framework would be to provide safeguards to mitigate related downside risk while maximizing the enormous advantages that it may bring.
Curé stated that a workable drought plan will emerge in 2022. Such a framework would be a tremendous endorsement of crypto and blockchain technology, and would very certainly accelerate its adoption by industry and society as large.
5. The shift to non-tier-one markets
Due to the proliferation of smartphones and greater internet access, residents in Tier 2, Tier 3, and Tier 4 cities are demonstrating a growing preference for digital lending channels. Even customers in rural places may now easily access digital lending platforms and credit solutions, owing to the all-pervasive technology penetration.
6. Video Banking to Become More Popular
As part of their migration to non-branch banking, financial institutions are examining how to effectively offer critical services to their consumers through video. By leveraging AI and machine learning technology, video banking expands on the smart chatbot service. For example, artificial intelligence may develop relevant responses to specific client inquiries.
ABN AMRO is one of the early adopters of video banking. “Customers are truly yearning for personal discussions with quality and knowledge,” investment banker Joeri Hartmans stated. What video banking brings to the table is the ease of digital that clients want.”
Traditional banks with a higher level of technological sophistication are expected to invest in video banking in the next year as a means of increasing consumer interaction, combining human staff with the aid of AI and machine learning.
7. APIs are being adopted at a faster rate
APIs are for developing new apps or adding new features and services to existing ones. While a McKinsey survey found that 91% of bank-developed APIs were privately held in 2018, we are seeing a year-over-year increase in the number of partner and open APIs on the market. This can be ascribed in part to the availability of several open-source PSD2 compliance APIs. This opens up new avenues for fintechs, banks, and other service providers to collaborate, “exchange technology,” and “extend their networks.”
Initiatives such as the Open Bank Project reaffirm our belief that APIs will play a critical role in shaping the future of finance. As of early-2021, the effort has enrolled over 11,000 software developers and made available over 350 distinct APIs.
8. Customer intelligence as a revenue predictor
Another trend worth noting in fintech is the use of customer information to forecast revenue. Historically, client data was obtained through focus groups and questionnaires. However, the findings were somewhat ambiguous, making it difficult to make any inferences. Businesses now have access to massive amounts of data. They may evaluate information using Machine Learning to gain valuable insights into what clients need and value, enabling financial institutions to create more tailored services.
Capital One, for example, has launched the Capital One Second Look service, which may monitor spending trends. It may disclose whether a consumer has paid twice for the same goods or service and notify them. This gives clients a sense of security.
Another extremely applicable example of how banks exploit consumer information is how banks such as ING and BGL Paribas determine a prospect’s projected earnings and risk level when applying for a loan or mortgage online. They determine the borrowing power amount and the minimum/maximum number of months they are prepared to grant the loan by assessing the applicants’ previous purchases (for example, if the individual spends on entertainment) and income.
Without a question, the financial industry experienced a turbulent and game-changing year since 2020. As a result of the epidemic and the worldwide economic turmoil it sparked, a slew of new trends have emerged on the horizon. Fintech specialists place a premium on operational efficiency. This includes developing recession-proof business models, modernizing the pre-COVID-19 technology stack, and identifying methods to automate repetitive tasks and save money.
Other significant developments to watch in 2022 and beyond include cooperation between banks and fintech firms, open APIs, blockchain, and the introduction of robots. These and other factors discussed in this article, I believe, will define the rules of the fintech and banking game.