Due to the situation related to COVID-19, all the industries were affected in various degrees. But how has the Pandemic impacted the Fintech? What trends will appear in the future? To answer these questions we need to make a review of FinTech’s story and development. It will allow us to realize the crisis influence. After that, we can make quite clear predictions taking into account technological innovations that were implemented during last year.
The historical overview shows that the emergence of Fintech that happened in 2007-2008 was connected to the world financial crisis. It provoked the growth of the industry, emergence of the Fintech, and different positive achievements. Therefore, the crisis here is an engine for progress. That’s why the COVID-19 didn’t provoke destructive consequences for Fintech.
Due to Beauhurst, only 1% of FinTechs was critically affected by the Pandemic. For comparison, in other categories, 17 percent of companies were severely damaged. It means that Fintech has all possibilities to involve new investors and grow as an industry. The popularity of new Fintech’s services is related to a lower number of face-to-face interactions among people while performing financial transactions. But it’s only one among the set of the reasons that caused the appearance of new trends. Let’s consider what they are and what they will lead to.
Trend #1 – Digital Banking
A new wave of digitization in the banking sector is expected. The financial area notices fast because banks provide peer-to-peer transfers, contactless MasterCard alongside free transaction fees, global payments, an opportunity to purchase and exchange Ethereum, Bitcoin, or other cryptocurrencies.
It’s obvious that digital-only banks are going to prosper. In the current situation, nobody needs to waste time staying in line. Less physical contacts and paperwork are appreciated. That’s why digital-only platforms Ally, Revolut, Monese, Monzo, HelloBank are being intensively developed. They have a set of advantages for the user:
- Fast payments.
- Analytics instruments.
- Review of the payments.
- Efficient cost management.
The number of visits to banks was slowly reducing from 2017. The process had been boosted by the Pandemic.
Trend #2 – Biometric and cybersecurity
The second trend is directly related to the first one. Financial services and mobile banking are accessible to anybody. In these conditions the number of cybercrimes is growing intensively, a lot of questions related to security have appeared.
Security measures become more actual for companies that are operating in the industry. Biometric is one of the ways to increase security by providing users with the powerful protection of the data. Technologies related to the verification of the person and different contactless solutions are going to grow in popularity.
People are recommended to avoid cash. This triggered the appearance of new biometric solutions for payment and identification. Contactless smart access systems are going to develop in the future. The same could be said about general digitization of the banking area, where cybersecurity is very important. It aims to avoid thefts, money laundering, or other malicious acts.
Managers of the banks are still concerned that financial products remain vulnerable. This is confirmed by the situation that happened with bank Monzo in 2018-2019. As a result of a failure in the security system, the bank’s representatives ask customers to change PIN codes. Another Fact was discovered. A cyberattack is dangerous for online banking services because it leads to average costs of 1.8 million dollars.
Trend #3 – Cryptocurrencies
The traditional financial system is slowly modified by the cryptocurrency. Due to Ian Balina that founded Token Metrics, the recognition and adoption of different cryptocurrencies are new trends for the next year. The rise of the cryptocurrency will provoke the popularity of services that work with crypto indices and rankings. According to Ian Balina, the price per Bitcoin is going to exceed $20 000. We saw such figures in December 2017.
Besides Bitcoin, there are a lot of other cryptocurrencies that show positive dynamic:
- Litecoin (this cryptocurrency can mesmerize with wide opportunities for investment but from a technical point of view it’s not flawless).
- Ethereum (it is known as one of the most liquid cryptocurrencies that will be stable in 2021).
- Basic Attention Token (BAT became highly demanded in 2018, this trend will be still actual in the next year).
- Cardano (the cryptocurrency entered the market in 2015, modern tendencies show that it will be even more popular in 2021, especially if the prices per coin remain available).
- BNB (this cryptocurrency is the best option for those who want to diversify assets, the price per one BNB is growing steadily).
Trend #4 Artificial Intelligence: a new reality for Fintech
Artificial Intelligence and related technologies help Fintech to prosper and be more productive. For example, financial institutions that use AI solutions to manage any large transaction can increase savings to 1 trillion dollars by 2030. Also, these technologies can be used for any voice assistant. Such assistants were mostly entertaining in previous years. But in 2021 they will be connected to the banking sector.
Voice assistants would serve different aims, namely:
- Authorizing of payments.
- Answering the set of standard questions.
- Setting up regular payments.
- Re-directing of the customers.
There are all chances that voice payments will be intensively used by such companies as PayPal, Square Cash, or Venmo in 2021.
Note that AI is already being used in applications and customer services related to the financial sector. For example, lots of chatbots are based on AI solutions. Machine learning is being gradually implemented in apps for the automatic calculation of credit and insurance. Due to the lack of experts working with AI strategy, companies that work in the financial sector invest in the learning of their experts.
Trend #5 Regtech
Regulatory technologies are important for the financial area. They are being developed in parallel with the industry. Regtech contributes to using the software in accordance with regulations and laws. Basic Regtech solutions are classified into different groups: customers’ protection, management of risks, monitoring of the transactions, obligatory reporting, etc. These solutions will help financial institutions to protect their customers and to enhance stability. Also, such technologies have a set of advantages, from speed to analytical capability. Let us summarize. The revolution in the Fintech area is continuing. Trends that were discussed above will help financial services to grow in 2021. Industry prospers even in remote parts of the world. For example, the Republic of South Africa comprises 41 Fintech companies.