When we hear the term ‘FinTech’ many assume that it is a technological equivalent of ‘Wingardium Leviosa’. A phrase that only tech gurus have the power to wield. But as words go, it is not that complicated. While it is undoubtedly a component that branches out of refined technology, if you have used mobile banking, split a meal check via Venmo or bought cryptocurrency on your phone, this means that you have employed fintech to be at your service. While this decade has been one of many technological milestones, one that shares the spotlight with several others is ‘FinTech’.
A bio for FinTech
Fintech, a blend of the words financial and technology, encompasses a wide range of applications, software, and technological innovations designed to enable individuals or businesses to conveniently access, manage, and gain insights into their finances, as well as conduct various financial transactions. It has the ability to even extend to hardware solutions, such as internet-connected piggy banks. Fintech’s résumé is quite impressive considering how it can handle routine financial tasks like depositing checks, transferring funds between accounts, paying bills, and applying for financial assistance and complex financial concepts like peer-to-peer lending and cryptocurrency exchanges.
Over the past ten years or so, fintech has become a crucial means for consumers to address financial challenges and work towards achieving their financial goals. People have increasingly relied on fintech for a multitude of purposes, such as banking, budgeting, investment, and lending. This mainly because fintech offers real-time everyday benefits, making financial tasks more accessible, efficient, and user-friendly for individuals and businesses both.
A sector that is increasingly reliant on fintech for various purposes such as payment processing, managing e-commerce transactions, and streamlining accounting processes, is the business sector. This is because as a result of COVID-19, an increasing number of businesses started to depend on fintech to enable contactless payment options and adopt other technology-driven advancements in their operations.
Fintech trends to keep an eye out for in 2023
BNPL. Not a keyboard smash but an acronym for Buy Now, Pay Later is one of the latest fintech innovations that is experiencing rapid growth within the fintech industry. BNPL services allows customers to postpone payments for their online or in-store purchases. According to a report released by Business Insider, the global BNPL market which was valued at $24 billion in 2020, is expected to expand to $67 billion by the year 2025.
The popularity of BNPL can be attributed to several key factors. Primarily, it gives customers the advantage of conveniently managing their finances, enabling them to spread the cost of their purchases over time. Next, BNPL can be a valuable tool for businesses, helping to increase sales and cultivate customer loyalty by offering flexible payment options. In addition, BNPL companies often offer competitive interest rates and favourable payment terms, making it an attractive choice for both consumers and business alike.
Any conversation about technology is incomplete if there is no mention of AI. According to expert financial advisers, artificial intelligence (AI) technology is expected to bring about a significant transformation in financial planning in 2023. AI-powered software has the capability to analyse extensive volumes of financial data and generate personalised investment strategies tailored to an individual’s preferences and risk tolerance. This is made possible through techniques like sentiment analysis, which can gauge market sentiment and trends.
Furthermore, chatbots powered by AI are expected to become increasingly proficient at identifying and resolving customer issues, potentially even in local languages and dialects. While one may think that this is too much to expect from a mere technology, the recent spate of events will prove otherwise. AI-driven chatbots can also serve as virtual financial advisers, offering guidance and support that may not have been readily accessible to younger generations in previous years.
The predictions suggest that AI will gradually assume some of the responsibilities traditionally handled by human financial advisers. While this is not an entirely positive outcome, this shift is expected to lead to enhanced efficiency, speed, and accuracy in managing financial matters, ultimately benefiting individuals seeking financial guidance and services. It is noteworthy that AI is not limited to just one avenue of fintech but will act as a common denominator in all or most of its endeavours.
In addition to BNPL and AI, a trend that seems to have picked traction is virtual bank cards. These are digital versions of traditional credit or debit cards that are stored in an electronic wallet rather than physically carried in a wallet. They are provided by both neobanks (also known as challenger banks or digital banks) and traditional banking situations like Bank of America or Capital One.
The main benefit of virtual cards is that they permit customers to make payments both in physical stores via NFC technology and on various online platforms sans the risk associated with traditional credit or debit card fraud. Each transaction made with a virtual credit card is usually authorised through the customer’s banking app. In case a virtual card is compromised, it can be quickly invalidated and replaced with a new one through a simple online process.
For example, neobanks like Revolut, Monzo, and N26 utilise virtual cards to enable customers to conduct peer-to-peer transactions, make in-app purchases, and complete online payments before they receive their physical card. Some challenger banks even offer “disposable” virtual cards, which change their details after each transaction, thus minimising the chances of fraudulent use. Thus enhancing the protection of customers’ financial information when making online purchases or other transactions.
An informed look at the financial landscape proves that even against the challenges that highly inflammable geopolitics and economic instabilities hurl, the atmosphere that fintech has created looks promising. The fintech industry is undergoing constant change due to technology advancements and shifts in consumer behaviour. The trends that appear to be spearheading the growth in 2023 are AI, blockchain, digital banking and mobile payments, cybersecurity and fraud prevention, and open banking with API integration. These trends offer more personalised, convenient, and secure services to customers. Therefore, 2023 may just be the year that shapes the future of digital banking and finance, globally.
(Sandunlekha Ekanayake)