Fintech Trends: AI, smart contracts, neobanks, insuretech, regtech, open banking and Blockchain.
“Fintech” describes the new technology integrated into various spheres to improve and automate all aspects of financial services provided to individuals and companies. Initially, this word was used for the tech behind the back-end systems of big banks and other organizations. And now it covers a wide specter of finance-related innovations in multiple industries, from education to crypto-currencies and investment management. While traditional financial institutions offer a bundle of services, fintech focuses on streamlining individual offerings, making them affordable, often one-click experience for users. This impact can be described with the word “disruption” – and now, to be competitive, banks and other conventional establishments have no choice but to change entrenched practices through cooperation with fintech startups. A vivid example is Visa’s partnership with Ingo Money to accelerate the process of digital payments. Despite the slowdown related to the Covid-19 epidemic, the fintech industry will recover momentum and continue to change the finance world’s face.
Fintech users fall into four main categories. Such trends as mobile banking, big data, and unbundling of financial services will create an opportunity for all of them to interact in novel ways: The main target group for consumer-oriented fintech is millennials – young, ready to embrace digital transformation, and accumulating wealth. What needs do they have? According to the Credit Carma survey, 85% of millennials in the USA suffer from burnout syndrome and have no energy to think about managing their personal finances. Therefore, any apps that automate and streamline these processes have a good chance to become popular. They need an affordable personal financial assistant that can do the following 24/7: Present an overview of their current financial situation What they expect to achieve: Stop overspending (avoid late bills, do smart shopping with price comparison, cancel unnecessary subscriptions, etc.) Invest money (analyze deposit conditions in different banks, form an investment portfolio, etc.) Fintech industry offers many solutions that can meet all these goals – not only on an individual but also on a national scale. However, in many countries, there is still a high percentage of unbanked people – not having any form of a bank account. According to the World Bank report, this number was 1.7 billion people in 2017. Mistrust to new technologies, poverty, and financial illiteracy are the obstacles for this group to tap into the huge potential of fintech. Therefore, businesses and governments must direct the inclusion efforts towards this audience as all stakeholders will benefit from it. Apparently, affordable and easy-to-get fintech services customized for this huge group of first-time users will be a big trend in the future.
Digital or internet-only banks do not have brick-and-mortar branches and operate exclusively online. The word neobank became widely used in 2017 and referred to two types of app-based institutions – those that provided financial services with their own banking license and those partnering with traditional banks. Wasting time in lines and paperwork – this inconvenience is the reason why bank visits are predicted to fall to just four visits a year by 2022. Neobanks, e.g., Revolut, Digibank, FirstDirect, offer a wide range of services – global payments and P2P transfers, virtual cards for contactless transactions, operations with cryptocurrencies, etc., and the fees are lower than with traditional banks. Clients get support through in-app chat. Among the challenges associated with digital banking are higher susceptibility to fraud and lower trustworthiness due to the lack of physical address. In the US, the development of neobanks faced regulatory obstacles. However, the situation is changing for the better.
A smart contract is software that allows automatic execution and control of agreements between buyers and sellers.
