It’s probably no surprise that the broad application of technology to the financial sector, resulting in the birth of a new industry, called fintech, changed the ways we bank and handle money.
The umbrella term describes a wide variety of advancements and innovations in the financial world, and today, it’s difficult to separate any aspect of matters related to this sphere from the technology that makes them possible.
Fintech is always at the precipice of change. Where are we now? What should we expect in the coming year? Here are 5 trends that are likely to dominate the space in 2022.
1. Digital-only Banking Is on the Rise
According to a 2021 survey, 61% of Americans would be willing to move to digital-only banking. An even larger percentage of millennials — 77% — said they would do so.
This is evidence supporting the idea that brick-and-mortar banking and financial institutions are on their way out. During the pandemic, many physical establishments, including banks, faced closures in droves, with consumers conducting the vast majority of their activities in a digital space instead.
There are many benefits to digital-only banking. It increases accessibility in some respects, since individuals, including those with mobility challenges, don’t have to be physically present to take advantage of banking services. Of course, the method is more convenient, faster, and otherwise efficient, too.
Today, a variety of activities are conducted online, from monetary transfers — which no longer carry the substantial fees they once did — to deposits and much more.
2. Cashless Transactions Could Become the Norm
Sweden expects to be fully cashless by 2023. And it’s not alone in its goals for fully embracing digital transactions and eliminating the need for paper money entirely. Governments aiming to go completely cashless are quick to tout the many benefits of leveraging forms of payment other than paper money. It’s more convenient for vendors and consumers alike, who don’t have to carry around or handless physical money.
Plus, it deters some forms of physical criminal activity thanks to the fact that there is no tangible money to steal. And it can save time. There’s also the fact that it’s leading to innovations, new forms of conducting transactions.
But that’s not to say the picture is entirely rosy. There is the matter of privacy — or lack thereof — given how you’re always leaving a record of purchases and transactions. Consumers may also see their personal information become more vulnerable to cybercriminals. And not everyone has the technical skills necessary to survive in a cashless society.
Of course, fintech is always about embracing solutions, so we could see innovators addressing these challenges in the future, too.
3. Blockchain Is Seeing Tremendous Growth
The worldwide blockchain market is expected to reach 39.8 billion USD by 2025, seeing a CAGR of more than two-thirds from 2020. While not entirely confined to the fintech space, this is one of the most important innovations we have seen in recent years.
Today, the technology is applied to far more than cryptocurrency. As financial organizations seek to improve security, make their operations more efficient and streamlined, and create a broader sense of transparency, blockchain is proving to be an invaluable tool.
It’s also clear that consumers are putting their trust in blockchain more and more, recognizing the power the immutable, decentralized, digital ledger holds.
4. Open Banking: Showing Promise
Leveraging application programming interfaces (APIs), open banking is making waves as a service that could mean transformation for the way we provide information and conduct transactions.
This facilitates the “open access” transfer of data between financial service providers, such as banks, and outside institutions. This saves time and effort for clients and consumers. By creating decentralized networks, third-party institutions can access huge amounts of data — via secured channels — in order to offer them services that support their financial health.
For example, banking institutions can share this data when clients are setting up accounts among different companies. Clients can also receive personalized recommendations about loans and financial products and services. Consumers, too, will have a clearer picture of their own financial situations.
5. AI Continues to Dominate the FinTech Landscape
Of course, an overview of the near future of fintech would be incomplete without a discussion of artificial intelligence (AI). AI is infiltrating practically every sector at a rapid speed. In the financial realm, it’s seeing a huge range of applications.
AI is the technology that can identify fraud taking place in real time. For example, if a large purchase is inconsistent with a consumer’s typical expenditures, the technology can flag this activity, and the consumer will receive an alert that asks them to review it. It’s also applied to evaluating whether a candidate is appropriate for a loan, assessing past behaviors and patterns to determine the risk.
AI can save time and effort for businesses, too. For instance, it can handle questions of increasing complexity through chatbots, freeing up customer service agents. Moreover, these tools are equipped to handle a variety of repeated transactions, such as facilitating deposits and even making recommendations based on previous behaviors and activities. AI also makes personalization all the more possible.
The Future of Fintech
This is by no means a comprehensive picture of fintech in the coming year. Fintech is an industry characterized by innovation, and change is just around the corner.
This field has a huge impact on our lives and livelihood. Clearly, businesses in this space understand the responsibility they have to the financial world and individuals themselves as a vehicle of immense possibility and transformation.