While many industries have experienced a decline in sales and usage as of late, fintech, for the most part, saw an uptick. A report by Statista shows general global growth in the use of finance applications in the months leading up to the pandemic, with Japan experiencing the greatest increase at 55%.
As the world becomes increasingly digital, fintech is having a moment — or rather, a wave — with plenty of opportunities on the horizon. Technologies like blockchain, artificial intelligence (AI), and many others are paving the way to improve existing innovations and power new ones. What are the most influential fintech creations in today’s landscape? Here are tools both individuals and businesses should have on their radar.
Since their inception, digital banks were heralded as the banking of the future. Leaders in the space like Ally allow people to maintain their finances completely online. Today, they can even make deposits without leaving the house by simply taking a picture of their check with their smart device, check their credit score, and much more.
Brick-and-mortar banking institutions still exist, of course, but we’re starting to see digital-only platforms replace them as the financial management means of choice for consumers and companies alike.
This provides benefits for everyone: banks save costs by not having a physical location — costs that they can, in turn, devote to developing strong user interfaces (UI) and other customer service measures. Customers, on the other hand, will have convenience and low-cost methods of managing their money.
Alternative Credit-Scoring and Loan Assessments
Traditionally, people with poor credit scores or no credit history, including low-income individuals and those who haven’t been able to establish a credit history due to lack of access to financial services, have also had trouble securing loans. But thanks to fintech, accessibility is no longer an issue.
Alternative credit-rating organizations like Nova Credit take non-traditional approaches to gather and assessing data points, such as evaluating the individual’s social media presence, to determine their loan-worthiness, helping them secure loans for which they probably wouldn’t qualify via traditional assessments.
Peer-to-Peer Lending (P2P) and Payments
Originally targeted to younger users, P2P platforms like Venmo have gained significant traction among the older users — and even among users and businesses, with some organizations using these tools to make transactions.
P2P lending removes the middleman from the process, allowing for more efficient, less costly, and quicker transactions. A similar model is peer-to-business (P2B) lending, in which individuals lend their money to businesses, such as those in the real estate industry, with the promise of receiving high returns on their investments.
How do you, as a business, ensure that your customers’ digital transactions are secure and efficient? One method that’s gaining popularity and sophistication is the payment gateway. This tool transfers payment data from the consumer to the business. Transactions are quickly accepted or declined as the intermediary or gatekeeper validates the user’s credentials.
The system is encrypted, protecting both parties, and prevents the business from accepting payments that shouldn’t be authorized — for example, if the user doesn’t have sufficient funds in their account. Even with the intermediary, the transaction occurs quickly, streamlining the payment process.
In addition to using this system for online-only payments — which, these days, represent the vast majority of transactions in certain industries like retail — businesses can also implement it to process payments on the go, such as when they are at conferences. For example, with Square, the vendor can utilize the customer’s credit card information to make the sale efficiently and receive instantaneous feedback about whether the transaction went through.
Popularized by Bitcoin, perhaps the most famous of its kind, cryptocurrency utilizes blockchain, an unalterable, decentralized ledger, for secure transactions that don’t require any type of intermediary to process. Instead, individuals can conduct transactions almost instantaneously.
Why is cryptocurrency on a list of new and/or improved fintech innovations? It’s becoming increasingly clear that this digital asset is not just a trend — it’s here to stay for the long haul. In fact, PayPal, the parent company of Venmo, announced that in 2021, it’s incorporating cryptocurrency into the mobile payment app. Venmo users will have the opportunity to buy, sell, and maintain cryptocurrency within the app.
Climate finance, otherwise known as green finance, is an umbrella term encompassing eco-friendly innovations in the fintech and general finance arena. This is because fintech isn’t without its downsides — and one of them is its huge carbon footprint.
But some fintech businesses are looking to change that. For example, the Ant Forest project from Alipay seeks to help users be more conscious of their impact on the environment by offering rewards to those who make efforts to reduce their carbon footprint.
Users earn “green energy points” each time they take environmentally-friendly initiatives, such as biking to work. When they earn enough points to grow a virtual tree in Alipay, the company will, in turn, do something for the environment, such as plant an actual tree.
Increased Financial Cybersecurity
With all these enormously beneficial fintech innovations in the pipeline or already in place, it’s imperative to ensure that they’re safe to use for both consumers and businesses. When it comes to your money, security is paramount.
Software developers are taking strides to protect fintech users, with some projects and products dedicated to improving cybersecurity specifically in the fintech realm. Just look at Cybera Global. This platform seeks to prevent organizations, including governmental institutions, from falling victim to finance-related cybercrime by collecting government blacklist data and immediately signaling any potentially unsavory activity in real-time.
Of course, many of the technologies behind the innovations discussed above, such as blockchain, include layers of cybersecurity protections as part of their innate design.
The future of fintech is bright. With so many innovations changing the very face of how we conduct transactions and other financial matters, this important industry is clearly booming thanks to increased security, more efficient payment methods, and much more.