The fintech industry has grown quickly in the past decade with new hubs for startups popping up across the globe. The coronavirus pandemic and subsequent lockdowns did a lot to make fintech mainstream as people sought out solutions for managing their banking and finances at home. The demand for these services does not show any signs of slowing down, and investors are pouring money into the larger fintech ecosystem.
Everyone is trying to identify the next big trend and capitalize on it as fintech moves into the mainstream. The fintech industry is poised to address many of the shortcomings of the finance industry that have long bothered customers.
Below are some predictions for the future of the fintech industry and its impact on the larger world of finance and banking.
1. Hyperpersonalization of Services
Recent research from Martec Alliance showed that two-thirds of customers expected companies to understand their personal needs. At the same time, customers are viewing fintech products and services more as needs than novelty.
Fintech is in a unique position to provide hyperpersonalized services to customers. These companies can custom tailor solutions according to the exact needs of their customers in a way that traditional banks and financial service providers cannot.
People will likely start to turn to fintech organizations as they seek out solutions that address their unique situations. Consumers are uninterested in additional but unnecessary components and services. Fintech companies are highly focused on customer experience and ensuring a positive interaction with products and services.
2. Financial Protection for Older Adults
The life expectancy of humans across the globe has increased an incredible amount over the past few decades. According to current estimates, a full quarter of the world’s population will be over the age of 60 by the year 2050.
By and large, the people who are older have expendable income available, which can make them targets for people with exploitative intentions. Moreover, these individuals often need help understanding how to make their money work for them. Fintech companies may soon focus on how to protect people from financial exploitation as they age, while also giving them the tools they need to take control of their financial futures.
3. More Reliance on Blockchain Technology
One of the biggest revolutions in the financial industry has been the advent of blockchain technology. Through blockchain, financial transactions have become safer and more transparent. With this technology, asset transfers, investments, and payments will become simple and error-free.
These processes will help increase scale of operations and generate greater confidence in financial transactions. Also, the applications of blockchain are still being explored and moving forward there may be many more benefits that become apparent for both fintech companies and their customers.
4. Access to Financial Education for the Young
Successful adulting depends on financial literacy. Unfortunately, education systems across the world do not frequently emphasize coursework on relevant topics. Moreover, studies have shown that most people form their financial habits by the age of 7. This makes it important to begin financial education as soon as possible.
Fintech companies are recognizing the importance of financial instruction and may begin creating their own programs for teaching basic finances early in life. In the years to come, fintech companies may try to distinguish themselves by providing options for financial education to younger people so that they develop healthy habits for the future. This type of programming could be very appealing to parents.
5. Movement toward Decentralized Finance
The decentralized finance movement, otherwise known as open finance, relies on blockchain technology to remove the need for financial middlemen. Historically, the finance industry has had a centralized finance model, which means that intermediaries like exchanges, banks, and brokers are necessary to manage transactions.
Many fintech companies are embracing a future in which these intermediaries are no longer necessary given the security and transparency of blockchain. This model gives power back to investors.
In many ways, the finance industry is already headed in this direction, but it may become the primary model before too long. With this model, a lot of the overhead of financial services is eliminated to make processes more efficient and cheaper.
6. Merging of Various Security Teams
Historically, the anti-fraud and cybersecurity teams at banks and other financial institutions have been separate entities. These two teams have focused on threats from fundamentally different types of people. However, this division is now being exploited by criminals who know that there are blind spots in which the separation of responsibilities works to their advantage.
This means that fintech companies will need to rethink their security in a fundamental way to maintain the confidence of their customers. Some crimes, like synthetic identity fraud, are actually aided by automation and artificial intelligence—which were originally developed to fight against more traditional forms of criminal activity. Combining these teams is the best way to provide full-spectrum protection for customers.