Fintech is always changing. From cashless transactions to digital banking, here are some of the fintech trends we’ll see in 2022.
While the worldwide COVID-19 epidemic overshadowed the previous year, the FinTech industry made tremendous progress, with 2021 ending up being a record-breaking year for its expansion. The industry is flourishing, with over $132 billion in global funding generated throughout the year.
The expansion of FinTech is happening at a breakneck pace, from interest rates and cryptocurrencies to consumer transactions and electronic wealth management. But what may we expect in this upcoming year? What’s clear is that we’ll witness new ideas, as well as improvements to existing ones. Critical areas like contactless banking and user protection will be fine-tuned, while topics like sustainability and inclusion will receive much-needed attention.
Let’s dive in deeper! Here are eight trends that will likely dominate the market in 2022.
An Even Greater Rise in Cashless Transactions
So far, Canada appears to be leading the race, having been crowned the world’s most cashless nation, with a score of 79.1%, backed by Hong Kong (76.8%) and Singapore (76.2%). They’ve all got some fine competition alongside them, with Sweden expected to go completely cashless by 2023.
Several governments aspiring to go entirely cashless are eager to extol the numerous advantages of using payment methods other than banknotes. For starters, it is more practical for both sellers and consumers since they do not have to issue any change while maximizing efficiency since neither one of them has to carry or manage actual money. Furthermore, because there is no physical money to steal, it discourages various sorts of criminal activity.
There’s also the issue of lack of privacy, given that you’re constantly leaving a trace of purchases and transactions. Consumers’ personal details may potentially become more susceptible to hackers. And not everyone possesses the technological abilities required to thrive in such a tech-savvy cashless society. Without any doubt, Fintech companies are all about exploring new solutions, and 2022 might be the year that we see new emerging innovations swiftly tackling these issues.
Solutions for new security threats are gradually increasing
Let’s face it; security is a considerable risk when it comes to the tech world. According to CBS News, organizations such as DarkSide (the same group that attacked the fuel delivery system across the Southeastern US) are even offering RaaS, ransomware as a service. These complex cybercrime groups function like any other business, equipped with advertising and promotion, customer support, and mediators who may manage communications with victims on their customers’ behalf.
So, what’s the play? Preparing and equipping themselves for such an attack is the banks’ and FinTechs’ best tactic. Take the words of Lalit Bhakuni, Head of Global Cyber Intelligence Center at ABN AMRO, stating that “Businesses need to prepare backup solutions and make sure that all these things are tested.”
AI & ML (Artificial Intelligence and Machine Learning)
Unsurprisingly, the growth of AI and ML has found its way into the FinTech business. Such firms are heavily investing in AI and machine learning tools to improve their ability and provide simplified and automated services, which might result in quicker transactions and interactions between customers.
What about security? Artificial intelligence is a type of technology that can detect (and prevent) fraud in real-time. For example, suppose a significant transaction is out of line with a user’s usual spending. In that case, the system can immediately flag it, with the consumer receiving an instant alert asking them to confirm it. Another great use of it is to analyze whether a prospect is a good fit for a loan or not through a deep evaluation of his/her past actions and tendencies.
AI and ML provide quicker handling of massive data sets, allowing businesses to produce precise and detail-oriented results while offering services to clients via data-driven algorithms. This is most commonly observed in insurance plans and the appraisal of consumers who use their services.
Progress inevitably entails change, and the last few years have seen transformations that would have appeared unthinkable only a few years ago. The most significant shift is probably owing to how Covid-19 and home-delivery collided, radically altering the idea of a local business.
Real-time cross-border payments are used in over 60 nations, ranging from minor to major transactions. According to a report provided by Accenture, the world’s total cross-border transaction flow is expanding at roughly 5% per year and is expected to reach US$156 trillion by 2022. On the small side of the scale, several companies, such as Revolut, also provide a platform that allows basically anyone to send payments in their home currency and have it immediately changed to the recipient’s currency in a matter of seconds.
International transactions, enabled by the expansion of eCommerce, provide significant development possibilities for small enterprises outside their local market, allowing them to cater to a more substantial customer base with numerous currencies in real-time. In the United States, around 40% of big firms have implemented real-time payments in their financial activities. It’s what’s being expected. We’ve been thrown into a new world of cross-border business, where customers demand straightforward and easy payment options as a standard.
Blockchain Technology is Changing the Way Companies Operate
Blockchain technology is well recognized as the underlying technology of cryptocurrencies. Blockchain powers Bitcoin, Litecoin, Zcash, and the other 4000 cryptocurrencies, making it one of the most significant modern financial innovations. FinTech is being reshaped by Blockchain in more than one way.
For starters, it generates a digital ledger while drastically enhancing the efficiency of the transaction recording process, lowering the amount of time required to compile logs and the expenses associated with manually recording them. Another outstanding achievement is that it guards against fraud owing to its decentralized nature, with enhanced security that has the ability to avoid standard fraud protection approaches that need multiple parties to confirm transactions.
The adoption of Blockchain by financial companies has been slow, but it is still a major trend expected to prosper in 2022. Indeed, we are witnessing a growth in blockchain-based firms and the application of crypto technology across many business sectors. Considering the major advantages mentioned above, it’s relatively simple to predict that Blockchain is a trend no business can afford to neglect.
The Buy Now, Pay Later Concept is Expected to go Mainstream
With the surge in popularity and admiration of online shopping and the influx of new generations online, new payment solutions are being adopted at a faster pace than ever before. Consider purchase now, pay later services such as Paypal and Afterpay. This is an interest-free payment option that enables a buyer to postpone payment of a commodity or service or even pay in installments over time. The Buy Now, Pay Later concept is at the heart of many developing FinTech firms that want to be a step ahead and provide an innovative technique to pay for products and services.
Digital Banking is Becoming Increasingly Popular
We’re not talking about just digital payments or online banking here; we’re talking about virtual banks. The tech is already available, and there are several advantages to switching from the traditional to the virtual world. The benefits are absolutely endless. Let’s consider one of the big guns in this niche at the moment: Revolut.
Revolut is a $33-billion (as of 2021) FinTech firm with its headquarters in the United Kingdom. Nikolay Storonsky and Vlad Yatsenko launched the company in 2015. It provides a wealth of benefits, like for example, feeless currency exchange, debit cards with commission-free contactless payments in any currency, disposable virtual cards, interest-bearing “vaults,” stock trading, crypto trading, commission-free atm withdrawals (in 150 different currencies), commodities, loans, insurance, and other services through its accounts.
As we said, free-floating banking platforms are already transforming the way individuals bank, and it’s not difficult to imagine a day when much of the world’s banking would be done entirely online.
FinTechs Focusing on ESG will Shoot Upwards
Due to the increasing importance of Environmental, Social, and Governance (ESG) awareness across the spectrum, FinTechs with ESG characteristics, such as those focusing on global warming, emission reductions, and sustainable consumption, will undoubtedly experience significant attention.
The list could go on and on, and this is far from a complete picture of what we should expect from the FinTech scene throughout the year. We didn’t even get the chance to mention the developing countries and how FinTech firms will more than likely shift their focus towards conducting and finalizing more deals in these regions. In addition, this increased global demand should boost the awareness levels in terms of regulations, which should be more than enough for responsible regulators to dig deeper and keep a closer eye on the customers by addressing important topics such as accountability and available recourse.
We can all agree that Fintech is a forward-thinking sector and that change is on the horizon. This field has a significant influence on our lives and well-being. Clearly, firms in this field recognize their role as an engine of great opportunity and development in the financial world and among countless individuals.
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