The fintech segment will gain prominence with even more aspiring practices in 2021.
Financial technology – or FinTech – has unexpectedly matured since the pandemic swept across the world. Many businesses, households, and consumers have had to rely on the digital world more than ever before to simplify their financial affairs.
That is why 2021 will probably witness more practices in this area.
Digital and Contactless Payments
Digitisation is tranforming the world’s payment. Instead of cash, all consumers need are credit/debit cards or even their phones to complete safe purchases within a few simple steps.
According to McKinsey’s 2020 Global Payments Report, the decline in cash and ATM usage was nearly 50% in mature markets such as the UK, US, Japan, and Singapore. Businesses, therefore, benefit from reducing cash-handling expenses and incremental margins from electronic payments.
Owing to these behavior changes, contactless and digital transactions will expand and dominate global payments in 2021 and beyond. It could also fuel a shift in technology adoption of financial institutions to diversify the payment methods.
E-wallet is anticipated to become the most attractive financial solution in the next few years. This digital method employs app software to link the connected checking account to the vendor where the transaction or purchase happen virtually – and therefore, instantly.
Its enhanced security, convenience, and cost-efficiency facilitate the payment process. That will help organizations improve customer experiences and foster economic recovery in the new normal.
“We need banking. We don’t need banks anymore”. Bill Gates might be right when people consider using digital banks mainly instead of paying a visit to the physical banks.
There are over 14 million and 12 million citizens in the US, and the UK, respectively, who utilize digital banking. Digital banking services are expected to continuously gain popularity in 2021 because of their accessibility and ease of use.
This trend also has nudged financial firms and their patrons towards paperless banking. Customers can easily communicate with their banks via applications and online messaging to finalize deals without any papers.
Concurrently, banks could save a lot of time and money moving documents around. Replacing paperwork enables them to run the business more efficiently. They can digitally store, retrieve, index, and search information much easier and faster.
As a result, they are capable of delivering instant services with decreased transaction fees, thus expanding financial access for all. Additionally, it will help financial providers reduce their operational and maintenance costs.
Artificial Intelligence and Biometric Security
Banks and fintech companies are adopting artificial intelligence solutions at increasing rates. Their investment in AI could surge from $1.5 billion in 2019 to $4.3 billion in 2024 solely in the Asia Pacific, as stated by IDC.
The main reason for their huge spending on this technology is its practical applications in various business stages. AI and machine learning (ML) solutions are being utilized in:
- Automated chatbots
- Customer data analysis
- Fraud detection.
They turn financial systems into customer-centric ones by recording all the interactions, analyzing, and offering the right financial products and assistance for clients via chatbots.
They are also capable of managing rising cybercrimes by identifying financial frauds and threats. The automation leverages their operations, reduces customer support and compliance cost, prevents payments fraud, and gathers more valuable insights from data.
Besides, we will see a spurt in experimenting with biometrics security features. As cybercriminals are more than active now, financial providers are enhancing these methods to protect both themselves and their clients.
According to Mastercard, over 90% of consumers prefer biometric methods to passwords. Fingerprints or facial recognition are popular ways to prove users’ identities in the verification process.
Such systems and other biometric sensors, for example iris scan, voice recognition, are only increasing. They are becoming more advanced and accurate, and this is a trend set to continue in 2021.
This will be another outstanding fintech innovation in 2021 on account of changes in people’s interaction with finance. Autonomous finance takes the burden off consumers’ shoulders by offering more accessible systems to control financial activities.
People can pay their bills, insurance, cable subscription, and other repeated payments with ease, thanks to AI-based services.
AI algorithms learn patterns, behaviors and trends based on collected data, then recommend adaptive services and offers, such as suggesting a payment gateway, currencies, and other frictionless and optimized payment processes.
As more people try to save time for themselves, they will be delegating recurring tasks to fintech solutions. To meet the rising demand for self-drive finances, financial companies will keep developing applications based on customer’s unique journeys, specific portfolios, and financial needs.
The advances aim to automate their portfolio management or bill payment for better fund allocation and operational efficiencies. With these advantages, they will gain customer loyalty with trustful AI-generated recommendations of self financial management.
Partnerships With Traditional Banks
Fintech has traditionally been seen as a disruptor, upending financial systems to offer fresh technology-forward approaches and products. With Fintechs’ growth in recent years, financial institutions have become more open to establish partnerships with them.
Citi and several banks have recently collaborated with Google to build an all-new banking system. Mastercard and Visa are working with fintech firms to improve their existing technology.
Those collaborations present a great opportunity for banks to increase revenue and, most importantly, innovation. We can expect that relationships among Fintech and traditional banks will keep thriving in 2021.
The fintech revolution is gaining momentum as people want to get more things done with less effort.
With a track record of offering speedy and transparent transactions, payment security, and useful financial information, fintech is a power for good in the world. Undoubtedly, fintech trends will continue to transform and become the standard in financial markets.