India is one of the fastest growing Fintech markets in the whole world, alongside China. Digital banking with global payment solutions is on the rise everywhere, and brick and mortar banks are feeling just as threatened to compete with this technology that is predicted to disrupt a giant industry worth $4.7 trillion globally. Not to mention, we are still at the very beginning of the fintech revolution.
That being said, traditional financial institutions are also vying for opportunities and catching speed with these changing trends. Top global institutions have partnered with or acquired fintech startup unicorns to provide a more robust bouquet of services to their customers and upgrade themselves with this revolution.
A recent report by Research and Markets, as of March 2020, suggests, “The fintech market in India was valued at Rs 1,920.16 billion in 2019 and is expected to reach Rs 6,207.41 billion by 2025, expanding at a compound annual growth rate (CAGR) of approximately 22.7 percent during the 2020-2025 period.” This just goes to show that the fintech revolution is for real. So let’s see the top fintech trends in 2020 that are shaping the future of the industry worldwide:
Fintech cybersecurity and stability
One of the first questions that customers have while adopting technology in the financial space is security; understandably so because of the rise of cybercrimes, phishing attacks, fraudulent practices and espionage. And the fintech industry as a whole is making all the necessary investments and efforts to address this issue head-on.
Payment gateways, digital wallets and cashless transactions are integrating added layers of security to protect the best interests of their customers. We can expect that in 2020, smaller finance businesses that were once more vulnerable to cyberattacks by seasoned hackers, will now invest more in building robust security systems. This is critical to their growth as customers demand absolute privacy and the awareness about this aspect of fintech is exponentially growing every single day.
Fintech entrepreneurs shall have to look at not just building good cybersecurity systems, but also have a quick plan of action to deal with any attacks that they face and sustain as little damage as possible. And an investment in this aspect of their business will go a long way in building the trustworthiness of their brand.
A few years ago, it would have been only a dream to imagine that there could be a bank that does not necessitate any personal visit or the lengthy queues and the tedious paperwork. But today, that is a reality.
A research study from CACI suggests that customer visits to physical banks are set to drop 36% in the period between 2017 and 2021, with mobile transactions rising by 121% during the same period. CACI suggests that in the next five years, 88% of all the interactions will be mobile.
2020 will see a sharp spike in digital-only banks and financial institutions. With fintech, small business owners and startup entrepreneurs are able to secure their personal line of credit within minutes. Likewise, a few other draws of digital-only banks include resetting cards seamlessly just with a click, quick balance review, any time payments, and more.
Cryptocurrency and Fintech Blockchain
One technology which has the power to make the finance industry truly global, cost-friendly and fast is cryptocurrencies and blockchain. In 2016, the global number of blockchain wallet users was at 11 million, a figure that has jumped to 40 million today is witnessing a continual spike. Established financial services are also looking for partnerships with blockchain players, welcoming new innovations in the direction of faster adoption of the technology.
Fintech currently uses technology that helps enable and implement transactions within a day or two. But if combined with blockchain technology, the industry has a potential of bringing down this transaction time to a fraction of that. Blockchain can help enable the entire transaction circle right from assessment to issuance to settlement of the business transaction.
2020 will see a rise in integration of blockchain technology by financial services with greater research and development in the space.
The integration of Artificial Intelligence (AI)
AI-powered systems are the backbone of the fintech revolution. From helping make wiser and higher ROI-yielding investments to ensuring better cybersecurity by detecting the possibility of suspicious or fraudulent activities at faster speed than the human eye, AI has multifaceted uses that can help fintech grow phenomenally.
Traditionally, banks relied on credit score and historical standing of an individual or an establishment to disburse personal finance. However, AI has enabled a much more robust, 360 degree credibility evaluation system which not just helps financial institutions take better decisions, it also helps entrepreneurs and small business owners secure loans easily. This in turn boosts the startup economy and overall economic growth.
2020 will witness a stronger relationship between AI and fintech, and the industry is predicted to see many more innovations that use big data and machine learning to improve customer experience, cybersecurity, process streamlining and much more.
Localization and Regulations
The fintech revolution has had a significant impact on the global economy as well as the local regulatory bodies. With a level playing ground that it offers to almost anyone to enter the financial sector, fintech has compelled regulatory bodies to amp up their regulatory and monitory systems in order to guard customer security and protect the economy from any adverse impacts of technology. But at the same time, fintech has also helped local institutions adapt better to the technology trends, implement policies for stronger monitoring of the industry, and offered analytical tools that enable regulators predict market risks and take precautionary steps to avert those risks.
And we foresee that 2020 shall witness a greater buy-in of fintech by local bodies and regulators.
With the significant uptake of fintech even as digitalization is still in its nascent stage, we are certain that the technology is here to stay. To improve customer experience, to integrate stronger security systems and to make a truly global industry. Only time shall tell how this market grows and scales, and what life changing innovations can it bring to the table.