As the year progresses, the fintech industry has the most eyeballs glued, looking up to all the trends that might follow, how new AI advancements play out and how fintech security evolves. At the forefront of this is the advent of digitised payments, marking a significant shift from conventional cash-based transactions to electronic, seamless, and efficient financial interactions.
Fintech now encompasses a spectrum of technologies, from mobile banking and peer-to-peer lending to blockchain-powered cryptocurrency trading. Let’s dive into the emerging trends in the fintech industry for 2024. Global FinTech Series had exclusive conversations with industry experts and we’ve gleaned collective insights for you.
1. Financial Wellness will be Key to Customer Loyalty
In today’s fast-paced world, consumers are increasingly seeking financial stability and well-being. Financial wellness has emerged as a critical factor in fostering customer loyalty for financial institutions. David Dowhan, Chief Product Officer at SavvyMoney, a credit score solutions and digital personalization company, shared his insights on the fintech industry and stated that “By helping consumers improve their financial health, banks can reduce the risk of defaults and build stronger relationships with their customers, naturally leading to increased customer loyalty and profitability for the FI.”
Whereas, the fintech landscape meets with its fair share of challenges for organisations to achieve customer loyalty so easily. Fintech companies face regulatory hurdles, navigating complex compliance requirements. They must also contend with cybersecurity threats, protecting sensitive financial data. Scalability and maintaining technological innovation amid rapid changes in the financial landscape pose additional obstacles. David further spoke about the challenges, “The financial landscape is changing rapidly, and those who fail to innovate will be left behind. Fintech companies are at the forefront of this innovation and can offer traditional financial institutions the expertise and agility they need to compete. If FIs are serious about staying ahead of the curve and attracting the younger generation, they must take action now.”
2. Generative AI Will Create a More Financially Inclusive Future
By analysing patterns and behaviours, generative AI algorithms can identify creditworthy individuals who may have been overlooked by traditional credit scoring models. This opens up avenues for extending loans, insurance, and other financial products to previously marginalised segments of society. “An important impact that generative AI will have is empowering people to discuss their financial worries or hardships without fear or embarrassment. For some, it is easier to talk to a chatbot than a live human when seeking advice about financial matters. By providing a confidential and non-judgmental way to get financial advice and support, AI will create a more financially inclusive future where everyone has access to the financial advice and support they need, regardless of their background or circumstances.” David says.
3. Financial Institutions Must Embrace Digital Transformation or Be Left Behind
By digitising processes, streamlining operations, and enhancing the customer experience, traditional banks can position themselves for sustained growth in the digital era. David added about this, “Financial institutions have two choices in 2024: partner with a fintech company or make the investments themselves. But if they wait, they might not have customers or a business in the future. The financial landscape is changing rapidly, and those who fail to innovate will be left behind. Fintech companies are at the forefront of this innovation, and they can offer traditional financial institutions the expertise and agility they need to compete.”
While the digital transformation is proving to be a boon, the security concerns are growing. Consumer privacy is one of the most important pillars of fintech. Fintech firms must prioritise robust cybersecurity measures, including encryption, multi-factor authentication, and regular security audits. Investing in advanced threat detection and response systems helps mitigate risks. Building a strong culture of security awareness among employees through training and protocols is crucial. David added to this concern saying, “We must be thoughtful about consumer privacy and data security as fintech evolves. That means providing clear disclosures about data collection and usage, allowing consumers to opt out of AI, limiting internal AI use through policy and retaining control over data instead of permitting it into third-party systems. Although AI does not alter the privacy and security paradigm, fintech necessitates additional vendor selection and data governance scrutiny to mitigate new risks.”
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4. AI-Powered Chatbots Are the Future of Personalised Financial Advice
Chatbots have the potential to scale personalised advice across large customer bases, thereby enhancing operational efficiency for financial institutions. David observes, “AI-powered chatbots will become increasingly more intelligent and sophisticated, enabling consumers to get quick and accurate answers to their financial questions without having to wait for a live agent. AI chatbots can also be used to provide personalised financial advice and recommendations based on the customer’s unique needs and circumstances. This will make it easier for consumers to access the financial information and support they need when they need it most.”
5. The Banking Industry Must Shift Its Messaging to Meet the Needs of Younger Generations
The banking industry is undergoing a demographic shift, with younger generations wielding increasing influence over market trends and consumer preferences. To remain competitive, financial institutions must adapt their messaging and offerings to resonate with the values and lifestyles of Millennials and Gen Z. David added on the same thought as, “As a digital industry, banks need to transform their educational messaging into more snackable nuggets of practical advice rather than overwhelming people with complex volumes of content. Adapting the delivery and tone to be more casual and conversational can help make financial concepts more appealing and receptive to the younger generations.”
6. Digitised Payments: The Future of Transactions
Fintech companies are driving innovation in the payments space, developing solutions that streamline transactions and enhance the overall payment experience. Whether it’s enabling instant money transfers, facilitating cross-border payments, or integrating cryptocurrencies, digitised payments are reshaping the way we exchange value in the digital economy. The digitised payments are enhancing the banking process by the day. There are a few significant points, one should keep a lookout for in this year
a) Domestic and cross-border cost reduction
Digitised payments offer substantial cost reductions domestically and across borders by streamlining transaction processes, minimising intermediaries, and leveraging efficient digital infrastructures.
Dean Leavitt , CEO, Boost Payment Solutions, a technology platform for commercial trading partners, says “Generally looking through a commercial credit card lens, or certainly a digitised payment lens, we are definitely going to see a lower overall cost of a transaction for enterprise-level B2B payments and that’s going to continue, and to me, it’s unequivocal. Some people are super excited about that, and others are very concerned about it, and that depends on where you’re generating your revenue from. We are definitely seeing a reduction in the costs, both domestic and cross-border. For example, 10 years ago, a multinational corporation was Xerox, IBM or a General Motors, but now, lots of organisations are multinational companies with . Employees in many different countries and suppliers around the globe, so cross border payments have a different meaning now.”
b) Shared credit card transaction fees
Shared credit card transaction fees facilitate cost optimization for merchants by pooling resources and negotiating favourable rates, thereby enhancing profitability and competitiveness in the digital payments landscape. Dean added, “We’re going to definitely see a trend towards a sharing of who’s paying for credit card transactions. This is a trend that we’ve already started seeing over the last 12 months on the consumer side, but I believe it’s going to continue and broaden in a very big way to the B2B industry. Historically, card transaction cost was generally picked up by the seller. In 2024, I think we’re going to start seeing more of a sharing, which is going to be based on the respective perception of the value proposition to each side. This trend is also largely driven by some of the laws and regulations that now allow it in certain states where it used to be prohibited. But I think the bigger the commercial, the bigger the influence is on the value proposition.”
c) Working capital trumping rebates for commercial credit cards
In commercial credit card transactions, prioritising working capital over rebates becomes advantageous in fintech ecosystems, allowing businesses to optimise cash flow and liquidity management while capitalising on the convenience and security of digital payment solutions. “Corporations are focusing more and more on the working capital benefit of a commercial card product to the extent that some are willing to give up their rebate entirely if they could extend their days payable outstanding. Over the last 10 years, the issuer community, the bank community, and non-bank issuers have gotten hooked on the rebate. The pendulum has begun to swing and what is pushing the pendulum is the dramatic increase in the cost of borrowing.” states Dean.
A Dynamic Landscape Unfolds
As we navigate 2024, fintech and digitised payments stand at the forefront of financial evolution. While anticipating continued growth in mobile banking, decentralised finance (DeFi), and artificial intelligence-driven solutions. Blockchain’s impact will deepen, influencing secure and transparent transactions.
Cryptocurrencies are expected to gain wider acceptance, reshaping traditional banking paradigms. But of course, regulatory frameworks will have to adapt to these shifts, balancing innovation with risk management. Also expected is the heightened collaboration between traditional financial institutions and agile fintech startups. In this dynamic landscape, user-centricity, cybersecurity, and sustainable practices will be paramount.
The year ahead promises the emergence of a financial ecosystem where technology converges with finance, shaping a more inclusive, efficient, and resilient future.
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