FinTech as a segment is gaining its fair share of attention, with businesses the world over creating new finance technology innovations to serve a wider consumer base.
69 percent of China’s digitally active consumers use Fintech, immediately followed by India with 52 percent of its population following fintech trends and leveraging financial tech solutions. Then comes the UK, with 42 percent Fintech consumers, Brazil with 40 percent, Australia and Spain with 37 percent of their masses using fintech.
Business Insider recently revealed these stats to show the proliferation of fintech globally. After witnessing rapid adoption, the sector is now maturing with startups and established enterprises leveraging technology to change financial services.
As new players emerge, the focus is shifting from saturated to the untapped markets where investors see a lot of potential. One of these is the Asia Pacific market that boasts of opportunities abound.
Open banking and other regulatory initiatives are reimagining financial services markets with third-party providers poised to gain access to the previously proprietary based banking customer data niche.
Let’s look at some of the top global fintech trends that are pegged to shape the industry in 2020.
Top 10 Global Fintech Hubs
According to Findexable’s Global Fintech Index 2020 report, these are the top global cities rapidly becoming fintech hubs:
- San Francisco Bay
- New York
- Singapore City
- Sao Paulo
- Los Angeles
The report spots a trend here. Nearly 50 percent of the world’s key financial centers drop out of the map when we plot the top fintech hubs. Replacing some of the old names such as Frankfurt, Shanghai, and Zurich are Sao Paulo, Bangalore, Mumbai, and New Delhi.
These rankings prove we are going through a decoupling between the financial strength and the commercial domination of traditional financial centers. This can easily be termed as the rise of non-traditional finance.
Sharing Economy in Fintech
Fintech might be the sharing economy’s final frontier with the traditional banking system already facing challenges from fintech solutions such as SoFi, Revolut, and Robinhood. Progressive banks are now starting to realize that if you can’t beat them, join them.
The sharing economy is expected to grow from $14 billion in 2014 to $335 billion in 2025. Most often, the sharing economy is described as the peer-to-peer activity of receiving, giving, or sharing access to goods and services.
Expansion in this industry simply means that people like to monetize stuff they don’t use all the time. After Uber and Airbnb, sharing economy is touching fintech with social capital and economic sharing.
Peer-to-peer lending, payment possibilities, and equity crowdfunding are proving to be the three leading areas where sharing economy has the highest potential. According to Forbes, P2P lending has grown massively and is a new source of fixed income for investors. Take, for instance, Funding Circle that allows people to lend directly to businesses and Lemonade, the first P2P insurance company.
Blockchain under commercialization
Financial institutions have an array of Blockchain applications to leverage, such as trade surveillance, fraud deterrent, prediction, and stock markets, KYC and anti-money laundering, international money transfer, and so on.
Take, for instance, cross-border payments, which are a chronic pain for banks paralyzed by a lethargic and low-paced process. Cross-border payments take as much as up to a week to get realized.As per Deloitte, Blockchain-based payments from B2B and P2P result in 40-80 percent reduced transaction costs. As per a projection by McKinsey & Co. blockchain can drive $50-60 billion in transcontinental B2B and $3-5 billion in P2P payments.
Westpac and Australian Bank partnered with Ripple – an enterprise Blockchain company for cross-border payments, in an instance. IBM & Maersk collaborated for a global trade platform to find and develop scalable Blockchain solutions in Fintech.
Customer Intelligence through Digital
If banks and other financial institutions’ idea of what their customers value has been hazy, it’s about time to change that. Previously, customer intelligence was based on simple heuristics, built from surveys and focus groups.
Now, as digital becomes mainstream and normal, technology advances are giving banks and fintech companies more opportunity to collect, store, and analyze customer data to derive insight.
Banking and financial services companies are now looking for AI and analytics to have a bottom-line impact in 2020 and beyond. According to Opus Research study conducted on 400 decision-makers, banks and financial services companies are the top ones looking for artificial intelligence and analytics solutions to offer a better customer experience powered by data and insights.
Reshoring and Localization with Robotics and AI
The past 20 years have seen many companies, especially from the US and Europe, outsourcing some of their more repetitive and mundane tasks to other parts of the world that offer more cost-effective labor.
Simultaneously, artificial intelligence is getting steadily integrated into the banking sector right from ATM to customer-facing chatbots that automate petty functions. As AI capabilities get more mature and accessible, along with the increasing cost of labor globally, functions that were once outsourced off-shore, will get back home and localized.
Already, leading financial services and technology companies are coming together to address key pressure points, reduce costs, and mitigate risks. These companies are working on focused initiatives such as logical reasoning, pattern identification, physical sensors, social and emotional intelligence, and mobility to replace the bank teller and yet offer a well-rounded experience to the fintech customer.
Even though cybersecurity concerns line the path for financial services in the digital age, the industry is not backing down. The number of people using contactless payments stood at 440 million in 2018 and is expected to reach 760 million by 2020, according to Statista.
As financial services providers turn from competition to collaboration, a lot will happen in the fintech industry that will help customers leverage solutions for a more immersive and easy digital experience.