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Ten big trends in fintech

In the world of banking, fintech is on everyone’s lips. It has revolutionised several industries in the financial sector, from payments to consultancy services. To help you stay on top of all the latest trends propelling the fintech revolution, we have compiled a list of technologies changing the industry.

1) Blockchain

Distributed ledger technology is increasingly acting as the infrastructure of the digital world. It is the technology behind Bitcoin and other cryptocurrencies, but it can be used for many more applications.

The potential of blockchain technology has not even been remotely touched yet. Some new groundbreaking developments could emerge within this field over the next few years.

Decentralised finance (DeFi) and non-fungible tokens (NFTs) are only two examples of how blockchain might change the world of finance. There are countless other ways in which people can use this technology, and it is difficult to predict what new developments will appear within these areas over the next few years.

Blockchain has tremendous potential for growth and several challenges to be overcome before it becomes more widespread.

2) Sensors and Internet of Things (IoT)

The Internet of Things is changing the way financial services operate and the way we look at data. Sensors are frequently mentioned as a component of the fintech revolution. These sensors, which are becoming more and more commonplace, allow companies to collect data like never before.

According to research by Harvard University, “The ability to place inexpensive sensors to monitor the temperature, location and stress of almost any moving part opens up broad possibilities to monitor remote operations, whether simple household devices or systemic capital equipment.”

Examples of sensors being used in the financial services industry include ATM machines, which can detect how many people are lined up to use them. Sensors can also be used in micro-payment transactions to allow for small payments without a user having to enter their credit card information, as in the case of contactless payments.

3) Mobile Payments and Digital Banking Services

Neobanks are one of the most popular fintech services disrupting traditional banking. A neobank refers to a new type of bank operating online only and is built with mobile-first design principles.

Customers can open an account through an app on their smartphone instead of making the trip to a physical branch or filling out endless paperwork in paper format.

Such apps feel more user-friendly, and most of them offer a wide range of banking features, including savings accounts, loans for customers’ cars or mortgages, along with easy payments and remittances.

For example, the apps of neobanks like the UK-based Monzo or Starling Bank and Germany’s Number26 have been growing rapidly in Europe and often ranked higher than banks. According to a study by Forbes, $1 trillion (USD) has been invested by banks in digital banking across the world to remain competitive.

4) Digital IOUs

Technology is enabling a financial process older than the banking system itself – the humble IOU.  It is natural for things to feel a bit weird when borrowing money from family or friends, and that’s the exact reason why allowing a third party to take care of the fine print is often the more simple and suitable option.

Instead of treating it like a favour between friends, think of it as a loan from a lender. Using a third party will often ensure you have a friendship to go back to.

Checkout the next big craze in fintech >

5) Augmented Reality / Virtual Reality (AR/VR)

The use cases of VR in financial technology are hitting the market slowly, with people able to invest in stocks or trade currencies through virtual reality. It provides an immersive experience to monitor real-time movements on the market and make quick investment decisions. It is an excellent example of how consumers can use fintech and modern technology for their investments.

While most experts agree there is still some time before VR has other viable use-cases, companies are already experimenting with the technology to explore its potential. According to Goldman Sachs Research expert Heather Bellini, virtual and augmented reality will be an $80 billion+ dollar industry by 2025.

In 2021, $10 billion (USD) of investment went into VR through Meta (formally known as Facebook). The tech giant is also behind VR-headset producer Oculus and plans to hire 10,000 people to build a ‘metaverse’. There is a high probability fintech will play a foundational role in such a grand scale simulation.

6) Smart Contracts

While its potential is yet untapped, smart contracts can provide numerous benefits for the financial services industry: improved security (e.g., eliminating third parties), increased efficiency (with faster transactions and lower fees), better transparency (increasing accountability), and reduced fees (eliminating overhead costs).

Examples of smart contracts being used in financial services include Compound Finance, which uses smart contracts to allow users to take out a short-term loan using Ether as collateral. Another example of a startup using smart contracts is called Agrello, which aims to develop smart contracts for enterprise customers, which execute when certain conditions have been met.

Most people associate smart contracts with blockchain technology; however, they deserve their own category since older examples include automated clearinghouses (ACHs) and central securities depositories (CSDs) used for bond issuance.

7) Robotic Process Automation (RPA)

RPA uses digital robots or programs (bots) to automate routine, repetitive activities humans previously performed. It is different from artificial intelligence because it does not require a human type of brainpower.

To free up resources and improve accuracy, many businesses have already implemented RPA technology. It is used for simple tasks, such as data entry and information processing.

RPA is a great way to reduce the operating cost of fintech businesses without sacrificing quality or productivity by automating back-office functions in an organisation so people can focus on more innovative and value-adding activities.

8) Voice-Enabled Payments

An older generation of adults used to watch television series like Star Trek and think those futuristic concepts only belonged to fiction in the 60s. Now they have become a reality, with voice-enabled smartphones being one of them.

Voice-enabled technology allows people to use their smartphone’s voice recognition software and a digital assistant like Siri, Google Assistant, or Amazon Alexa to hear their balance and make payments or money transfers.

Fintech startups looking to implement proof of concept (POC) projects on tight budgets can look to voice-enabled payments as an option. There is an opportunity for the technology to be used for payments in retail stores with no contactless payment terminals. It also aids those with visual impairments in gaining access to the cashless economy.

9) Virtual Cards 

Virtual cards are based on VISA or Mastercard, and people can use them instead of physical cards for online transactions. There is no plastic involved, only a sixteen-digit card number, CVV code, and expiration date.

Some virtual cards also allow users to store loyalty programs on them and use the same account for both fiat spending and crypto transactions, making it easier to manage funds by creating one consolidated balance across all accounts. Virtual cards can also be used as a backup payment method in cases where physical cards get declined or cannot be found.

It is straightforward to set up virtual card accounts on mobile apps such as Zumo and iCard. One disadvantage of using virtual cards is they may not work properly with all retailers.

10) Autonomous Finance

How do you automate finance? In simple words, autonomous finance is a system of machines and devices that can automatically perform financial transactions without the involvement of humans.

The use cases for this type of technology include automatic payments for insurance premiums or autonomous investing using robo-advisers such as Wealthfront or Betterment.

Another example of autonomous finance would be using blockchain-based smart contracts to automate fund management and insurance premiums. Etherisc allows users or organisations to set up “flight-delay” insurance policies to automatically payout if flights get delayed by two hours or more, removing the hassle of filing a claim manually after something happens.

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The Cash Mag

Helping everyday Aussies do better with cash.