The fintech landscape has witnessed a whirlpool of changes recently. While investment and valuations have temporarily cooled, fintech innovation remains robust across a variety of verticals. From AI-driven solutions to the rise of neobanks, there’s a lot to look forward to. By driving automation, personalization, and accessibility, fintech will cement its role in defining the future of how financial services are delivered and consumed around the world. The agility and customer-centric nature of fintech will be pivotal to its growth trajectory moving forward. Here are the key trends that will shape fintech’s future:
The Rise of Embedded Finance
Embedded finance seamlessly integrates financial services into non-financial environments like retailer apps and gig platforms. This makes accessing financial products easier within contexts consumers already use. A report by Dealroom predicts the embedded finance market size will hit $7.2 trillion by 2030. This would surpass the combined value of all fintech startups and top 30 global banks and insurers.
Research shows embedded finance delivers benefits like simplified customer experiences, time and cost efficiencies for businesses, and increased brand loyalty and spending. Bond report shows one-third of customers increase spending after using a brand’s embedded financial services. And 30% of customers say embedded finance makes them more loyal to the brand versus competitors.
AI Transforming Fintech
Cutting-edge AI technologies are driving innovation in financial services. AI is reshaping key areas of fintech including customer experiences, fraud prevention, and data-driven investing. As digital transformation continues, AI-powered analytics and predictive modeling enable hyper-personalized financial services.
The global artificial intelligence in fintech market is expected to reach USD 41.16 billion by 2030, growing at a CAGR of 16.5% from 2022. AI improves critical capabilities like chatbots, business analytics, customer behavior modeling, fraud detection, and quantitative asset management. In 2023 and beyond, AI will catalyze transformative changes across fintech. Its intelligent algorithms and automation will help fintechs enhance customer experiences, boost security, uncover insights, and make smarter data-based decisions.
Robotic Process Automation (RPA)
RPA is transforming efficiency in financial operations through automating repetitive, manual tasks. RPA software bots can analyze invoices, process complaints, spot financial crimes, and handle many other high-volume, routine processes faster and more accurately than humans.
According to Grand View Research, the RPA market will expand at a 39.9% CAGR from 2023–2030 as adoption accelerates. The banking, financial services and insurance sectors are leading adopters, accounting for 30% of the RPA market in 2021. By incorporating RPA, financial institutions can speed up processes, improve compliance, reduce errors, and significantly lower costs. It’s no surprise this technology is going mainstream across the finance industry.
Regulation Technology Goes Mainstream
The financial services sector faces a tremendous regulatory burden. To reduce costs, financial institutions are adopting regtech solutions which leverage automation and AI to streamline compliance. With regulations continuously increasing, regtech adoption is predicted to grow 200% between 2022–2026 according to Juniper Research.
As compliance costs rise, with an estimated $274.1 billion spent on financial crime compliance in 2022, it is critical for financial institutions to reduce these expenses while maintaining compliance. Regtech matters because it proactively identifies and prevents regulatory risks, ensures compliance as regulations evolve, provides significant cost savings.
Neobanks — Rise of Digital-only Banking
Neobanks are gaining popularity among younger demographics, offering digital-first services like bot-powered support and social media integration. These are licensed banks operating fully online. Grand view report highlights that the global neobank market is projected to grow at a 47% CAGR, potentially reaching $722.6 billion by 2028. Key neobank benefits driving adoption include:
- Lower fees and charges
- Ease of use with smoother interfaces
- Fewer account restrictions and accessibility
- Alignment with preferences of tech-savvy, millennial/Gen Z demographics.
With expanding mobile/internet access, neobanks’ online model is well-positioned for massive disruption. Their convenience-driven approach appeals to younger generations and heralds a user experience transformation for the banking industry.
Open Banking — Unlocking Financial Data via APIs
Open banking Application Programming Interface (API) are poised to be game-changing for the fintech industry. Open banking allows third-party developers to build applications and services through APIs integrated with financial institutions. This trend is being driven by the immense potential for growth, transformation, and collaboration between fintech developers and banks.
According to Statista, the number of open banking API calls is forecast to grow from 102 billion in 2023 to 580 billion in 2027. During the same period, the value of open banking transactions is expected to grow sharply as well and reach 330 billion U.S. dollars in 2027. By enabling secure and efficient data sharing between applications, open banking APIs are catalyzing fundamental shifts in banking worldwide. The impact has been rapid across greater customer empowerment, enhanced user experiences, new partnerships, and real-time transaction capabilities.
Gamification — Applying Gaming Techniques to Banking
Gamification is emerging as a major fintech trend, applying game mechanics to make financial services more engaging and motivate positive behaviors. By using game elements like points, badges, rewards, and leaderboards, fintech companies can drive increased user satisfaction, acquisition, retention, and referrals. MarketsandMarkets projects the gamification market will reach $30.7 billion in 2025, at a 27.4% CAGR.
Gamification directly impacts key success metrics:
- Enhanced customer satisfaction and loyalty
- Improved user acquisition and retention
- Increased word-of-mouth recommendations
In fintech, gamification powers experiences that motivate and reward positive financial behaviors. By gamifying traditionally complex, mundane financial tasks, fintech companies are making finance more accessible, enjoyable, and impactful for consumers. The potential of gamification in fintech is immense. This innovative trend promises to deepen customer engagement, drive business growth, and enable financial institutions to have a more positive impact on financial lives and outcomes.
