Fintech is evolving rapidly, and 2024 is poised to be a year of major innovation. From AI and ML to blockchain and cryptocurrencies, there are a number of trends that are set to reshape the financial landscape.
Stay ahead of the curve and learn about the top fintech trends to watch in 2024.
What is Fintech and Why It Is Important?
Fintech, or financial technology, is the use of technology to improve and automate the delivery of financial services.
It encompasses a wide range of technologies and applications, including mobile banking, online payments, peer-to-peer lending, and blockchain-based solutions.
Fintech is important because it is making financial services more accessible, affordable, and efficient for both consumers and businesses.
It is also helping to drive innovation in the financial sector and create new opportunities for businesses and individuals alike.
Financial technology has become a matter of significant interest for all financial organizations. They are now recognizing that failing to embrace fintech could leave them not just behind but potentially obsolete.
According to Google Trends, the search volume for the term fintech software development company has surged from 0 to 100 in just one year, showing a clear and growing trend.
Here are some specific examples of how fintech is making a difference:
- Mobile banking apps make it easier and more convenient for people to manage their finances on the go.
- Online payments platforms make it easy and secure to send and receive money online.
- Peer-to-peer lending platforms allow people to borrow and lend money directly to each other, without having to go through a bank.
- Blockchain-based solutions are being used to develop new financial products and services, such as cryptocurrencies and decentralized finance (DeFi) applications.
In the past, many people were excluded from the financial system, either because they lived in remote areas or because they did not have the necessary documentation to open a bank account.
Fintech is changing that by providing new ways for people to access financial services, regardless of their location or income level.
According to a study by the World Bank, fintech has helped to reduce the global unbanked population by 35% since 2011.
Top Fintech Trends to Watch in 2024
1. AI and ML in Finance
Artificial intelligence (AI) and machine learning (ML) are two of the most transformative technologies of our time. They are already having a major impact on the financial sector, and their influence is only going to grow in the coming years.
Here are some of the top ways that AI and ML are being used in finance today:
Fraud Detection:
AI and ML algorithms can be used to identify and prevent fraudulent transactions. For example, banks use AI to detect patterns of suspicious activity, such as multiple failed logins attempts or unusual spending patterns.
Risk Assessment:
AI and ML can be used to assess the risk of borrowers and investments. For example, lenders use AI to assess the creditworthiness of borrowers, and investment firms use AI to assess the risk of potential investments.
Personalized Financial Advice:
AI and ML can be used to provide personalized financial advice to customers. For example, robo-advisors use AI to develop investment portfolios that are tailored to each customer’s individual needs and risk tolerance.
Automated Trading:
AI and ML algorithms can be used to automate trading decisions. For example, hedge funds use AI to develop trading strategies that can execute trades quickly and efficiently.
Lending Club, Wealth front, and Oscar Health are some examples of fintech companies utilizing the power of technology to simplify and grow their businesses.
2. Blockchain and Cryptocurrencies in Finance
Blockchain is a distributed ledger technology that allows for secure, transparent, and tamper-proof transactions. Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units.
Most common used cases of blockchain and crypto currencies in finance.
Payments:
Blockchain helps in faster, cheaper, and more secure payments. For example, Ripple is using blockchain to develop a new global payment network that can settle transactions in seconds.
Trade Finance:
Blockchain automates and streamline trade finance processes. For example, Trade Finance Distribution Initiative (TFDi) is using blockchain to develop a new platform for trade finance that can reduce costs and improve efficiency.
Asset Management:
Blockchain manages and track assets more efficiently. For instance, Fidelity Investments is using blockchain to develop a new platform for asset management that can improve transparency and reduce risk.
Investment Banking:
Blockchain automates and streamline investment banking processes. For example, Santander is using blockchain to develop a new platform for investment banking that can reduce costs and improve efficiency.
Coinbase, PayPal, and Robinhood are exemplary fintech companies that have pioneered secure online transactions, significantly revolutionizing and bolstering the e-commerce industry.
3. Open Banking
Open banking is a new financial paradigm that allows customers to share their financial data with third-party providers.
This enables third-party providers to develop new and innovative financial products and services. Open banking is also helping to promote competition and innovation in the financial sector.
Common used cases of technology in Open banking are:
Account Aggregation:
Open banking allows third-party providers to aggregate account data from multiple banks into a single view. This makes it easier for customers to manage their finances and to track their spending.
Payment Initiation:
Open banking allows third-party providers to initiate payments on behalf of their customers. This makes it easier for customers to make payments and to transfer money between accounts.
Lending:
Open banking allows third-party providers to assess a customer’s creditworthiness and to offer them loans. This makes it easier for customers to access credit and to get the best possible interest rates.
Personal Financial Management (PFM):
Open banking allows third-party providers to develop PFM tools that can help customers to budget, save, and invest. This can help customers to improve their financial health and to achieve their financial goals.
Here are some examples of fintech companies that are using open banking:
Plaid:
Plaid is a fintech company that provides open banking APIs. Many of the fintech companies are using Plaid APIs to develop new and innovative financial products and services.
Yodlee:
Yodlee is a fintech company that provides account aggregation services. Millions of consumers are using Yodlee’s services to track their spending and to manage their finances.
Tink:
Tink is a fintech company that provides open banking APIs. Hundreds of fintech companies in Europe are using Tink’s APIs to develop new and innovative financial products and services.
TrueLayer:
TrueLayer is a fintech company that provides open banking APIs. Hundreds of fintech companies in the UK used TrueLayer’s APIs to develop new and innovative financial products and services.
4. Insurtech
Insurtech is the use of technology to improve and automate the delivery of insurance products and services. It encompasses a wide range of technologies and applications, including artificial intelligence (AI), machine learning (ML), blockchain, and the Internet of Things (IoT).
Insurtech is transforming the insurance industry by making it more efficient, affordable, and customer-centric.
Most common used cases of fintech in insurtech are:
Product Development:
Insurtech companies are developing new and innovative insurance products tailored to the specific needs of customers.
Lemonade is a peer-to-peer insurance company that offers homeowners and renters insurance. Lemonade uses AI and ML to underwrite policies and to process claims quickly and efficiently.
Underwriting:
Insurtech companies are using AI and ML to automate the underwriting process. This is making it faster and easier for customers to get insurance quotes and to purchase policies.
Oscar Health is a health insurance company that uses AI and ML to underwrite policies and to assess the risk of potential customers.
Claims Processing:
Insurtech companies are using AI and ML to automate the claims processing process. This is making it faster and easier for customers to file claims and to receive compensation. For example, Tractable is an insurtech company that uses AI and ML to assess the damage caused by car accidents. Tractable’s technology can help insurance companies to process claims more quickly and efficiently.
Risk Assessment:
Insurtech companies are using AI and ML to assess risk more accurately. This is helping insurance companies to set prices more fairly and to offer customers more personalized coverage options. For example, Root Insurance is an auto insurance company that uses AI and ML to assess the driving habits of customers and to set prices accordingly.
Lemonade, Oscar Health, Tractable, Root Insurance, Hippo, and others are leading insurtech companies that have proactively embraced technology to disrupt the traditional insurance systems.
Insurtech is still in its early stages of development, but it has the potential to revolutionize the insurance industry.
By making insurance more efficient, affordable, and customer-centric, insurtech is making insurance more accessible to everyone.
5. Regtech
Regulatory Technology (RegTech) is the use of technology to help financial institutions comply with regulations. RegTech solutions can help automate tasks, improve efficiency, and reduce risk.
Most common used cases of fintech in Regtech are:
Know Your Customer (KYC) and Anti-Money Laundering (AML):
RegTech solutions can help financial institutions comply with KYC and AML regulations by automating tasks such as customer onboarding and transaction monitoring.
Onfido is a RegTech company that provides identity verification and fraud detection solutions.
Trade compliance:
RegTech solutions can help financial institutions comply with trade compliance regulations by monitoring trading activity and identifying suspicious patterns.
ClauseMatch is a RegTech company that provides trade compliance solutions to financial institutions.
Market abuse:
RegTech solutions can help financial institutions comply with market abuse regulations by monitoring trading activity and identifying suspicious patterns.
Nasdaq Fraud Detection is a RegTech company that provides market abuse detection solutions to financial institutions.
Financial reporting:
RegTech solutions can help financial institutions comply with financial reporting regulations by automating the reporting process.
For example, Suade is a RegTech company that provides financial reporting solutions to financial institutions.
RegTech solutions can help banks automate KYC and AML checks to reduce the risk of financial crime.
Onfido, Nasdaq Fraud Detection, Compliance.ai, and more are prime examples of fintech companies harnessing the power of artificial intelligence to drive a regulatory revolution.
They have fundamentally reshaped how we perceive and interact with financial regulations.
The fintech industry is evolving rapidly, and the trends that we have discussed in this blog post are just a few of the many ways that technology is transforming the financial sector.
According to a report by Boston Consulting Group, Fintech is projected to Become a $1.5 Trillion Industry by 2030.
Growth depends on a number of factors, including the increasing adoption of mobile banking and other digital financial services, the growth of e-commerce, and the rise of new technologies such as blockchain and artificial intelligence.
The fintech industry is also playing a key role in driving financial inclusion. By making financial services more accessible and affordable, fintech is helping to bring more people into the formal financial system.
