The financial services sector has become more diverse and competitive with the rise of digital technologies, business models, and niche use cases. From embedded finance to RegTech, these FinTech trends are gaining traction.
The banking industry is massive and profitable yet faces innovation and customer experience challenges. Therefore, building FinTech products with the latest tools that address these challenges is essential.
Here are the top 10 FinTech trends that will transform the financial landscape 2024.
1. Virtual Cards
Virtual cards enable businesses to transact more securely and privately. These cards minimize the amount of personally identifiable information (PII).
They can be used for online purchases but ensure personal and financial information privacy. Moreover, it provides a solid layer of security by generating a unique card number for every transaction.
2. Embedded Finance
Embedded finance has changed the transaction landscape and how businesses build and manage relationships. It allows firms to deliver banking services without hindering customer experience and journey.
As per a recent report by Bain and Company, the embedded finance market is expected to reach USD 51 billion by 2026. Moreover, embedded finance’s transaction value will reach USD 7 trillion in 2026.
The increasing market warrants integrating financial services into nonfinancial businesses’ infrastructures without redirecting to traditional financial institutions.
As consumers prefer to conduct financial transactions online, neobanks have gained traction. These banks provide numerous banking services like P2P transfers, international remittances, and contactless payments. They eliminate the tedious paperwork and the need to visit a bank.
As per a recent report by Fact, MR, “Neobanking Market Global Forecast 2022-2032,” neo-banking will accumulate a market value of USD 2,595 billion. Due to the utmost convenience and increasing market value, it is likely a trend to look out for in 2024.
4. Decentralized Finance (DeFi)
DeFi is a peer-to-peer concept that uses smart contracts on the Blockchain network. It democratizes finance and replaces traditional centralized institutions such as banks, brokerages, and Non-Banking Financial Companies (NBFCs). The tech minimizes errors, increases efficiency, and creates an immutable financial system.
The correct adoption of DeFi will help firms make asset management safe and accessible. It helps in aligning with the values of the Blockchain network. In 2024, there will be democratized access to financial services and increased transparency.
5. Open Banking and API
Open banking allows third-party financial service providers to access the bank account via API with proper consent. This way, firms can offer more personalized financial services and products.
Open banking enables banks to address the increased demand for financial services. It improves customer experience and makes financial services more accessible. The technology also ensures solid security levels for customers and businesses. Moreover, it helps drive innovation and increase transparency.
As per a recent report by Juniper Research, “Open Banking: Forecast 2023-2027,” the open banking transaction values will exceed USD 330 billion globally by 2027. This indicates that the banks will embrace open banking and API integration to enhance customer offerings.
6. Artificial Intelligence (AI)
AI-driven software will help analyze vast financial data. It will also help create tailored investment strategies via sentiment analysis. Chatbots can efficiently identify customer issues and offer assistance to address them.
AI will take over tasks traditionally handled by human, financial advisers, facilitating greater efficiency, speed, and accuracy.
7. Buy Now, Pay Later (BNPL)
BNPL drives sales and enables customers to use the products or services while paying for them. This increases long-term customer loyalty. A BNPL report by Juniper Research states that the number of global BNPL users will surpass 900 million by 2027.
BNPL improves customer experience and is cost-effective to automate. The checkout mechanisms are simple to integrate into existing systems. This way, firms can experience minimal order abandonment, which enables them to design secure transactions.
RegTech (regulatory technologies) automate tasks and help firms comply with regulatory requirements like know your customer (KYC) and anti-money laundering (AML) obligations.
Numerous RegTech companies help protect against different types of risk like data management, data breaches, and fraud prevention.
As regulators continue to introduce new regulations, tech like AI will help process vast data and extract valuable insights. This way, financial organizations can comply with regulations while saving time and money.
9. Cyber Security and Fraud Prevention
With banks relying more on tech, cybersecurity, and fraud prevention will become essential. In 2024, FinTech companies will continue to invest in robust cybersecurity measures to protect the customers, data, and reputation.
With the help of AI and ML, banks can track fraudulent activities. Moreover, these approaches are backed by underwriting models.
Fraud prevention can help earn users’ trust and make secure online payments and transactions. Adequate fraud prevention measures can help improve customer experience and ensure high levels of user satisfaction.
10. Credit Scoring
Credit scoring benefits customer service and sales by reducing approval time. At the same time, it automates the decision process but eliminates personnel costs associated with credit approvals.
Firms seek quicker and more effective approaches to analyze customers’ financial and credit profiles. Using customers’ online activities to predict and AI-powered credit scoring will help banks streamline and make the processes cost-effective.