Robinhood v. Wall Street. From bitcoin to Ethereum. The buzzwords are everywhere and if you feel like you can’t keep up, you’re not alone. And trying to stay on top of every new fintech startup might be causing your head to spin.
Fintech is used to describe new tech that seeks to improve and automate the delivery and use of financial services. At its core, fintech is utilized to help companies, business owners, and consumers better manage their financial operations, processes, and lives by utilizing that are used on computers and, increasingly, smartphones. Fintech, the word, is a combination of "financial technology."
From specialized software and algorithms, some elements of fintech are starting to use cutting edge technologies such as blockchain and artificial intelligence (AI).
The word fintech conjures up an expansive list of agile startups threatening big banks and Wall Street. But it also refers to steps the financial services insiders are taking to stay competitive. And increasingly, the small startups have begun partnering with established industry giants.
In all these permutations, fintech—which can be powered by the most basic technologies such as the Internet and mobile apps, as well as the very advanced like blockchain and AI—has the potential to disrupt and revolutionize financial services. We already see rapid change in who accesses financial services and how they do it.
1. Growing number of banks will offer embedded solutions
Embedded finance has been a growing trend over the past year and is well-positioned to grow even further as numerous banks look to become service providers to non-bank and non-financial institutions looking to deliver a customer experience or service proposition involving financial services as a component of a larger offering.
2. Growing number of banks will offer embedded solutions
Many fintechs will likely reinvent themselves into data organizations and data providers that happen to provide payments and other financial services in order to differentiate their organizations in the eyes of investors and the market.
3. There will be a stronger focus on dealmaking in underdeveloped regions
Investors will ramp up their targeting of jurisdictions considered to be underdeveloped in terms of financial services — making more deals in regions like Africa, Southeast Asia, Latin America, and the Middle East.
4. Environmental, Social And Governance Initiatives
Environmental, social and corporate governance, also known as ESG, is a domain that’s garnered considerable attention and huge influxes of investment funds in recent years. This year, as the host of COP27 vows to revive global efforts in combating climate change, investments in the ESG space can be expected to further increase. Bloomberg analysts estimate that global ESG assets will surpass the $53 trillion mark by 2025, accounting for more than one-third of total assets under management.
Further, incubators designed specifically for ESG-focused fintech solutions have emerged to cater to firms and organizations in this niche. The Monetary Authority of Singapore (MAS), for example, has joined hands with Google Cloud to launch the Point Carbon Zero Programme with an aim to support climate fintech innovation in Asia.
Riding the waves of the latest fintech trends while being socially responsible, fintech companies with ESG mandates can enjoy the benefits of both worlds and uniquely position themselves for rapid and exponential growth.
5. Blockchain Technology
This year has been a rollercoaster ride for crypto traders and investors. In the worst of times, some $2 trillion worth of paper wealth evaporated compared with the peak the year before.
That said, the fall could be transient, not permanent. This is partially because the underlying blockchain technology has much broader applications—a notable one being cross-border payments.
At present, the international fund transfer process tends to be protracted and expensive. Blockchain technology, however, aims to address these issues with increased speed and security in international payments, as well as typically lower costs.
Recent survey findings revealed that more than half (52%) of consumers view cryptocurrency as a “valid alternative” for making overseas fund transfers, and 45% are already using it for this purpose. In this regard, blockchain technology could be a real game-changer. And if this is another dot-com bubble, the cloud surely has a silver lining.
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