5 Emerging Fintech Trends Shaping The Financial Services Industry

According to Fortune Business Insights, the global fintech market size is projected to reach USD 882.30 billion in 2030, at a CAGR of 16.5% during the forecast period from 2023 to 2030.^[1]

Financial institutions that master emerging fintech trends will be the ones to dominate the market. Embracing these trends can significantly enhance operational efficiency, reduce costs, and improve customer satisfaction, directly impacting the bottom line. I hope this article will help fintech builders and service providers in this journey. 

Before we move on, let’s clarify a few basic concepts. If you prefer to skip this part, feel free to jump straight to the trends.

What is fintech and why it matters

Ever wished your bank app could do more, like talk to your other financial accounts or help you budget like a pro? That’s the magic of fintech. It’s about using technology to modernize finance, giving your money matters a tech makeover.

The World Bank and the IMF use the term “fintech” to describe “advances in technology that have the potential to transform the provision of financial services spurring the development of new business models, applications, processes, and products.”^[2] Essentially, fintech is about tech innovations that change how we manage our money.

One example of fintech in action is the rise of mobile payment solutions like Apple Pay and Google Wallet. These platforms enable users to make secure, contactless payments using their smartphones, streamlining the checkout process and enhancing convenience.

Read also: What is a Fintech Application – Knowledge for CEOs

What’s the big deal with fintech?

Here’s my personal short and sweet:

1. Fintech makes finance easier. Emerging technologies can help users stay on top of their finances like never before
2. Fintech makes finance faster. It’s all about speed. With online payments and faster loan approvals, users can say goodbye to financial slowdowns.
3. Fintech is making finance empowering for everyone. More and more people will gain access to tools to save, invest, and borrow money.

To sum up, fintech is making finance more user-friendly, accessible and inline with consumer expectations, and even more secure. However, it also brings challenges, such as regulatory concerns or cybersecurity risks. Read more here: Fintech Cybersecurity: Challenges, Best Practices, and Future Trends

Excited about staying up-to-date with the latest in this area? Let’s dive into the key trends in financial technology that I believe you should keep in mind for the next 2-5 years.

Top 5 current fintech trends

1. Open banking: Sharing is caring (for your finances)

Imagine this: all of a user’s financial accounts, from checking to savings and even investment accounts, communicating with each other. That’s the basic idea behind open banking. It’s like a direct connection between a bank’s app and other financial tools, helping them to securely share data with the user’s permission.

For example, Plaid has revolutionized fintech by enabling secure connections between apps and users’ bank accounts, while Revolut uses open banking to offer seamless financial management across multiple accounts.

The main point here is that the user controls access to their financial data. Traditionally, only the bank had the key, and the user could only access their information through the bank’s app. With open banking, the user decides who else gets a key – new budgeting apps, loan comparison services, or even robo-advisors for investments. This opens the door to a whole world of possibilities.

Here’s why open banking is such a hot trend:

• Financial fitness boost: Imagine an app that tracks a user’s spending across all their accounts, giving a real-time picture of their finances. Open banking can power these budgeting and money management tools, helping users get a grip on their cash flow.
• Smarter borrowing: With open banking, lenders can gain a more complete view of a user’s financial health. This could lead to more personalized loan offers with better interest rates, tailored to their specific situation.
• Innovation boom: Open banking gives creative startups access to a giant financial playground. This is expected to result in a surge of innovative financial products and banking services that leverage user data to make financial management easier. Of course, there are some security concerns to iron out, but overall, open banking has the potential to revolutionize the way users manage their money. It’s a trend worth keeping an eye on, as it could unlock a more personalized and efficient financial future.

Read also: Mobile App Security – Protect Your Data and Users – Know Threats and Vulnerabilities

2. Card-linked BNPL (Buy Now Pay Later)

Buy Now Pay Later (BNPL) is a type of short-term financing allowing consumers to make purchases immediately and pay for them later, typically through a series of installments. The financing solution is issued for purchases at any Point of Sale (POS), whereas the consumer’s funding approval is instantly performed. It’s super convenient, especially for online shopping.

What’s great about BNPL?

One of its standout features is that it can even be used post-purchase, meaning an already completed payment can be retroactively converted into a BNPL product. Imagine buying something with your credit card and then switching it to a BNPL plan – pretty neat, right?

One of the biggest perks of BNPL over traditional credit cards is the cost. With credit cards, users are hit with interest charges if they carry a balance from month to month. BNPL, on the other hand, often comes with no or little interest, making it a wallet-friendly option for spreading out payments without the extra cost.

BNPL represents the next big wave in the digitalization of consumer credit. Even though BNPL providers are making strides in the market, many consumers still prefer to stick with their banks.

In fact, a whopping 70% of current BNPL users would consider using BNPL plans through their bank if they were available. And even among consumers not currently using the payment trend, awareness and positive sentiment is also increasing, about a third said they would be interested if their bank offered it.^[3]

For banks, partnering with a BNPL software provider can drastically speed up the time to market. Just one integration can help them bypass complicated checkout and POS systems, enabling them to start growing their card business revenue in a matter of weeks. Plus, this partnership can save banks a ton on tech and resource costs, making it a win-win for everyone involved.

However, one of the major risks of BNPL is that it can lead to overspending, as consumers might be tempted to make purchases they cannot afford. Additionally, missed payments can result in late fees and negatively impact a consumer’s credit score, potentially leading to further financial difficulties. Despite these risks, BNPL can still be a valuable tool for consumers when used responsibly.

3. Expanding ways to improve credit score

A credit score used to be the gatekeeper of financial life. However, traditional scores miss income and spending habits, which are both key signs of how well someone manages money.

Consumers and lenders are both on board with revamping credit scoring. People are surprisingly open to sharing more data. Many are comfortable providing bank info or past bill payments to get a fairer financial picture. This shift shows a desire for transparency and a more accurate reflection of their financial health.

Fair credit decisions can help users achieve their goals. Lenders win too! They can find creditworthy borrowers who might have been missed before. This means more loans and potentially less risk. Fintech is uniquely positioned to lead this revolution.

Here’s how fairer credit scores can create a win-win situation

• Unlock access for more people: Use alternative data to reach underserved communities, promoting financial inclusion.

• Make sharing data easy: Build user-friendly ways for consumers to share verified info like income or bank info.

The future of credit scoring is ditching the limitations of a single number. By embracing alternative data and prioritizing transparency, fintech can build a fairer and more inclusive financial system for everyone.

4. Blockchain and DLT

Alright, let’s move on to blockchain and Distributed Ledger Technology (DLT). The global financial system seems to be waking up to the benefits of the blockchain as a conduit for seamless and efficient payments. Compared to old-school methods like bank transfers or checks that often involve intermediaries, delays, and extra costs, blockchain is like a breath of fresh air. 

Using blockchain for business-to-business (B2B) transactions brings many benefits, such as:

Key benefits of blockchain for B2B transactions

• Lower costs: One of the coolest things about B2B transactions using crypto is that they can occur directly between parties and cut out the middlemen. This means lower transaction fees, especially for international payments. Imagine sending money abroad without those hefty charges! Read also: How Much Does it Cost to Develop an App in 2024? New Cost Breakdown
• Faster settlements: Speed is of the essence in global trade. Traditional banking systems can be painfully slow. With cryptocurrencies, however, transactions are processed much faster. This is especially crucial for businesses that need to move goods and services quickly.
• Global reach: Cryptocurrencies know no borders. This empowers businesses to trade internationally without the constraints of traditional financial systems. Whether you’re dealing with partners in Tokyo or Toronto, crypto makes it seamless.
• Enhanced security: Blockchain technology is super secure. Each transaction is cryptographically secured and recorded on a decentralized ledger. This means it’s incredibly hard to tamper with, reducing the risk of fraud. Your data stays safe and sound. Read also: Fintech Cybersecurity: Challenges, Best Practices, and Future Trends
• Simplified management of remote teams: As more and more businesses open crypto accounts and hold digital currencies, paying employees and freelancers in crypto becomes available. It’s perfect for borderless salary disbursements, which is great for remote workers or international teams.
• Transparent fundraising: Charities and nonprofits are jumping on the crypto bandwagon because of the transparency and traceability blockchain offers. Donors can see exactly how their contributions are being used, which builds trust and accountability.

With all these benefits, it’s no wonder crypto payments and remittances are certainly on the rise in 2024. Blockchain isn’t just a buzzword anymore; it’s transforming the way we do business globally.  If you want to read more about our experience in building products in the crypto domain, check out the MetaPro app in our portfolio.

5. Generative AI and automation

Remember that episode of Black Mirror where everyone’s social score dictated their entire life? Well that’s probably not happening in banking – at least not yet! – but AI is definitely making a power move, and it’s changing the game.

AI runs on data, and banks and other multiline financial institutions are sitting on mountains of high-quality, customer-centric data – bank accounts, transactions, savings habits… the whole shebang. This data is a goldmine for AI, letting it learn and become super smart about financial life.

It’s already being used in the likes of personalized investment advice, where AI analyzes a user’s goals and risk tolerance to build a custom investment plan.

Generative AI (GenAI) is not about replacing existing AI strategies but adding a powerful new tool to the arsenal. We’re entering the era of GenAI, and it essentially gives regular AI a superpower boost. It’s not just about analyzing data anymore; GenAI can actually create new things, like writing reports or even generating code.

Imagine an AI that can whip up a financial analysis report in seconds, or help developers build better banking apps – that’s the kind of magic GenAI can bring.

JPMorgan Chase is at the forefront with their new tool, IndexGPT. It uses GenAI to revolutionize thematic investing. Think you want to invest in esports? Traditionally, you’d need a financial advisor, but now IndexGPT does the hard work.

• Theme to keywords: Tell it “esports” and it generates a massive list of related keywords, from gaming platforms to VR headset makers.
• Company matchmaker: It then scans news articles to find companies that align with those keywords, uncovering hidden gems you might have missed.

The result? Super comprehensive thematic indexes that capture the essence of emerging trends. This is a game-changer for investors, especially those chasing hot themes.

Right now, IndexGPT is for big investors, but imagine using similar AI tools through a Chase banking app! Build your own portfolios based on your interests, from sustainable energy to self-driving cars.

As more banks embrace AI, we can expect a future of increased efficiency, personalized financial experiences, and potentially higher returns for investors. This shows just how versatile and impactful AI can be in finance.

To sum up – the future of finance is all about collaboration, transparency, and leveraging data for better outcomes. Open banking empowers consumers, while BNPL offers flexible payment options. Credit scoring is becoming more inclusive, and blockchain technology is streamlining B2B transactions. And finally, AI is transforming financial services with personalization and automation, paving the way for a more efficient and rewarding financial experience for everyone.

Droids On Roids – your fintech app development partner

In today’s fast-moving financial industry, staying ahead of the curve is crucial. With our experience in building mobile applications for the digital banking industry, cryptocurrency, and other financial services, we’re the perfect partner to bring your innovative fintech idea to life. For our clients in the financial sector, we have built applications such as Sarwa, Sadapay, HoneyBee, Your Card, Metapro, Cellery, and SnowBite. 

Have an idea for an app? Define your product goal and the strategy to achieve it. Sign up for our Free Digital Product Strategy Workshop. 

Final thoughts

The fintech world is evolving rapidly, and staying ahead means more than just keeping up – it’s about setting the pace. By exploring the latest trends like open banking, BNPL, alternative credit scoring, blockchain, and AI, financial institutions can find new avenues for growth and innovation.

Adopting these trends is crucial. 

• New technologies can streamline operations, enhance customer experiences, and create new revenue opportunities. 
• Personalized services powered by data and AI can significantly boost customer satisfaction and engagement. 
• Ensuring robust security and staying compliant with evolving regulations will safeguard both your business and your clients. 
• Additionally, focusing on financial inclusion through alternative credit scoring and blockchain can help you reach a wider audience.

The future of fintech looks promising, offering a more inclusive, efficient, and personalized financial experience. By integrating these trends into your strategy, you can drive innovation and achieve sustainable growth.

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