Technology-driven products and service delivery have brought about a monumental evolution in the financial sector. All of these changes are categorised under the umbrella term, financial technology. Fintech companies have emerged as disruptive forces, revolutionising the finance industry with cutting-edge technology.
Technological innovations relevant to the financial sector are now adopted not only by fintech companies but also by banks and other financial institutions. Artificial intelligence, Blockchain, Cloud computing and big Data are the much-talked-about ABCD of fintech.
Today, let us look beyond these usual suspects and discuss some of the fintech trends that are expected to define the sector in this and the coming years.
With open banking, banks and financial institutions allow access to financial data to Application Programming Interface (API) providers. These often-sensitive data are shared only after the end-user’s consent and in a secure manner. This has enabled financial institutions to offer a more diverse product range, based on the data used. Customers stand to get customised financial products and solutions.
Banks that use open banking securely share customer data with authorised third-party providers. For the customer, it leads to better integration of payment services, investment avenues, budgeting tools, loan comparisons, etc. through smoother sharing of information.
Financial companies have a lot of regulatory and legal requirements to comply with. To address the hefty governance and data compliance needs of these organisations, RegTech has emerged as the new fintech trend in recent years. Apart from the primary objective of keeping the organisation compliant with regulations, RegTech also enables swift reframing and adaptation to regulatory changes.
RegTech capabilities can significantly reduce customer onboarding in banks and financial institutions, and simplify data management. The latter also means that data analytics and decision-making will be aided, while real-time reporting will be bolstered too.
We have been hearing about digitisation for years now. But how much digitisation would amount to full digitisation? As far as banking is concerned, the answer could be neo banks. These are online banking platforms with no physical presence. Neo banks are fast bridging the gap between the digital era customer expectations and conventional banking services.
No physical presence means low overheads, which means lower customer charges. Tech-driven means that services are customer-focused and personalised. This is achieved through better use of data, and monitoring and analysis of customer preferences. For the customer, it also means easy access, faster overseas transactions, and a personalised, clutter-free banking experience.
P2P lending is done through a platform that brings lenders and borrowers together. Both parties create an account in the P2P platform, as the platform evaluates the borrower profile thoroughly. Lenders can check the platform’s assessment of the borrower and decide if they want to lend.
P2P lending platforms are registered with an NBFC-P2P license with the RBI. RBI regulatory measures are in place to address P2P lending risks. As an alternative finance option, P2P lending eliminates middlemen and costs to come up with an affordable source of finance. Besides, it is ideal for borrowers with no credit history, low credit score or facing other factors that reduce loan eligibility.
Buy Now Pay Later is a short-term finance available for the purchase of goods and services. Instalment-based purchases of goods have always existed, but BNPL gives it a new-age look. The global BNPL market is expected to expand at over 26% CAGR till 2030, from its 2022 market value of $6.13 billion.
In India, BNPL service providers fall under RBI’s purview. Regulatory interventions have not been a setback for popular BNPL players like LazyPay and KreditBee, who continue to enjoy strong demand. Seen as an offshoot of BNPL, the Save Now, Buy Later (SNBL) is offering different saving avenues to buyers to foster planned purchases.
In another FinTech innovation, financial services are now often found embedded in non-financial websites and applications. The integration of e-wallets in e-commerce platforms are example of embedded payments. Similarly, if the e-commerce platform also allows you to convert the purchase to EMI, it becomes an example of embedded credit. You may have noticed embedded insurance options while booking your train or flight tickets. Platforms also offer embedded investment opportunities that can include account opening, trading, portfolio management, etc.
The conventional username-password authentication is being gradually replaced by password-less log-ins. An authentication code sent to the user over a push notification is accepted for the customer log-in. The Fast Identity Online (FIDO) authentication protocols aim to eliminate password-based authentication and are gaining acceptance worldwide. Joining the FIDO Alliance and World Wide Web Consortium are tech giants like Apple, Google and Microsoft. They are pushing for the promotion of digital passkeys as an industry standard.
Emerging FinTech trends will be massive cost-savers for financial service providers. At the same time, they will enhance the customer experience when it comes to everyday tasks like bill payments and loan applications. Enjoy the box seat view as the evolution continues to unfold in the financial world.