Tech disruptions and innovations have become the norm today, and the best way to land on your feet is to prepare and adapt. Fintech is an integral part of our everyday lives, it is (and can be) used by anybody. Contrary to popular belief, fintech isn’t just for the typical male executive in well-known financial businesses. Fintech is continuously revolutionising the finance sector and it empowers every consumer by providing them more options to enhance their experience.
By learning the trends that can impact fintech, you can understand the current market situation and improve your wealth and financial management, even in unforeseen circumstances.
5 fintech trends in 2022 that you should know about
Fintech is constantly evolving in response to the tech disruptions in the financial services industry. It can be overwhelming to identify which trends to watch out for since there are so many entrants at a time.
We’ve highlighted five key trends that integrate sophisticated systems and processes into day to day finances, allowing you to identify which ones may be relevant in your personal (or professional) life.
1. The rise of neobanking
Traditionally, banks have exclusively provided monolithic brick-and-mortars with malfunctioning ATMs and neverending paperwork. Neobanks are online banking platforms that offer digital-first or digital-only financial services to provide a seamless online banking experience for low costs, addressing the drawbacks of traditional institutions.
Neobanks have been referred to as “challenger banks” because they are typically fintech firms that offer apps and software solutions that can streamline mobile banking. The sophisticated use of technology enables neobanks to be more transparent, adaptable and agile than their traditional counterparts.
Neobanks have greatly impacted the standards for online banking, and its influence is evident across the globe. The majority of U.S.-based neobanks partner with traditional establishments in providing “back-end” services such as settlements, clearances and regulatory compliance. Meanwhile, neobanks in the Asia-Pacific region, including Korea and Australia, are pursuing full-service models.
Learning about how neobanks work (and how they’re expected to develop in the coming months) will allow you to enhance your banking experience.
Here are some factors you need to consider before switching to a neobank:
- Financial products – Neobanks will have varying business models, so check which services you need and whether your potential neobanks of choice offer them.
- “Fine print” fees – Check if there are any additional fees upon registering with a potential neobank.
- Financial education – It’s good to partner with a neobank that advocates for accessible and transparent financial knowledge, it will give you the confidence that your partnered bank will be honest and credible with all its customers.
2. Increased usage of global cross-border payments
Cross-border payments involve transactions between individuals, companies or institutions operating in at least two different countries. The cross-border payments market has been riddled with inefficiencies as technology went up to speed in the fintech industry, with consumers facing issues such as expensive transaction fees and overly complicated payment cycles.
Because fintech is continuously evolving, there is now a global move to improve cross-border payments as more people expand their purchasing power to an international scale. People are no longer limited to purchasing from local shops, they now have a bigger access to the rest of the world through the internet.
There are four types of cross-border transactions:
- Business-to-Business – This includes invoices and payments between at least two businesses
- Consumer-to-Business – This includes cross-border eCommerce and offline tourism spending
- Business-to-Consumer – This includes to anything from wage salaries to interest payments
- Consumer-to-Consumer – This includes remittance payments
Cross-border payments are an integral part of our customer experience, and we can expect the following changes in 2022:
- Heightened consumer demand – With the rapid digital transformation across all industries, customers are more discerning about the banking services they’re willing to pay for as they’re looking for options that are highly intuitive and accessible.
- Increased trade with new entrants – International transactions are continuously growing as emerging markets rise from different countries.
- E-payment accessibility – Mobile phone ownership is a necessity in fintech spaces, and customers are expecting user-friendly online banking and e-payment solutions.
3. Integration of embedded finance
Embedded finance is the process using financial services or tools, like payment processing, by a non-financial provider. For example, a retail shop can provide a point-of-service (PoS) for their products sold in-store.
Here are three examples of embedded finance:
- PoS lending – Financial tools that can be embedded can empower small businesses to seek out larger financing or more significant purchases.
- Investments and trading – The average customer may be intimidated by the number of investment options available to them, embedded finance tools in investment apps can make investments an exciting and accessible wealth management option.
- “Buy now, pay later” policy – This provides a new line of credit for online shoppers, giving them access to a wider range of products and services that can be paid in instalments.
Even fintech is considered a type of embedded finance, as it offers multiple financial services and tools through one platform. Here are trends that you can look forward to when it comes to embedded finance:
- Improved digital-first experience – Customers expect a better “digital-first” experience, and different industries are fast responding to this growing demand. Leading sectors with highly developed digital-first experiences include retail and e-commerce, food and beverage and transport. The financial services industry is sure to evolve in response to this customer expectation.
- Increase of B2B applications – B2B applications enables companies and sellers to conduct transactions with their target customers in a thriving online marketplace. Examples of this include Amazon and Shopify.
- Increase of “plug and play” APIs – The development of the fintech industry has enabled companies to develop services via application programming interface (API), so that they can include additional products to their existing offerings, such as payment transfer, credit and insurance.
4. Advocacy for digital one-stop-shop solutions
Historically, financial services have been a very closed and insulated system, but the rise of fintech has opened opportunities for a global open finance.
Based on how quickly tech disruptions can impact the industry, the “one-stop-shop” financial experience is the next logical step in 2022. Older generations of customers, such as Boomers, are used to partnering with a singular bank or financial institution regardless of the limited services it provides. Now, customers are seeking a one-stop-shop banking experience that will enable them to grow their finances and wealth.
This type of experience also advocates for “open finance” which extends the limits of financial data sharing capabilities to a wider range of users, such as pension providers, lenders, insurers and brokers. A one-stop-shop banking experience with strong “open finance” regulations can increase transparency and inclusivity, empowering users to gain the necessary knowledge and tools in making informed financial choices.
5. Improved accessibility of gold as an asset
While physical gold is a great asset to include in an investment portfolio, its tangibility definitely has drawbacks. It’s costly to secure and store, and physical gold can have limited liquidity. That’s why the development of digital gold is becoming an important asset in fintech.
It may seem an unusual pairing from the get-go, but gold and fintech work together very well. Digital vendors and gold-backed fintech platforms such as Nauggets have enabled users to make the most of what gold has to offer, without any of the traditional limitations. Digital gold allows you to invest in its equivalent in pure gold through secured online channels while it’s secured in vaults.
The growth of fintech, and the financial services industry at large, is a positive sign for what we can expect in the coming months. Learning about the trends that you can expect within the fintech space will enable you to harness the tech disruptions for your benefit.
If you’re ready to seize the financial knowledge and tools you need in building your finances, contact us at Nauggets. We can help you find the gold in your financial journey.