As we celebrate World Fintech Day (1 August), it is essential to reflect on the revolutionary trends that are reshaping the financial industry. Fintech, short for financial technology, has been at the forefront of modernizing money interactions and financial services. With rapid advancements in technology and changing consumer behavior, the fintech ecosystem is witnessing remarkable transformations. Let’s explore five key trends that are shaping the future of fintech…
- Personalized Financial Services with AI/ML
Artificial Intelligence (AI) and Machine Learning (ML) are driving significant changes in the fintech industry. Fintech companies are leveraging AI-powered chatbots and ML algorithms to offer quick and personalized customer service. These technologies enable more efficient underwriting of customer service products and enhance the overall user experience.
Generative AI, a specific area of AI, is expected to lead in the future. Despite its slow progress, gen-AI-based fintech products are anticipated to become the next big thing in the industry. However, it is essential to be mindful of rising alerting risks and the use of AI for fraudulent activities. Adhering to evolving regulations related to AI is crucial for maintaining ethical and lawful AI use while mitigating potential risks.
- Financial Inclusion through Alternative Lending
The alternative lending segment is gaining traction, providing a viable option for individuals and businesses that were previously underserved by traditional banks. These lending platforms leverage technology and AI to streamline processes, making the loan application experience more accessible and affordable. As a result, fintech-powered alternative lending is projected to achieve significant growth in the coming years, fostering financial inclusion for a wider population.
- Contactless Payments
The pandemic accelerated the adoption of contactless payment methods due to health and safety concerns. RFID (radio frequency identification) and NFC (near-field communication) technologies are gaining popularity, providing safer and more convenient payment options. Consumers’ preferences are also shifting towards digital/mobile wallets and payments, with a significant increase in interest for using smartphones or wearable devices for payments.
- Online Lending and BNPL (Buy-Now-Pay-Later)
The pandemic led to increased automation of money lending processes, with online lending platforms offering more affordable and convenient options compared to traditional banks. The popularity of BNPL services, such as Klarna, soared, providing short-term financing solutions and enhancing customer loyalty through seamless shopping experiences.
- Blockchain Technology and Central Bank Digital Currencies (CBDC)
Blockchain technology continues to disrupt various industries, and fintech is no exception. Its decentralized nature enables secure and transparent transactions without intermediaries. The rising popularity of blockchain is tied to the acceptance of cryptocurrencies as a viable payment method. Additionally, some central banks are experimenting with Central Bank Digital Currencies (CBDCs) to explore their potential benefits and mass adoption.
