Top 5 Fintech Trends of 2020: What You Need to Know
2020 has been a year unlike any other. The coronavirus pandemic drastically altered everyday lives and changed how business is done. As a result, the financial technology sphere has evolved too. So, what are the Fintech trends to watch out in this unsteady climate?
Fintech in 2020: Overview
A growing reliance on digital services, coupled with an increased need for online customer service and purchases, has changed the landscape perhaps more than ever before. While, like in any crisis, there are losers who fail to adapt quickly and adjust to new challenges. However, there are also winners. These are the businesses able to acclimatize to new market demand swiftly.
On that note, let’s take a look at some of the top five Fintech industry trends in 2020, leading the way in this shifting market climate.
Top 5 Biggest Fintech Trends in 2020
1. Digital-Only Banks & Non-Traditional Banking Services
According to the Financial Times, in the last four years, up to one-third of brick and mortar bank branches have been closed. But does this mean we’ve returned to storing money under the mattress? No, quite the opposite.
Currently, 23% of UK adults have a digital-only bank account, up from 9% in 2019. This makes it one of the biggest trends in Fintech to date. And it’s only growing. It is estimated that by 2025 almost half of the adults will do their banking online. The success of such Fintech startups as Revolut, Monzo, and Starling is proof of this.
Alongside the Fintech trend of digital-only banks, traditional banks are adapting to this Fintech trend. More than ever before, providers are upgrading their technology stack with web and mobile apps to cater to their clients’ needs for online services. PwC defines this trend as “getting ready for the new normal,” indicating digital services are here to stay.
2. Mobile Payment
However, the changes aren’t just occurring within the banking sphere—the usage of mobile payment systems in growing too. The mobile payment sector is expected to reach a CAGR of 3.66% between 2019-2024.
PayPal, Amazon, Alphabet Inc, and Alipay.com are the innovative web businesses leading the evolution. Yet alongside them appear traditional financial stalwarts, such as Visa and Mastercard, who both have recently heavily invested in financial technology acquisitions.
As the mobile payment demand grows, especially in the current COVID-19 contactless climate, China, the US, Japan, the UK, and Korea are leading the pack in developing cashless societies. While we hope coronavirus will soon be a distant memory, it’s clear that some of its effects, such as contactless payments, will only grow.
3. Fintech Cybersecurity and Stability
Just as the popularity of digital solutions for banking and payments grows, so too does the need for security. That applies to both the side of the client and the company providing the service.
In a 2020 report by PwC, 47% of companies experience fraud, the total cost of which is estimated at around $ 42 billion in losses. Not a small amount. Research shows that investing in fraud prevention rather than reacting after an event occurs is a cost-saving measure that companies can take to minimize losses.
That’s where Fintech comes in. Innovative solutions such as blockchain can aid companies in keeping data secure and almost unhackable. Meanwhile, new solutions for document reading and authentication can be used to complete vital anti-money laundering (AML) and know your customer (KYC) processes seamlessly at a distance.
This ensures businesses can keep up with the demand for distance while fulfilling even the most intimate of security processes needed to protect their company and customers.
4. Big Data
Data, analysis, and personalization are more critical now than ever before. The days of out-of-the-box solutions for all customers are long gone. Big Data has broad applications across business, affecting the work of all departments from Product to Design to Content. Yet one of its brightest uses, in recent times, is in the customer service sphere.
In 2020, COVID-19 forced offices to move to remote working, a move many were not prepared for. Yet, the demand from customers didn’t slow down. Many had questions on everything from orders to security and everything in between. However, there were simply not enough specialists to fulfill all requests quickly. Enter Big Data.
Big Data allows companies to analyze the most frequently asked questions to create customer-focused chatbots that help clients solve issues without the need for a physical customer service specialist.
For example, Alipay (a fintech payment platform) handles between two to three million requests a day. It is said to be between 30-60% more efficient, in terms of processing speed, at addressing concerns than human handling the request.
But, does this mean we should go all-in on Big Data and digital chatbots over human customer service? Not quite yet. AI and Big Data are advancing company capabilities, but they can’t replace a human agent. Instead, they allow that employee to focus on more complicated issues and focus on client satisfaction.
Across the world, many governments issued loans to support businesses during COVID-19 lockdowns. However, many states struggled to meet demand, were not inclusive in all cases, or slow to materialize, putting smaller enterprises in particular at risk. This, coupled with unheard of restrictions, left many companies incredibly vulnerable over the short-term and at risk of permanent closure.
As a result, the early months of the crisis were marked by an almost 200% increase in demand for lending services. So, it’s no surprise the private lending sector was quick to step up. Yet, even in times of great need is the potential of high risk.
Like the opportunities, in 2020, risks are evolving more rapidly than ever before, and in no sphere is this more important than the insurance sector. Properly assessing risk is a critical component of any insurance company. Yet, in the current coronavirus environment, this is not as straightforward as it might once have been, and new solutions are required to assess the risk for providers adequately.
Take GiniMachine, for example. GiniMachine is a machine learning and artificial intelligence Fintech platform that focuses on consumer and business lending. The role of this technology is to help build credit scoring models, enabling businesses to make smarter lending decisions.
As the instability of 2020 is set to continue, such technological solutions are vital to help lenders correctly and accurately analyze real risks, while capitalizing on the potential of the rapidly progressing situation.
What to take away?
2020 might have been a challenging year for many. Yet, as Albert Einstein said, “In the middle of difficulty, lies opportunity.” So, as we continue to live and work through the coronavirus pandemic and all the challenges that have arisen throughout this year, there is one thing we can say for sure — the Fintech landscape has changed exponentially.
Looking ahead for the rest of the year and into 2021, we’re excited to see what advancements will be achieved and solutions that will become available to the world.