The financial world and banking are traditionally conservative segments. But the phenomenon of technology is bringing a fresh wind to them. What are the latest trends in fintech according to Zuzana Stehlíková from IC Group?
The term Embedded Finance, or Banking as a Service, is used for banking and payment services integrated into other environments and ecosystems. This solution opens up additional possibilities for people to use financial services or make purchases. An example is the "Pay Later" service, where clients can choose to pay "later" on e-commerce sites through a third-party credit. And financial institutions can reach new target groups in this way, without additional investment. In the last year, this financial trend has been booming and well positioned for further growth as many banks are increasingly looking to provide the aforementioned services to non-banks and non-financial institutions. For these, this is a great advantage and the next step in enhancing the customer experience, which then simply includes financial services as part of a broader offering. Young start-ups and established banking houses can thus provide an ever wider range of services to customers without the need for costly investments related to new product development or licensing.
Traditionally, the fintech field has focused more on consumer-to-merchant payments, but this too is changing. Currently, more elegant solutions for financial transactions are going mainstream and may appeal to consumers. For example, let's mention payout options such as salary advances, e-money payouts, crypto payouts or early payouts. These innovations represent significant opportunities and can be expected to play an important role in the field of financial innovation and practices in the near future.
The return of banking innovation
According to Accenture's "Top 10 Banking Trends for 2022" study, the decade following the Great Financial Crisis was a period of downturn, during which many banks stepped back from introducing new products and focused more on getting the existing ones right. However, start-ups and digital firms have stepped in and found promising areas of growth that had been neglected by traditional financial institutions. However, the new situation brought about by the Metalloid era has forced banks to get creative in their defence. For example, two large global banking institutions have integrated their APIs for treasury services into Stripe's payment platform, which is part of the Shopify e-commerce platform. Their clients can then pay on this platform completely seamlessly and conveniently.
Blockchain as a service (BaaS)
Blockchain has become an increasingly inflected word in recent years, even in the mainstream financial world. It is no wonder that progressive companies are bringing with them a new trend. Blockchain as a service BaaS is a cloud-based solution that allows customers to work with blockchain to create their digital products. These digital goods can be smart contracts, decentralized applications (Dapps) or even other services that don't require the entire blockchain infrastructure to function. However, through specially designed cloud platforms, it is possible to create architectures that are completely independent and decentralised. Thus, innovations are rapidly being introduced into our daily lives and are actively evolving. Blockchain, then, can significantly help economic growth in the coming years, according to PWC analysis. The main application areas that should drive this growth are tracking and controlling financial transactions, providing financial services or creating contracts.
Infusion of artificial intelligence and machine learning
From traditional institutions deploying "robo-advisors and communicators" to advanced algorithms assessing a loan applicant's risk, fintech companies will continue to expand and refine their use of AI and machine learning. Artificial intelligence will increasingly predict consumer behavior. Thus enabling companies to better target products and services, as well as use more effective sales channels or marketing tools. As the popularity of mobile phones grows and they have become the primary means of communication, planning, reading, lifestyle and financial planning, banks are now demanding more complex AI software for them to improve customer service and banking processes.