It’s fair to mention that 2020 has been the year of disruptions in almost all industries. The pandemic that swept the world, totally altered the way businesses operate. Suddenly, remote and digital channels became primary for most businesses, especially during the times when there were strict restrictions in moving out freely.
Some industries were heavily impacted due to this new trend of working remotely. However, few industries became beneficiaries. The Fintech industry has arguably benefited the most from this sudden surge in digital adoption. This has paved the way for a lot of interesting trends, most of which are expected to continue and grow further in 2021 as well.
The Fintech industry is tightly coupled with the technology industry and has always pulled the best of emerging technology to the financial sector. It has also pushed the technology industry to go to the next level of innovation to support the financial sector.
Top Predictions for the Fintech Sector in 2021
Below are the top Fintech trends to watch out for in 2021
In the last few years, the number of digital payment companies has surged all over the globe. Especially in bigger markets like India, many newer players have created platforms to send money to anybody simply by using one’s phone numbers or even QR code scanners.
UPI number based payments are also becoming very popular in India. As per the data available in NPCI, in 2020, the number of banks that are UPI platforms has almost doubled and the value of UPI-based payments has doubled to INR 4.16 Lakh Crores.
Contactless payment is steadily replacing the traditional bill payment software provided by all banks. Some of these payment systems also offer digital wallet services, negating the dependency on the banks for payments.
In 2021 as well, we can watch out for newer Fintech players entering this space. As the number of players increases, we can expect these payment systems to create more intuitive interfaces and innovations to convert the payment systems as the one-stop-shop for payments and bill management.
Digital Only Banks
Digital banking that includes online and mobile banking is not a new concept. In the last 3 to 5 years, with smartphones becoming smarter by day, mobile banking apps have evolved to leverage the full potential of smartphones. Especially due to the pandemic, when people were confined to the comfort of the homes for the majority of the year, the usage of digital channels for banking needs has only surged further. Even senior citizens, who are traditionally comfortable doing financial transactions by visiting the brick and mortar branches of banks, have adopted digital channels.
This behaviour change has given new opportunities for the fintech firms to seriously look at digital-only banks or neobanks as is popularly called, as the future banks. With no physical branches and all the banking facilities available through digital channels, there is a big saving in the operational cost for the bank owners. This is paving the way for equivalent services by physical banks at even better rates.
Next Generation Biometric Security Systems
Security is the bedrock of any financial system. As the financial institutions grow both in terms of numbers, as well the size all over the globe, the adoption of digital channels has only increased drastically. With this, the need for having a stable and upgraded security becomes paramount to maintain the financial credibility of institutions.
Fingerprint scanners are in use for biometric scanning since the last decade or so. However, due to the pandemic and health risks involved in touching a commonly used device, alternate biometrics like facial recognition, iris recognition, and contactless financial cards are slowly but steadily emerging.
It will be interesting to see how soon the financial institutions transition to the next-gen contactless biometric devices that provide the same security as fingerprint scanners but carry fewer risks of becoming carriers of communicable diseases.
Advances in AI and ML
Artificial intelligence (AI) and Machine Learning (ML) are possibly the most significant developments with enormous potential in almost all industries. The Fintech industry is no exception.
Some big names like IBM Watson Platform, Microsoft Cortana, and Google Cloud Platform have already made a giant leap in this thriving technology area.
In 2021, Fintech apps will start to leverage AI and ML technologies more rigorously than ever. It could be chatbots addressing banking customers’ queries, virtual agents supporting customers in banking transactions, analytics engines analysing large volumes of data or fraud-prevention tools verifying the authenticity of KYC (know your customer) documents. These RPA tools will do all the recurring and schedulable works flawlessly, and the potential for AI’s and ML’s use in Fintech will continue to grow notably.
Digital Currencies or Cryptocurrencies as they are called, are virtual currencies without any underlying physical asset and are not controlled by any central banks. In the last decade, digital currently had got its share of users.
Though the practical applications of cryptocurrencies are still limited to trading them in cryptocurrency exchanges, financial regulators are opening up to the idea of using digital currencies. The shift in perception is slow but steady. This is mainly because digital currencies provide a paperless means to exchange currency equivalents.
Since the first cryptocurrency “Bitcoin” came into existence in 2009, more and more such currency types have emerged. In 2020, around 5000 cryptocurrencies popularly called “altcoins” were in use. As per data available in the public form, the market capitalisation of bitcoin has increased six-fold to around $600 Billion in January 2021 compared to around $100 Billion in 2017.
This year could witness the Fintech sector leading the way in enabling practical applications of cryptocurrencies, other than being yet another tradable commodity.
Providing one’s expertise as a service to others in need is not a new concept. Starting from APIs’ emergence more than a decade ago, interfacing between two indigenous systems has become easier.
Fintech-as-a-Service refers to a niche emerging industry where Fintech providers specialised in services like Bank Statement Analysers (BSAs), ACH clearing, payroll processing, payment processing, billing management, regulatory technology, etc. provide their core competencies as a service platform to different banks and non-banking financial institutions. This way, the banks and NBFCs can simply focus on their core business and leave the rest to the experts. 2021 could be a year of a lot of new players forging this industry.
The Fintech industry has grown leaps and bounds in the last decade. Starting from being a sub-industry within the financial sector, Fintech has evolved so much to earn its position as a separate thriving industry on its own. The above trends only reflect the path of the ambitious journey the Fintech industry is in.