Modern customers are getting more demanding and want exceptional financial services. Thus, they’re opting for FinTech, as it offers quick solutions and is known for eliminating bureaucracy. According to Statista, the number of FinTech startups is only growing year over year. In 2018, there were 5,686 startups only in the Americas. As of November 2021, there were already 10,755 startups, a two-times increase in three years.
Traditional incumbent financial institutions, in turn, are now more readily implementing digitalization strategies into their workflow to better meet the needs of the demanding financial market and stay competitive. However, as FinTech startups, traditional financial institutions need to find a trusted financial software development company to ensure their businesses are digitally evolving in a proper and customized way.
- The current condition of the financial services market and how it will change in the near future
- How FinTech influenced the banking industry
- Which FinTech development solutions and technologies are worth implementing now to be better prepared for the future
Current Financial Industry Overview
We can describe the current financial business landscape as a battle between trust and innovation in financial services. Since the new entrants into the market such as FinTech startups have to take intensive measures to win the trust of the customers by convincing them to use only their services and transition from traditional banking. On the other hand, traditional banks that are long on the market already have the trust of their customers but may lack a proper level of innovation.
In December 2021, YouGov surveyed 20,000 consumers of financial services across 18 global markets and revealed the following findings:
- Most global consumers choose risk from hackers as their biggest concern when adopting digital financial services.
- Generation Z and millennials are more prone to take risks with their money and more often use online financial services.
- Trust in digital financial services is accumulative, as those users who used any digital service for at least three months build up their trust and more readily try other services.
- Still, 66 percent of global respondents have the biggest trust in traditional banks, and 55 percent — in digital banking services.
These findings are only proving that the financial industry is steadily heading toward digitalization and consumers are gradually getting used to digital financial services even despite all the risks. With time, online financial services can become the new norm and there will be almost no need to visit a bank or any financial institution in person.
The question here is: how many market players will be relevant? We may see that the number of FinTech solutions is only growing. Thus, the fight over consumer interest will only intensify and new entrants will find it harder to stay competitive. In turn, traditional financial institutions with a solid customer base that choose a path of digital transformation can find themselves in a winning position for having it all: trust and innovation.
Role of FinTech in the Banking Industry
Banking future technology solutions allowed the traditional banking industry to evolve into digital banking. Key characteristics of a digital bank include:
- Online financial services available via web-based software or mobile application
- Digital wallets and limitless online payments
- High customer-centricity with the help of sleek UI/UX, gamification, and rewards system
The digital banking sphere keeps growing and improving every year. And simple web-based online banking gets substituted by neobanking. The work-from-home routine spurred by COVID-19 has made people less inclined to visit banks in person. Thus, feature-rich and interactive digital banks are in high demand now and will be in the near future.
Future of FinTech
The future of FinTech is confusing as the more technologies appear on the market, the more pressure financial services companies will experience. The key here is keeping a balance between trending innovations and your real customers’ needs. So it’s better to move at your own pace with due attention to customer feedback. However, we can still overview common technologies that are here to stay for years to come.
- Artificial intelligence (AI). AI financial solutions help FinTech companies to maintain a productive interaction with customers, for instance, with the help of chatbots or personalized offerings. AI is also efficient in promptly detecting fraud and instances of money laundering. FinTech businesses can also choose AI for customer screening to make sure they work with trusted people.
- Decentralized finance (DeFi). DeFi is an emerging technology solution based on blockchain and smart contracts. This solution is readily used in the financial technology sector, as it eliminates the need for intermediaries during financial transactions. Thus, customers have more control over their digital financial assets and can better manage the security of those assets.
- FinTech-as-a-service (FaaS). FaaS is a great solution for those financial market players who don’t want to compete with large incumbent financial institutions. Instead, FaaS providers choose to cooperate with such financial institutions by offering their FinTech services through APIs or by embedding them into their clients’ existing core financial systems. Each FaaS provider offers different types of services, for instance, anti-money laundering services, investment, or digital banking services.
- Cloud computing. As FinTech startups, so many incumbent financial institutions are actively moving their core systems to the cloud. This way, they can better handle high loads, increase service availability time, and ensure stable scalability of their core systems in the future.
Hybrid cloud solutions can also be a great choice as they allow the distribution of your company assets between public cloud, private cloud, and on-premises environments. It’s convenient, as, for instance, you may have certain applications or data elements that must be stored only on-premises. Whereas, less regulatory data can be stored in the cloud so that it does not take up additional space on your servers.
The main idea of this article is that as a financial services provider, you should stay flexible in your attempt to keep pace with the rapid growth of the FinTech industry. But to stay on the safe side, always reasonably approach your technology choice and ensure that customer-centricity is one of your core company values.