With the coronavirus pandemic creating mayhem all over the world, the financial and banking sectors have had to undergo a radical transformation to tide over 2020. Moving on to 2021, we can expect to see more innovations and upgrades in the fintech frontier.
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Halfway into 2021, we have already witnessed how technology has helped the fintech sector evolve. The hottest technologies like AI, machine learning and IoT, are being harnessed to improve the overall customer experience and productivity of banking organizations.
Moreover, as information security rules supreme in the fintech sector, highly sophisticated technologies are also being used to abate data security challenges. As time flows by, cases of cybersecurity threats such as ransomware attack, data breaches, and phishing attacks seem to be gaining incidence. In 2020, while the world was fighting a pandemic, there were at least 1001 cases of data breaches reported, affecting nearly 155.8 million people. To counter the debilitating actions of cyber miscreants, organizations are heftily investing in the adoption of advanced technologies like AI and Blockchain and enforcing highly complex algorithms for data encryption and protection.
The Hottest Trends In The Fintech Sector
While cyberattacks are reportedly the most rapidly growing crime in the world, employing modern technologies can help evolve traditional methods and make them more future-proof. Observation reveals some interesting fintech trends that have fundamentally transformed how banks and other financial organizations function. Let us take a look at five of the hottest trends of this year.
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Person-to-Person (P2P) payments
P2P payments are increasing in popularity among the customers, but it is under the replacement cycle for the financial institutions. Talking about the year 2021, more financial institutions are trying to replace the P2P tool, which can easily be concluded by the amount of money invested in it by the fintech sector.
However, the consumer’s side of the story is entirely different. Payment wallets like PayPal have got a lot of popularity, and people use them daily. In addition, transaction platforms like Google Pay, Venmo, Zelle, etc., are regularly used by consumers. Thus, even though financial institutions are trying to level down the use of P2P tools, it would be interesting to see how they tackle it regarding the rising demand.
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Cloud Computing
The number of institutions deploying cloud computing has increased significantly since 2020. More and more banks and credit unions embrace this technology as they find it efficient, safe, and productive. Financial institutions can now manage their data in a trusted environment and secure using cloud computing techniques. It is also more affordable than on-premises data storage; thus, it helps to reduce costs efficiently. Cloud computing can also leverage different trending technologies like data science, ML, AI, etc., in the financial sector. It works to improve personalization, speed and leads to better innovation.
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Opening bank accounts online
With the advent of the contagious coronavirus, more businesses are turning digital, and the fintech sector is not an exception. Even though banks have embraced digital banking methods for the last few years, this year, there has been a considerable rise in the number of digital account openings. Moreover, the pandemic has influenced both the commercial and the retail sectors to let go of all the doubts related to digital account opening and embrace it with open arms.
If we take a closer look at numbers, nearly 44% of banks and one-fourth of the credit unions are estimating to add or substitute existing accounts with customers’ digital account opening this year.
It is, however, essential to note that these entities have started promoting online account opening in the last few years. Still, the pandemic has helped them get a better response from the clients concerning this.
Commercial digital account opening is expected to go up this year as more banks are likely to choose new systems for security and convenience. This one is gaining popularity among the credit unions too.
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Collaborating via video
The pandemic has put everyone under lockdown, and it is now challenging to interact face to face. This issue has influenced banks and credit unions to encourage video collaboration. Around 30% of entities in the fintech sector have decided to invest in video collaboration for the first time in 2021.
It can be a significant psychological shift for the employees of the concerned sector as the focus will shift from branch admission, which was believed to be the most important channel for a long time. However, it would not be a problem for the customers as they need someone to talk to rather than visit the branch. Video conferencing applications can take care of these requirements. But banks need to make sure that they are using the right tool so that customers can easily interact with the right person.
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Banking APIs (Application Programming Interface)
Popularly known as API, this has become one of the hottest trends of the year 2021. Nearly 53% of credit unions have already invested in this technology, and more banking institutions are joining this league. Talking about the present time, even though only 30% of the banks have deployed this technology, it has considerably gone up from last year’s figures.
The unique features of the API have contributed to its increasing demand, like with this technology, one can expect greater speed, agility, and more personalization- which will indeed help the banking sectors.
However, it is not clear whether banks are catering to public or private APIs, but we guess it would mostly be private. The main focus of using API in fintech sectors is efficiency which includes cost and speed.
Conclusion
Apart from the trends mentioned above, the fintech sector is also witnessing the rise of blockchain or decentralized banking. Blockchain, one of today’s latest technological advancements, has found widespread acceptance among financial organizations, apart from crypto-currencies. Blockchain is attributed with scalability, traceability, immutability, and transparency, as well as high-level security – features that are fundamental requirements of organizations dealing with monetary transactions and highly sensitive information. Along with foolproof data security, blockchain also helps optimize operational expenses.
