From traditional banking to the digital finance ecosystem we have today, it's an underestimation to say that technology changed the game. The fintech trends this 2022 are here to take the industry by the scale and ready to transform the financial experience of their market.
There had been different finance solutions introduced throughout the years — open banking, neobanks, contactless payments and cryptocurrencies, among others. What fintech trends for 2022 would be at the forefront of the industry? What will be the best fintech to invest in? Will there be a plateau or consistent demand for these digital solutions? Let's discuss it in detail below.
What are the fintech trends for 2022?
Digital-only bankingA significant rise in digital banking and neobanks (only online financial bodies that help customers manage their money online) was seen since the pandemic came in as going outside was kept to a minimum. There was suddenly no need to line up in banks to make a transaction in your account and no more tedious paperwork was needed.
Now that the market is more tech-savvy, this new course made it easier for them to get the most out of the digital financial solution. It's predicted to have an upward development trajectory along with the biggest fintech products. In fact, neobanks was valued at almost $35 billion in 2020, and is projected to grow at an average rate of 47.7% over the next eight years. With this kind of convenience that removes the need for physical interaction, both digital-only banking and neobanks are expanding their market by attracting unbanked consumers to avail of the service.
Stricter fintech regulationsAs fintech proliferates, industry regulators are expected to put up stringent regulatory guidelines as well. Financial services is one of the most regulated fields, because it deals with the consumers’ money and personal information. Now that it has an active digital collaboration, it has also become subject to fraud and data breaches.
To ease the minds of consumers and businesses, legislations tackling concerns about fintech and cybersecurity, data ownership, and data protection are being anticipated to push through. The rapid advancement of the arena meant regulators trying to stay abreast with its developments, while keeping the protection of consumers at their priority.
Continued Mergers & Acquisitions (M&A)2021 has been a lucrative year for the fintech arena. A CB Insights’ State of Venture Quarter 3 of 2021 Report revealed that $91.5 billion in funding has been catapulted to the [fintech] sector, which is two times more than its total collection from 2020. One reason behind this drastic growth is the birth of 43 fintech unicorns (term used to describe a private startup valued at over $1 billion), which brought up the numbers to an even 200. This kind of partnership and M&As are forecasted to continue this 2022 due to elevated resource requirements, stemming from austere regulatory demands.
To further improve their service delivery, banks are to leverage fintech companies in order to introduce services they cannot offer by themselves alone. According to Forbes, smaller organizations are attempting to merge with regional banks to better the banking experience of their clients. Partnering with specialist providers paves the way for banks and financial institutions to support the growing call for innovative banking today.
Embedded financeAnother trend to take the financial sector by storm is embedded finance.
Embedded finance is the seamless integration of financial tools or processes into a non-financial environment or provider. It is a great opportunity for consumers to access any kind of financial service under any circumstance. The best example of this is a mobile application with an online payment option, or the buy-now-pay-later credit scheme for shoppers.
As the solution goes mainstream, access to personal funds is easier and inexpensive. Gone are the days when you still have to go to the store to make a purchase, or go to the bank to apply for credit. This platform removes the pain points of consumers and augments customer experience with contextual financial services they may need, less the hassle.
Rise of Web 3Have you ever heard about decentralized finance (DeFi) or non-fungible tokens (NFT)? If you do, then you must have heard about the buzzword (or new jargon) in the fintech industry lately: Web3.
Web3, also known as Web 3.0, is the umbrella term that proposes the elimination of the big intermediaries on the internet, which in this case is the Big Tech. The platform's main goal is to decentralize the internet by building it upon the foundation of a shared, user-driven ledger (i.e. blockchain) while making sure that data ownership is in the hands of the users/individuals.
Traditional banking was a rather exclusive service, but through Web3, anyone has the access to the apps and programs being offered on the then decentralized internet. As such, without any financial middlemen (banks, brokerages, etc.), DeFi allows direct transactions from one person to another, promotes efficiencies in the current financial ecosystem and offers a personalized and smarter consumer experience but without proper supervision, it can cause a great deal of risk.
Why fintech is the future
The pandemic aggravated the long-overdue growth of fintech. People and businesses were forced to look for other ways to save and manage their finances as banks closed their doors for the time being — this started the phenomenon of digital finance solutions.
Digital-only banking and other fintech applications have reached their peak since 2020 and are predicted to flourish continuously through the years. As the post-pandemic era kicks in, more people are opting to stay in this way of financial services; not only because of its accessibility but because of the opportunities of expanding their financial portfolio seamlessly. Growing investments, for an instance, is now possible through cryptocurrencies (although volatile at most) and requires only your device, a steady internet connection, and the amount of money you're willing to invest.
With the increasing maturity of fintech trends this 2022, we're about to see how the collaboration of financial services with the advancing technology would be a boon to both businesses and individuals. We can expect new business models in the financial arena that would ideally extend their offerings to the underbanked and transform banking for their current market.
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