Just like every other industry, the financial sector has been influenced by technological disruption. The fusion of financial services and technology now operates under the name of “fintech,” which has now become a mainstream term. In general, fintech refers to companies that take advantage of new technologies in banking and financial services industries, making fintech an extensive area. Just think of products such as mobile banking apps, text fraud alerts, Facebook instant messaging service for customers, automated savings apps, financial protection services, and more.
But fintech is more than just online banking. And it’s grown into one of the most vibrant and rapidly-changing areas of technological innovation.
However, investments in fintech technologies are becoming more selective. According to a KPMG report, venture capital investors are spending more money on fewer deals today. In 2018, first-time venture investments reached $39.57 billion across 1,707 deals. A year earlier, VCs invested only $13 billion – but across three times as many deals (3,813).
We have an in-depth understanding of fintech as a sector thanks to our collaborations with various clients who shape its future. We support some of the most well-known fintech startups from Berlin such as Raisin or Spotcap. Another range of contributions comes from our R&D department that creates solutions for companies that invest in innovations, especially in areas such as AI, machine learning, and Big Data. We have applied these competencies in our collaboration with a global US-based hedge fund that operates on AUM worth $50 billion.
So what’s the future of fintech and where are fintech companies headed? Here are some essential fintech trends predicted to rise and expand in 2019.
Fintech trends in banking
2019 will mark another step in the expansion of traditional banks into digital banking. Financial institutions are expected to introduce innovative, standalone digital banking solutions that will operate independently of their legacy systems.
Another key area of growth will be applications and services supporting automatic savings. The idea here is to make saving money as easy and frictionless as possible by automating the process. A good example here is an application that rounds up the change from everyday purchases and puts it into a user’s savings account or towards paying off debt. For example, is a user buys iced coffee for $2.50, the app will take $0.50 and deposit it into another, previously designated account – offering a painless way to save money. Apps like Qapital, Digit, Blast, and USAA are already gaining traction on the market.
Fintech is also going to introduce voice technology to banking. Many users already operate their devices using voice commands, so the time has come for financial services to take part in these voice interactions. Some banks have already rolled out voice technology applications – think Capital One or Ally Bank. However, the range of tasks users can complete using voice commands is quite limited, like finding out information about the last transactions. But the technology advancing quickly and we’ll be able to do many other tasks like transferring money or applying for mortgages using voice soon.
Blockchain as a fintech trend for 2019
According to a report from KPMG, 2019 is going to bring us increasing levels of consolidation in more mature financial services areas but also emerging tech like blockchain.
One of the fastest-growing fintech trends is blockchain. The technology behind distributed ledgers that power cryptocurrencies such as Bitcoin or Ethereum is on its way to changing the financial sector dramatically.
Blockchain has already begun to take over the traditional banking system, and experts agree that 2019 is going to be a breakthrough year for the technology. Blockchain applications help to reduce paperwork by updating the records stored in the digital ledger in real-time. The technology also addresses a critical concern of fintech, security, by offering organizations an option of storing information on tamper-resistant ledgers.
In 2019, an increasing number of financial services companies will look into blockchain as a technology that enables digital payments. This application of the blockchain technology will most likely develop as part of more centralized systems. While decentralized finance and peer-to-peer lending are a distant vision, fintech platforms are going to implement key aspects of blockchain technology in their services, especially in the area of cross-border payments.
Fintech trends in payments
One of the vital fintech trends for 2019 is cashless payments. The spread of smartphones and stable internet connections in the developing world motivates users to choose digital payments over cash. Governments looking to reduce fraud are also interested in limiting cash circulation. They promote cashless payments or even ban large denomination bills like in India.
The European Parliament has recently launched a second payment service directive that authorizes all businesses to use alternatives to banks, opening the door to the development of cashless third-party payment solutions.
Fintech trends in asset management
Financial services companies will be investing more in portfolio management tools that offer personalized analysis and predictive capabilities. ABN AMRO recently introduced the CIOS-Engine that allows customers to benefit from a fully automated and rule-compliant analysis to create offers that match their individual requirements.
Codete experts deliver fintech advice to a leading financial services institution in Poland, building a data science solution that optimizes the customer experience during the purchasing process. We also equip the bank with tools that allow for excellent personalization of product offers.
Another strong fintech trend in asset management is robot advisers; solutions designed to provide customers with sophisticated counseling services. Such digital assistants will become a great competitive advantage in the future, offering banks a new way to engage with specific target groups – for instance, customers looking for sustainability investments.
Naturally, blockchain enters the asset management scene as well with the rise of the so-called crypto funds that enable systematic investment in crypto assets (which can be coins and tokens). Even if the trend slowed down slightly following the relative weakness of cryptocurrencies last year, the funds are here to stay and will play an important role in the future.
Fintech trends in security
Fintech has a lot of potential in revamping the approach of the banking industry towards security issues such as fraud prevention. 2019 will witness the emergence of many new services for protecting consumers from financial fraud, especially vulnerable groups such as seniors or teenagers. To help them maintain financial independence while still protecting their assets, these services will automatically control spending and provide transparency.
Security threats pose new challenges to emerging technology. Companies employ AI chatbots equipped with sophisticated machine learning algorithms to improve fraud detection and protect consumers from theft by identifying suspicious patterns in product usage (for example, credit card fraud).
Another emerging fintech trend is biometric technology that organizations are implementing as part of the security features of their products. Facial recognition, iris scans, or fingerprint scanners are biometric indicators that will become more widespread soon. Another major trend is voice activation. The idea here is to increase the effectiveness and security of fintech applications without having to rely on traditional logins and passwords.
2019 is the year of new fintech trends & challenges
The financial sector is undergoing a profound transformation thanks to new technologies and widespread move towards digital transformation solution. By keeping up with fintech trends, financial services companies can stay relevant on the market and start innovating their products to gain a competitive advantage. As fintech startups launch their incredibly popular products, banks need to build new features that improve the experience of users.
Are you looking for experts who could help you keep up with these fintech trends?
Contact our consultants; we help financial services companies become more innovative by building custom fintech applications that address their critical business challenges.