6 CRITICAL INVESTMENT TRENDS IN FINTECH

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Due to the fast-paced development of digitalization processes and the recent associated societal transformations, the Financial Technology (FinTech) industry is now facing dramatic growth. FinTech aims to provide financial services more widely, efficiently, and innovatively using state digital technologies, such as “Big Data” and cloud computing. 

Experts predict that the global FinTech market will continue to grow globally and exceed $300 billion by the end of 2022. In addition, they anticipate that the market will reach a compound annual growth rate (CAGR) of approximately 19.8% and a market value of approximately US$332.5 billion between 2022 and 2028.  

As FinTech continues to mature, more and more wealth-building opportunities are characterizing the platform. Here are six must-know fundamentals trends in the FinTech industry and how they’re foreseen to influence the investment world. 

The seamless integration of financial products and services into non-financial apps and websites is called embedded finance. For instance, this technology allows you to get fast personal loans from non-bank companies, make payments through digital wallets, or buy now, pay later (BNPL) options on e-Commerce. Embedded financing is typically driven by consumers’ needs, instant gratification, and desires for convenience.

Since 2018, the number of non-bank companies offering financial products and services has skyrocketed to more than 700%. Just in 2021, venture capital (VC) investments in embedded financing were three times higher than what they made in 2020. Its market is currently at $54.3 billion and is foreseen to exceed $248 billion by 2032.

Cyberattacks are the main threats looming over the global financial industry. This bold risk forced FinTech and IT leaders to deploy various new security measures. Among them is passwordless authentication, such as sending push notifications with an authentication code. However, according to 90% of security leaders, biometric technology is the sophisticated method that provides the highest level of security.

Fingerprint mapping, facial recognition, retina scans, and voiceprint are common examples of biometrics. However, these technologies could be overridden by some deep fake technology, causing financial leaders to be concerned. The good news is that there are recent advances in biometric technology, specifically finger-vein recognition. It’s more accurate and hard to forge, which may solve the recent privacy concerns.

The rising fraudulent activities in technology-driven economies, such as data breaches, cyber hacks, and money laundering, can now be managed with Regulation Technology (RegTech) solutions. It helps in managing the regulatory processes within the financial industry through automation, specifically cloud technology, machine learning, and big data analytics. 

Financial institutions around the world had spent around $213.9 billion on financial crime compliance costs just in 2021. Also, 30% of these firms spent more than 5% of their profits on compliance. However, with RegTech solutions, cost savings are expected to come to the bottom line. A report predicted that this market will grow by 200% between 2022 and 2026.

Software Robotics, also known as Robotic Process Automation (RPA) technology, are now automating menial yet time-consuming tasks in several financial companies. RPA technology comes with a lot of perks. This includes non-disruptive automation, reduced processing time,  improved productivity, better customer service experience, enhanced data security, and more yearly savings.

Due to its myriad benefits, 80% of global financial companies have adopted RPA solutions. They’re predicted to save 30% on their organization’s operational costs by 2024. Experts foresee the RPA market having a CAGR of around 38.2% between 2022 and 2030.

Consumers’ purchase behavior is now becoming more sustainable, causing environmental, social, and governance (ESG) considerations to dominate many investment decisions nowadays. FinTech companies are also jumping the bandwagon and capitalizing on environmentally-sustainable practices. 

These sustainable companies are offering finance solutions with green initiatives. They’re seeing success in the world of investments and consumer markets nowadays. While only 8% of FinTech companies claim they’re “sustainable,” more and more FinTech startups and companies are turning green. The highest concentration of sustainable FinTech companies is in Singapore, Spain, Switzerland, and Sweden.

FinTech innovations are also helping employees to combat the payroll status-quo through “earned wage access,” commonly known as “on-demand pay.” It enables firms to set up cloud-based platforms, where employees can log in on a mobile application and check their payroll balance and salary anytime. 

Statistics show that on-demand access to wages reduces the financial stress of many employees. It also even helped them save up to $1,250 annually. Additionally, research shows that employees with earned wage access tend to have increased loyalty to their employer and decreased turnover by up to 73%. 

FinTech is a rapidly growing industry segment. It has been bolstered by several major financial deals characterized by various sizes and geographic diversities. It represents a major disruptive force. Once this new paradigm is effectively embraced, great investment opportunities will follow.