Top fintech industry predictions for 2030
The fintech industry has undergone significant evolution since the birth of online banking. As this sector continues to experience rapid growth, industry participants find themselves pondering whether most fintech innovations have already occurred or if there are more groundbreaking developments on the horizon.
Fintech has revolutionized the accessibility and convenience of financial services, reshaping how they operate. If you have ever made online deposits, used budgeting apps, or conducted peer-to-peer money transfers, you have witnessed the transformative power of fintech.
With projections indicating a six-fold growth in the next decade, it appears that the story of the fintech industry is just beginning. The question then arises: How will fintech further revolutionize our understanding and use of financial services? Before delving into predictions, let’s take a brief overview of the current state of affairs.
Looking back. A brief fintech industry overview
Fintech explained
Fintech encompasses various technologies used to enhance, automate, and simplify financial services and processes. It encompasses a wide range of applications, including mobile banking, investment apps, and the technology companies behind these solutions.
Initially, the term “fintech” referred to the technology operated by financial institutions, such as ATMs and bank mainframe computers. However, its focus gradually shifted towards consumer-oriented services, which now form the primary emphasis.
According to Plaid’s Fintech Effect report, fintech is more widely used than social media, with over 88% of US consumers leveraging technology to manage their finances. This makes it one of the most widely adopted consumer technologies. Users have reported numerous benefits from using digital tools, including time savings, increased control over finances, and reduced stress levels.
Types of fintech solutions
The fintech landscape is characterized by a complex interplay between emerging startups and disruptive technologies, alongside traditional financial institutions. As banks and other traditional players embrace fintech services for their own purposes, the question arises: Will banks continue to dominate as the industry’s major players, or will they be overtaken by tech companies?
The number of fintech startups worldwide has more than doubled in just three years, from 12,131 in 2020 to 26,346 in 2023. This exponential growth is accompanied by record-breaking global funding, reaching $132 billion in 2021, indicating widespread interest in the industry. Among the popular categories of fintech-as-a-service are:
- Payments: Fintech companies in this space leverage technology to provide seamless, secure, and convenient payment experiences for businesses and consumers. For example, Armatic offers automated payment and billing solutions, including automated follow-up emails for late-paying clients and integration with accounting software.
- Budgeting apps/personal financial management: These services empower users to effectively manage and budget their finances, gaining insights into their income and spending behavior.
- Consumer banking and investment: Fintech companies facilitate tasks such as opening bank accounts, making online deposits, and intelligent fund investments with the assistance of robo-advisors.
- Digital lending and leasing: These companies employ digital tools, data analytics, and automation to streamline and enhance the lending and leasing processes.
- Open banking: Solutions in this area enable the secure sharing of financial data between different financial institutions and authorized third-party providers through application programming interfaces (APIs). TrustLoop, for instance, provides an elegant open banking solution that grants access to a wide range of high-quality financial data from banks across Europe via a single API.
Technologies powering fintech today
The fintech industry relies on four key technologies, often referred to as the ABCD of fintech: AI (Artificial Intelligence), blockchain, cloud computing, and big data. These technologies power various aspects of the industry and contribute to its growth and innovation.
AI plays a crucial role in fintech, enabling applications such as fraud detection, credit scoring, and the use of chatbots or visual assistants. With its ability to analyze vast amounts of data and identify patterns, AI provides valuable insights into consumer behavior, spending habits, and the ability to predict future risks.
Big data analytics is another essential component, allowing companies to predict market changes and develop data-driven business strategies. By harnessing the power of large datasets, fintech firms can gain a competitive edge and make informed decisions.
Blockchain technology revolutionizes financial transactions by eliminating the need for intermediaries. From cryptocurrencies to cross-border payments, blockchain offers a decentralized approach that enhances security, transparency, and efficiency in financial operations.
Cloud computing provides fintech companies with a scalable and cost-effective infrastructure. It enables them to securely store and process large volumes of data, supporting their operations and facilitating seamless access to resources.
Together, these technologies shape the foundation of the fintech industry, enabling innovation, enhanced customer experiences, and improved operational efficiency.
Looking forward. What should consumers, business owners, and fintech companies expect in 2030
The fintech industry is ever-evolving, and experts anticipate several significant shifts in how consumers, business owners, and leading fintech companies will perceive and utilize financial services in the coming decade.
For consumers
The decline of cash and in-person transactions
Speculation about a cashless society has been prevailing as cash has gradually lost its position as the primary payment method. This prompts the question of whether cash will still exist in 2030.
While cash may not completely disappear, digital payments are rapidly emerging as the primary mode of transaction. This shift is facilitated by the advancement of payment technologies, such as mobile wallets, QR codes, and biometric authentication. In fact, the Global Payments Report indicates that cash accounted for only 20.5% of all point-of-sale transactions in 2020, representing a significant 32% decrease from 2019. This trend suggests that digital payments will continue to gain prominence in the future, driven by the introduction of new technologies and the refinement of existing features like contactless payments and peer-to-peer transfers.
Increasingly customizable and personalized experiences
The future of consumer finance is poised to be highly personalized, offering tailored financial products and utilizing voice and gesture-based interactions. Through the utilization of artificial intelligence and powerful algorithms, fintech companies will gain the capability to comprehend the intricate nuances of consumer behavior.
This enhanced understanding will enable the creation of increasingly customized experiences, such as providing real-time financial advice based on contextual hints and up-to-date data. For instance, an app might offer spending insights and recommendations by considering factors like a user’s location, recent purchases, or financial objectives. Furthermore, as advancements in language processing and gesture recognition continue, users will be able to engage with financial apps and services in a more natural manner, employing hand gestures and facial expressions to interact seamlessly.
Virtual and Augmented reality will be used more in financial services
The integration of Augmented Reality (AR) and Virtual Reality (VR) technologies has the potential to revolutionize the way consumers engage with financial information. This trend aligns with the broader movement towards gamification and offers users a highly personalized online experience.
By combining AR and Chatbots, for instance, eCommerce client retention can be increased while delivering customized content that achieves up to 10 times higher click-through rates compared to standard content.
AR and VR are not limited to transforming the eCommerce landscape alone; they are also expected to have a significant impact on how consumers utilize financial services. This can encompass virtual interactions with customer support representatives, virtual banking experiences, virtual trading and investing platforms, or even immersive ways to visualize financial data and analytics. These technologies provide an immersive and interactive dimension to financial services, enhancing user engagement and facilitating a deeper understanding of complex financial information.
Buy now, pay later will become the norm
The utilization of buy now, pay later (BNPL) services is on the rise as more consumers adopt it as a budgeting tool for their spending habits. With BNPL, individuals have the option to make purchases and postpone payment, typically dividing it into installments, rather than paying the full amount upfront.
The increasing popularity of BNPL can be attributed to several key factors:
- Firstly, many BNPL platforms have established partnerships with popular online retailers, seamlessly integrating their services into the checkout process. This makes it convenient for consumers to select the BNPL option, leading to an increase in the average order value. Merchants are motivated to promote this service due to the potential for higher sales.
- Secondly, BNPL offers consumers a sense of convenience and flexibility in managing their finances. By spreading out payments over time, individuals can better handle their financial obligations and engage in budgeting practices.
- Lastly, BNPL serves as an alternative to traditional credit cards and loans, eliminating the need for a credit check or lengthy approval process. This accessibility appeals to a broader range of consumers, providing them with a financing option that is more inclusive and readily available.
For business owners
Financial business reputation will become increasingly important
Determining the reliability of a potential business partner is essential for establishing successful business relationships. While third-party data from banks and external institutions can provide valuable insights, one of the most significant indicators of trustworthiness lies in the partner’s business and financial behavior.
Lately, ratings have gained increasing importance in evaluating trustworthiness. There are now applications available that enable businesses to assess the level of commercial trust exhibited by their potential partners. These applications often translate confirmed payments into reputation points, which contribute to a company’s overall reputation score. B2B rating apps are gradually becoming the primary method for businesses to establish their trust profile and manage risk when initiating a new business relationship or negotiating a deal. By leveraging these rating platforms, businesses can make more informed decisions about potential partners based on their track record and reputation in the business community.
A shift from a business model based on payments to B2B and B2B2X
During the early stages of the fintech journey, the focus was primarily on payment solutions, which accounted for 40% of the industry’s revenue in 2021. This included various sub-segments such as cross-border payments and real-time payments, which played a significant role in shaping the fintech landscape.
While payments will continue to be a substantial source of revenue for the industry, a report by BCG and QED Investors suggests that the fastest-growing business models by 2030 will be B2B2X and B2B. B2B2X, which stands for business-to-business-to-any, refers to service providers that collaborate with other businesses (B2B) to offer services to a wide range of end-users. This model enables expanded reach and distribution of services.
On the other hand, the B2B model specifically targets small and medium-sized enterprises (SMEs), which represents a significant growth opportunity. Accessing financing is a pressing concern for many SMEs, making it a crucial area of focus. Fintech companies catering to the needs of SMEs in terms of financing solutions have the potential to thrive and contribute to the industry’s growth.
Decentralized financing for more accessible funding opportunities
Decentralized financing is set to revolutionize the way business owners secure funding by providing them with a more diverse range of opportunities. With decentralized finance (DeFi), businesses can directly access loans, crowdfunding, and investment opportunities through a network of individual investors, eliminating the need for traditional financial intermediaries.
This shift towards decentralized funding allows businesses to tap into a wider pool of potential investors and explore alternative sources of financing. By connecting directly with investors within a decentralized network, businesses can bypass the limitations and restrictions imposed by traditional financial institutions.
In addition to decentralized networks, online lending platforms are gaining traction as popular alternatives for business financing. These platforms utilize technology to simplify and streamline the loan application and approval process, offering businesses a convenient and efficient way to secure funding. With online lending platforms, businesses can access funds quickly and easily, providing additional avenues for financing alongside decentralized networks of investors.
Integrated fintech solutions + automation = increased efficiency
With the increasing integration of fintech into daily business operations, business owners will have access to comprehensive platforms that bring together various financial tools and functionalities into a single interface. These platforms combine accounting, invoicing, payroll, and financial planning tools, providing a unified solution for financial management, payments, and banking.
The advantage of these integrated platforms is their ability to streamline and simplify financial operations. By centralizing all financial tasks and data in one place, businesses can efficiently manage their finances, monitor transactions, and gain valuable insights into their financial health. This consolidation eliminates the need for multiple disjointed systems and reduces the chances of errors or discrepancies.
Furthermore, the integration of Robotic Process Automation (RPA) takes automation to the next level. RPA technology allows businesses to automate repetitive administrative tasks, such as data entry, report generation, and reconciliation. By leveraging RPA alongside integrated fintech platforms, business owners can significantly reduce manual effort, minimize human errors, and allocate resources more effectively.
The combination of integrated fintech platforms and RPA enables business owners to streamline their financial operations, enhance accuracy, and free up valuable time and resources. This increased efficiency allows businesses to focus on core activities, make informed financial decisions, and drive growth and success.
For fintech companies and fintech application developers
Unlocking the power of unstructured data
Unstructured data refers to data that doesn’t adhere to a specific format and cannot be easily organized and stored in a traditional database. Examples of unstructured data include customer support interactions, call center transcripts, emails, online reviews, social media posts, and more. While unstructured data poses challenges in terms of processing and analysis, it holds significant value in understanding consumer behavior and improving financial services.
Financial software development companies can leverage unstructured data to enhance the customer experience in a more personalized manner. By utilizing techniques like sentiment analysis on various sources such as social media posts and customer reviews, fintech companies can gain insights into customer sentiment, identify emerging trends, and evaluate the public perception of financial products or services. This analysis of unstructured data enables companies to better understand customer preferences, pain points, and expectations.
Furthermore, unstructured data can provide additional context and information that may not be readily available in structured data sources. It can offer nuanced insights into customer interactions, preferences, and behaviors, allowing financial software development companies to make data-driven decisions and tailor their services accordingly. By tapping into the potential of unstructured data, companies can uncover valuable patterns and correlations that drive innovation and improvement in the financial industry.
The rise of centaurs. Embedded financial services
The integration of financial services into non-financial applications, known as embedded financial services, is a prominent trend in the fintech industry. This direction suggests that fintech will expand beyond its traditional boundaries and become ubiquitous in various industries. This shift towards embedded financial services has given rise to the concept of “centaurs,” platforms that are a combination of fintech and another industry.
Embedded financial services offer users the convenience of accessing financial services directly within the platforms they already use, eliminating the need to switch between different applications. For example, eCommerce platforms or food delivery services may integrate payment functionalities, allowing users to make transactions or transfer funds without leaving the platform. This seamless integration enhances the user experience and simplifies financial transactions.
As the concept of embedded financial services continues to evolve, we can anticipate fintech assimilating with more niche services. This means that financial services and payments will become seamlessly integrated into various applications, making them almost invisible to users. The expansion of embedded financial services will enable individuals to access a wide range of financial functionalities within the platforms they rely on for other purposes, such as travel, healthcare, or entertainment.
Everything API
APIs (Application Programming Interfaces) indeed play a crucial role in facilitating connectivity and integration within the fintech ecosystem. Their significance is expected to further increase, driven by the emergence of open banking.
Open banking presents an opportunity for traditional banks to collaborate with fintech companies in order to remain competitive. By adopting open banking principles, banks can securely share customer financial data with third-party developers through standardized APIs. This enables financial technology companies to access customer account information, initiate payments, and develop innovative financial services that rely on data from banks or insurance providers.
The use of APIs in open banking promotes interoperability and enables the development of new, customer-centric financial solutions. By leveraging APIs, fintech companies can create applications and services that seamlessly connect with banking systems, providing users with enhanced functionality, personalized experiences, and access to a broader range of financial products and services.
Data analytics and blockchain will likely be surpassed by machine learning, IoT and RPA
The “Fintech 2030: The Industry View” report highlights the evolving landscape of technology in the fintech industry, indicating a shift toward the increasing importance of machine learning, IoT (Internet of Things), and RPA (Robotic Process Automation). While this suggests a potential decrease in emphasis on data analytics and blockchain, it does not diminish the importance of data itself.
Data will continue to be a valuable resource in the fintech industry, but its utilization will be more focused on algorithmic processing rather than human analysis. Machine learning algorithms can analyze large volumes of data to extract valuable insights, detect patterns, and make predictions, thereby enhancing various aspects of fintech operations.
Overall, the convergence of machine learning, IoT, and RPA with the abundance of data enables fintech companies to derive deeper insights, enhance customer experiences, and make data-driven decisions. While the focus may shift from human-led data analytics to algorithmic processing, the significance of data as a critical input remains unchanged in driving innovation and improvement within the fintech industry.
Conclusion
All the stakeholders in the fintech industry are highly concerned about what lies ahead for the industry.
Have we witnessed the majority of fintech innovations, or can we anticipate even more groundbreaking advancements? Is fintech merely a temporary trend or a genuinely transformative power?
Fintech appears to be here to stay, as it encompasses a range of developments such as personalized user experiences, virtual and augmented reality advancements, efficient business solutions, and the integration of financial services into various platforms. In fact, fintech has the capacity to greatly influence our daily interactions and our perception of financial services.
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