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Meet Cleo and Erica - top financial assistants that never sleep. Erica is a thoughtful Bank of America representative who gives information about transaction history, cash flow, and actually about anything connected with your bank account in a polite and professional way. 

Cleo, on the contrary, is a friendly advisor who can prevent you from going on a spending spree with $100 in your bank account. They are not just regular assistants who can help a limited number of people a day. They can process hundreds and thousands of requests day in and day out. They are robots. Financial institutions and banks all over the world are deploying these kinds of new financial technology trends to meet the future that is impending with great speed. 

Not to become an outsider in an “innovation marathon”, companies are actively investing in financial software development services, pushing the boundaries of the industry more every year.

In today’s blog, we’ll discuss top financial technology trends which are a Holy Grail of successful BFS companies.


TOP 10 Biggest Fintech Trends 2023

Trend 1: Internet of Things

A special place among fintech trends has been taken by a giant system of the Internet of Things. According to the analytics, the IoT market has experienced rapid unexpected growth, reaching $151 billion in 2018, and is foreseen to grow to $1,567 billion by 2025. 

Such rising popularity is driven by the ability of IoT devices to collect and analyze massive amounts of customer data. Through processing this data, banks and financial institutions can reduce NPAs, prevent fraud, increase operational efficiency, and completely redefine the customer experience. 

IoT could offer banks up-to-date information about the projects or persons in whom they are investing, allowing them to precisely calculate the return on investment. Mobile banking software now syncs with credit and debit cards, allowing users to make wireless payments using only their phones, with the goal of making transactions as simple as possible. The function has been extremely useful during the COVID-19 epidemic in stores and other busy areas.

Mastercard has used the technology to build strategic partnerships with market-leading companies such as General Motors, Samsung, and Coin. The purpose of these partnerships lies in the willingness to streamline some everyday activities. For instance, Samsung’s smart refrigerators have an in-built functionality through which you can order groceries. Customers can shop and select needed items, add them to the cart, and then have them approved by a 4-digit pin and paid for in a single checkout experience. The groceries are delivered to the customer’s home directly by the store, completely redefining the grocery shopping experience. How do you like this fintech trend?


IoT in fintech

Trend 2: Open Banking

Open banking

In 2015 the EU adopted the second edition of the Payment Services Directive. Since then open banking has become one of the most desired trends in fintech. The Directive aims to regulate online banking and payments within the EU and establishment of uniform rules for payments and transfers. According to PSD2, banks are to open access to their systems, giving their APIs to non-bank third parties for those to integrate their services to create a faster, safer, and more enhanced customer experience. 

The exposure of APIs to third-party developers obliges banks to more speedily innovate to meet the expectations of their customers more and remain relevant in the digital economy. In return, they get a chance to monetize existing assets, enlarge new revenue streams, and become players in a large, interdependent ecosystem. 

Open banking is a fundamentally new approach to finance that is primarily aimed at improving competition, driving innovations, and offering customers more personalized and profitable services.

According to Accenture, 90% of financial chairmen believe that open banking can increase organic growth by 10%. Customers also receive great freedom as they have the whole scope of financial services available to them. A good example is DBS in Singapore. They have recently set up an API developer portal that gives their customers access to more than 150 services such as money transfers, rewards systems, deposits, and many more.

Trend 3: Robotic Process Automation

PRA in fintech

RPA is one of the most commonly applied fintech industry trends. The industry is estimated to reach $22 billion by 2025 which is a substantial increase compared to $250 million in 2016. The implementation of RPA solutions can save fintech around 25-50% of processing time and cost, therefore it can be for sure listed among the biggest fintech trends in 2023.

Robots significantly improve customer experience, eliminate repetition, and reduce expenses. Compared to the salary of the in-house full-time employee, robot software “charges” employers nine times less not to mention expenses for company perks, vacations, sick leaves, etc. The quality of data processed and provided equals 99,5% accuracy almost eliminating the possibility of errors. They are much faster than humans due to the automation of a big part of standard task performance. 

The aforementioned Erica, a Bank of America chatbot has a highly advanced feature set deeply integrated with other financial technologies and users’ bank accounts. Therefore, it doesn’t behave like a usual chatbot that is able to play out only a pre-programmed scenario, and vice versa, Erica uses machine learning, cognitive messages, and advanced analytics to adapt to every conversation with a bank’s customer. The chatbot can remind users to pay the bills, show transaction history, and upcoming bills, and even monitor recurring payments.


Trend 4: Extended Application of Artificial Intelligence

Artificial Intelligence technologies have become a key part of finance industry trends and banks have no other choice except to implement AI in order not to run a race with a wooden leg. According to McKinsey, artificial intelligence might contribute $1 trillion to the banking industry annually. 

The technology allows banks to meet the demands of customers who are looking for smarter, safer, and more convenient ways to access and manage their money. There are countless ways of AI implementation in the financial sector. Most of us have already been actively using features that rely on AI solutions such as chatbots, biometric authentication, authorization, voice banking, etc. 

AI also helps banks to improve various daily processes such as reporting, data extraction, document classification, credit scoring, and many others that also have both direct and indirect impacts on customer satisfaction. AI improves compliance monitoring processes, timely identify potential fraud or money laundering transactions and prevents banks from cyber attacks.  

The deep learning algorithms which apply fraud detection with machine learning (ML), were found to be 50% higher effective at identifying fraud and had a 60% lower probability of false alarms. An analysis of banks that use AI credit underwriting found that it increases loan accessibility. AI algorithms accepted 27% more applications while lowering lending rates by 16%. Undoubtedly, AI application in banking is not limited only by those use cases, there are a lot more areas where AI solutions may improve efficiency and create fintech future trends.

AI in Fintech

Trend 5: RegTech

Regulatory management is one of the trends in finance industry that aims at restricting fraudulent activities with the help of machine learning algorithms produced on the basis of big data. 

The evolution of digital solutions is followed by an increasing number of data breaches, cyber-attacks, and money laundering. The ID Theft Resource Center states that only in the period between January 2005 and May 2020 there were 11,762 data breaches. Therefore, technology has become actively used in the financial sector for regulatory monitoring, reporting, and compliance. 

A Canadian startup Mind Bridge leverages Artificial Intelligence and Machine learning to build a data analytics platform for auditing. The platform integrates accounting data and domain expertise to find mistakes and detect possible risks. With the help of the startup, companies can have the entire set of their clients’ data analyzed and get a summary of possible risks and ways to omit them.


 Trend 6: Blockchain

blockchain in fintech

Blockchain is relatively new among banking fintech trends though the idea of decentralized finance has been discussed for many years. According to the Deloitte survey, 76% of respondents believe that digital assets will replace fiat money in the next 5-10 years.

Blockchain distributed consensus-based architecture eliminates any point of failure and doesn’t require the need for data intermediaries.

Because of these features, blockchains pose significant changes to the financial services sector, which has typically been centralized and managed by bank owners and regulators such as monetary authorities. It might also be extremely advantageous, allowing infrastructure to be streamlined while reducing fraud, boosting transparency, speeding up fundamental procedures like settling and clearing transactions, and increasing security.

For a long time, banks and other financial institutions have been testing and evaluating blockchain initiatives, with many of them already in operation. HSBC and Wells Fargo employ the innovation to resolve foreign exchange deals, while Paypal and Mastercard, as well as JP Morgan, which has its own cryptocurrency, allow payments to be made using blockchain cryptocurrencies on their networks. AXA, meantime, has developed its own blockchain technology to streamline the process of compensating clients whose flights have been postponed.

More new use cases for this extremely transformative technology will undoubtedly emerge in the years to come and we will experience a lot of new trends in the fintech industry related to the blockchain. 


Trend 7: Decentralized Finance (DeFi)

Decentralized finance is one of the new bank technologies that challenge the traditional centralized banking system as it doesn’t depend on central financial intermediaries but on blockchains, primarily, Ethereum.

Users engage with DeFi through software called dapps (decentralized apps) that allow them to lend, get a loan, trade, manage their savings accounts, and buy derivatives.

Without the need for assistance from intermediaries or central authorities, two parties can securely transact with one another directly. DeFi eliminates the need for users to share their identifying information with a third party or have their assets held in custody.

A wide range of financial services such as exchanges, lending, and payment apps represent decentralized finance. The transactions are executed automatically through smart contracts on blockchains such as Ethereum. It’s a completely computer-controlled market that innately executes transactions like issuing loans backed by cryptocurrency or paying interest on holdings.

DeFi has the potential to establish more open, free, and transparent financial markets everyone can access just with an internet connection.

In 2022, the global DeFi market size was worth $13,6 billion and is expected to expand at a CAGR of 46% from 2023 to 2030. Therefore, we can call it one of the top trends in fintech for the years to come.


Trend 8: Smart Contracts

smart contracts

Blockchain-based smart contracts are replacing traditional ones as they usually take longer and cost more. 

Smart contracts are simply programs that execute actions when the predetermined conditions have been met. By streamlining compliance through blockchain technology, smart contracts allow two parties to sign an agreement instantly and securely. This may include registering the vehicle, releasing funds, issuing a ticket, and so on. 

The process looks like this: by leveraging blockchain technology, an executable code facilitates an agreement between two parties without the involvement of a third party. The code that embodies the readable terms of a contract, runs on the network which executes the actions as soon as predetermined conditions are met and verified. As soon as the transaction is accomplished, the blockchain is updated and the contract is initiated and irrevocable.

Home Depot, for example, actively leverages smart contracts to resolve disputes with its vendors. It helps to bridge the gap in communication and visibility between entities and saves time for critical work and innovation.

Trend 9: WealthTech

wealthtech

Growing regulatory responsibilities, compliance requirements, and increasing customer demands made WealthTech one of the current top fintech trends. So, what is it?

WealthTech stands for the implementation of innovations in fintech, in particular investment management, to deliver services more efficiently and expand their availability to a wider social group.

Wealthtech companies comprise seven different verticals, such as:


  • Robo-advisors

Robo-advisors can analyze investment opportunities, income, goals, risk aversion, and personal data of users to provide them with the best investment advice and management.

  • Robo-retirement

An algorithmically generated retirement planning.

  • Micro-investments

Micro investing allows users to round up their everyday purchases to the closest primary unit of currency and invest the margin in their portfolio. This way, they don’t have to change their behavior to put aside a monthly sum of investing.

  • Digital Brokers

Digital brokers use algorithms to analyze vast amounts of data and offer investors best investment options and services such as asset allocation, tax optimization, and portfolio management.

  • Account Aggregators

Account aggregators use APIs to bring all individual or household financial accounts in one place.

  • Advicetech

Advicetech is used to help people and businesses make better decisions about their investments and finances.

  • Private Banking Solutions

Private banking solutions provide a range of personalized financial services and advice to high-net-worth individuals.

Wealthtech has already disrupted the traditional understanding of finance and economy by promoting knowledge and efficiency in financial services and democratizing a range of activities that were exclusive to experts not so long ago.  

Trend 10: Buy Now Pay Later (BNPL)

BNPL

Business Insider names BNPL services among global fintech trends with the highest speed of growth. The name speaks for itself. Buy now pay later lets consumers pay for purchases over time usually with no interest. How does it work?

A customer shops as usual and starts the checkout process and sees the option to purchase using BNPL. When the customer chooses this option, they enter some personal data and the lender runs a quick credit check to make sure the loan will be paid back. The percentage of retail transactions is billed directly to the retailer and the fee is deducted from the sum the lender remits to the merchant. If the customer pays off their full balance in a short period of time, they pay no interest. In case they need more time, the lenders can offer different payment plans.

This one of the current trends in fintech has already become increasingly popular among users, especially for beauty and apparel purchases. Most BNPL loans range from $50 to $1000.

Current Trends in Finance - a Key to the Industry’s Future

Implementation of the latest banking technology trends is a norm, not an option. 

 People are turning “digital” in their mindsets and actions at an extremely fast pace. They want to make payments and transactions, invest money, and get loans as swiftly as possible. Therefore, in 2023 among global fintech trends, we’ll continue experiencing more automation, decentralization, and AI-based advisors and assistants available 24/7 in our pockets.

To be most effective BFS companies should leave the traditional banking past behind and take up a new identity as an agile technology company. If you’re currently searching for a vendor to implement current fintech trends in your business, feel free to contact us anytime.

Frequently Asked Questions
Is fintech a growing industry?
Yes, fintech is a rapidly growing industry. It’s expected to increase at a CAGR of 20.5% and reach $699.50 billion by 2030. Fintech is expected to push out the existing traditional banking systems by implementing new technologies such as AI, blockchain, and IoT to maintain transparency and convenience.
What is the future of fintech?
The industry will continue to evolve with accelerating fintech technology trends. The majority of transactions will be automated so users will benefit from lower costs and faster services. In turn, financial organizations will also experience lower fees and save operational costs.
What are new bank technologies?

Latest fintech trends include extended applications of artificial intelligence, machine learning, the internet of things, blockchain, robo-advisers, decentralized finance, open banking, smart contracts, buy now pay later, and wealthtech.

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