The growth of fintech act as the main driver of finance transformation. Combination of technology and finance offering new avenues for innovative solutions to transfer, deposit, lend or exchange funds. Stay relevant with fintech industry trends is crucial for the implementation of fintech products. Understanding of market trends will help to navigate the fintech landscape and make an informed decision to introduce new products and services.
As the Fintech industry evolves at a rapid pace, staying relevant in the ever-changing digital fintech landscape requires keeping up with key trends and adapting to new technologies and customer expectations. The fintech trends of 2024 indicates that companies must focus on innovation, customer-centric solutions, and strategic partnerships to maintain competitiveness and ensure growth. Additionally, there will be emergence of new fintech trends both in the technology and regulation sectors.
Fintech Industry Trends to Watch Out
In 2024, the global fintech market size is expected to exceed $340bn. And this figure will increase reach $1,152 bn by 2032 with a staggering compound annual growth rate (CAGR) of 16.5%. Through the market size of fintech is getting staggering growth, investments were considerably low compared to previous years. In 2021, investments in fintech amounted to almost $226bn and in 2023, they reached $113,7bn.
Here the trends of fintech probably came into play! The fintech investors are more selective for investment in fintech projects now. The decentralization and autonomy of fintech products, a parallel fintech trend a highly visible. A competitive and in-demand solutions are capable to attract funds from investors. For all the more reason, to stay relevant and attractive, it is crucial to be aware of and come along with fintech industry trends.
1. Adaptation of Embedded Finance
Embedded finance will play a major role in 2024 as financial services become increasingly integrated into non-financial platforms such as e-commerce, retail, and travel. This allows and empower non-finance companies to handle monetary operations on their sides. The majority of modern businesses that sell products or services use embedded finance to offer seamless financial services and customer experience within their ecosystems.
Currently, embedded finance is one of the fast-growing and latest fintech trends. As per Dealroom, the embedded finance market will reach 7.2 trillion by 2030. The examples of embedded finance include but not limited to payments on streaming platforms like Netflix or Spotify, in online games, Roblox or Genshin Impact, and on online learning platforms, like Coursera or Udemy.
In addition, the non-financial services, other rapidly developing embedded finance services are insurance, lending, banking, and wealth management. Toi stays relevant in digital fintech landscape, companies should focus on –
- Partner with Non-Financial Platforms: Collaborate with industries outside traditional finance to integrate services like buy-now-pay-later (BNPL), loans, and insurance directly into their platforms.
- Offer API-Based Solutions: Build and offer open APIs that allow businesses to easily integrate your financial services into their apps, enhancing the customer experience and broadening your reach.
Fintech solution developer and operators need to be stay relevant and competitive, should focus navigating the embedded fintech market and provide services anticipated by customers. Offering right embedded finance services with right value propositions at right time is a MUST HAVE to influx of clients and ensure high return of investment (ROI).
2. Personalized Financial Services
AI and ML will continue to reshape the Fintech landscape next couple of years, particularly in areas such as personalized customer experiences, fraud detection, and risk management. By analyzing user data, AI-powered systems can offer tailored solutions and automate complex decision-making processes.
AI-powered fintech startups are getting attraction from investors steadily. In 2017, investments in AI-powered fintech startups were at the level of $500 million and in 2023, the same reached $2,500 million. The delegation of finance decision-making to AI gains momentum over last couple of years. According to Forbes, while making investment decisions, 59% of users trust AI-based services.
The AI based money management apps like Cleo, Eva Money, and Wizely become increasingly popular among users. The uses cases of AI and ML driven personalized financial services includes –
- Budgeting
- Expense tracking
- Investment advice
- Bill payment reminders
- Financial planning
To stay relevant, fintech companies can focus on the followings as a driver personalized financial management service.
- AI-Driven Personalization: Implement AI to offer customized financial products, like personalized investment portfolios, spending insights, and savings recommendations based on user behavior and preferences.
- Automation of Operations: Use AI and ML to automate customer service with AI chatbots, fraud detection systems, and loan underwriting, increasing efficiency and reducing human error.
3. Decentralized Finance (DeFi)
Blockchain and DeFi are poised to continue disrupting traditional financial systems by enabling peer-to-peer transactions without intermediaries. DeFi, or decentralized finance, is an alternative model offer decentralized lending, borrowing, and trading services, while blockchain provides greater transparency and security.
2024 marks as the year DeFi turn into one of the most significant fintech industry trends. As of April, 2024, the total value locked in DeFi platforms was accounted for 86.8 bn, while in 2023, level of decentralized operations did not rise above $52 bn. However, the investment for DeFi platform in 2024 is almost two times less than the same in 2022.
The recent trend suggests that, it is the time to jump on the fast-moving DeFi fintech trend. Fintech businesses should consider for the following aspects to stay relevant in fintech landscape and ahead of time.
- Leverage DeFi for New Financial Products: Offer DeFi-based products such as P2P lending, decentralized insurance, and blockchain-based savings to capitalize on the growing demand for alternative finance.
- Tokenization of Assets: Explore asset tokenization using blockchain to enable fractional ownership of real estate, artwork, or other high-value assets, making these investments more accessible.
4. Open Banking and API-Driven Financial Services
Open banking will continue to transform the Fintech landscape, enabling third-party developers to access financial data through APIs to create innovative products and services. This trend will allow Fintech companies to collaborate more effectively with banks and tech firms.
In 2024, open banking enables new cooperation forms between banking and non-banking organizations for development of advanced fintech products. Open banking concept first officially regulated in 2015 by the Payment Service Directive (PSD) 2 in Europe. Later the technological advancements of 2024 and the appearance of PSD3 create new trends and products in the fintech banking industry.
Open banking market size is estimated to reach $11.7 bn in 2027. In 2023 the open banking market size was $5.5 bn. On the other hand, the number of open banking calls will be reaching 580 in 2027, five times compared to 102 in 2023. Open banking accelerating innovative fintech solutions like – account aggregators, non-banking card issuers, real-time fraud detection solutions and instant loans and credit scoring.
Fintech providers and operation, can focus on the followings to ensure relevance in ever growing market landscape –
- Develop Open API Infrastructure: Build open API solutions that facilitate seamless data sharing with banks, enabling you to deliver personalized financial services like account aggregation and smart budgeting tools.
- Create Fintech Ecosystems: Leverage APIs to create interconnected Fintech ecosystems, offering users a comprehensive range of financial services from one platform.
5. Rise of Central Bank Digital Currencies (CBDCs)
The rise of Central Bank Digital Currencies (CBDCs) is reshaping the global financial landscape as governments explore digital currencies as a way to modernize financial systems and increase the efficiency of payments. CBDCs are digital versions of a country’s official currency, issued and regulated by central banks, offering a state-backed alternative to decentralized cryptocurrencies like Bitcoin.
Central Bank Digital Currencies (CBDCs) can be used to make payments, make P2P transfers, invest in securities, and make other monetary transactions. The correct implementation of CBDC, it will reduce the requirements of collecting documents to prove the source of funds. More countries are exploring the potential of CBDCs, that will lead to revolutionize payments, promote financial inclusion, and offer new ways to manage monetary policy.
Currently, more than 130 countries are planning to develop their own digital currencies. Countries like USA, UK, Australia, New Zealand, France, Switzerland, Ukraine are already on the path to digitalization of their currencies. Furthermore, additional 13 cross-border wholesale projects are aiming to streamline international trade. Fintech trends 2024 suggest that we will see more of these projects in the coming years.
6. Real-Time Payments and Cross-Border Transactions
Real-time payments and cross-border financial services will continue to gain traction as consumers and businesses demand faster, cheaper, and more secure ways to transfer money internationally. To stay relevant, fintechs need to focus on –
- Adopt Real-Time Payment Systems: Implement real-time payment solutions, allowing users to send and receive funds instantly, improving customer satisfaction and transaction speeds.
- Enhance Cross-Border Capabilities: Use blockchain or digital currencies like stablecoins to offer faster and lower-cost international payments while maintaining transparency and security.
7. RegTech and Compliance Automation
Bedsides, the emergence of new fintech products Fintech growth is characterized by easier access to personal data and bigger impact on financial decision-making. In order to secure the data, cybersecurity is essentials to address more sophisticated and tech-savvy cyber-attacks. Considering this, the fintech industry will experience new regulatory standards for in 2024.
With increasing regulatory demands, RegTech (regulatory technology) will be essential for Fintech companies to stay compliant with regulations such as anti-money laundering (AML), know-your-customer (KYC), and data privacy laws.
- Automate Compliance: Implement automated RegTech solutions that monitor transactions in real-time, conduct identity verification, and ensure continuous compliance with evolving regulations.
- Streamline KYC Processes: Use AI and machine learning to simplify KYC processes, allowing for fast and secure customer onboarding while minimizing the burden of manual compliance.
The Fintech industry is poised for further innovation in 2024, driven by advancements in AI, blockchain, open banking, and sustainability. To stay competitive, Fintech companies must embrace these emerging trends, focusing on personalized services, embedded finance, and real-time payments, while ensuring compliance, security, and inclusivity. By adopting cutting-edge technologies and staying customer-centric, Fintech firms can thrive in the ever-evolving digital financial landscape.
References:
FinTech Market Size, Share & Industry Analysis
Value and number of investments in fintech worldwide from 2010 to 1st half of 2024
The Rise of Embedded Finance | dealroom talks
Do Americans Trust Tech Giants And AI With Their Money?
Study shows 130 countries exploring central bank digital currencies
Central Bank Digital Currencies Tracker
