Like any other sector, the financial technology (fintech industry) is going through changes and will face unique challenges during COVID-19. You may still be apprehensive about ordering groceries or your latest gadget online. However, there are more drastic changes in the financial sector. These fintech trends will impact all things that involve money, from banking to payment.
Blockchain will take center stage, expanding the capabilities of digital wallets. If there are regulations and security standards in place, nations will be happy to embrace these incredible technologies. All these aspects have made fintech app development services in high demand. If you are thinking about investing in the same, then you have certainly landed on the right page.
We are here to with few of the predictions in the below segment related to it so that you can move ahead with clarity and then invest in fintech software development.
Prediction #1 – Rise in Embedded Finance Without Banking Applications
Despite the holiday season seeing an increase in BNPL usage, Klarna and other BNPL companies are facing a lot more challenges than usual. The stock market is negative about the whole BNPL trend due to increased interest rates and customer default rates that were not correctly calculated. Companies will therefore change their offerings.
BNPLs will continue to be around, even though they are a more advanced version of layaway purchase. This is especially true given the success of WeChat’s BNPL platform which was launched in April 2020 right as the pandemic struck.
Prediction #2: The rise of non-bank lending.
All types of non-bank lending are going to become more common. They’re not only going to be used to fund visions, but loans for things already done. Think about an organization that has a purchase order to fulfill. It would need to share financial information in order to obtain financing for the purchase order. Investors will then be interested in a loan to the business. This will ensure that everything is secured in the same way as a bank, but not the bank providing capital.
Non-bank lending can reduce the wealth gap by providing loans to minorities. However, it can also increase profitability for businesses, even those with government-backed contracts. Imagine a company that constructs roads. Before you can be paid by the government, you must pave the road. However, you will still need to pay costs in the interim. Because the lender is confident you will be paid, a non-banking lender may offer capital. They’ll charge 8 percent interest instead of the bank’s 15 percent.
SoFi is a non-bank lending entity that has demonstrated how successful this model can work with certain markets. It offers memberships, products and services ranging from student loans refinancing to loans IVF; Prosper; Rocket Mortgage and Upstart.
Prediction 3 – Only 10 percent of cryptocurrency companies will survive and thrive
It’s like 1999 all over again. Everyone needed a domain name. 90 percent failed to succeed, but the ten percent that did survive were successful: Amazon, Ebay and Shutterfly. We don’t even know the names anymore of all the successful ones, as they were bought by larger companies, such as Drugstore.com by Walgreens. However, they were still extremely successful.
Cryptocurrency will be no different. Most of the failures will fade away. Webvan, Pets.com, and Boo.com are all forgotten or talked about by anyone. Or Kozmo.com? FTX, BlockFi and Voyager Digital are the Pets.coms of the crypto bubble.
FTX may be the poster child of crypto-failures, but the surviving companies will eventually have real and enduring worth.
Prediction 4 – Regular banks will acquire non-banks at a faster pace.
Imagine how pharmaceuticals work. The drug is created by medical and research universities, then it’s proven by biotechs and sold to a large producer like Pfizer. It will be the same with neobanks. A small bank will come up with AI-powered credit cards lending. This doesn’t allow for credit limits, but instead allows for credit that is adjusted based on income and other data points. This product is profitable and comes with very little risk. It will be purchased by a super-regional, mid-sized or emerging national bank such as Capital One or PNC, and folded into their offerings. Goldman Sachs purchased BNPL platform Greensky from Greensky for $2.2B, in March 2022. Capital One also acquired many fintech companies including Lola, a travel tech startup, in 2021.
This is just another example of big companies buying small businesses to acquire technology or expertise.
Prediction 5 – Credit Analysis To Become More Powerful With AI
The last decade have seen credit scoring get better, and now predicting credit behavior and patterns with AI applications has gotten easy. Credit analysis has had an inherent bias or unconscious component for as long as credit analysis has existed. While there are still many things to fix with regard to credit scoring, even AI, it will get better. Data is data. It tells the truth. This will increase consumer access to credit which is good news for the economy. The models will be able to assess who is at greatest risk of falling behind with their debt. This will allow for better capital allocation.
Prediction 6: AI-based consumer buying And embedded financing will work together
AI will tell you if it isn’t available, and if it is, AI will show you another similar product.
All of this will be made possible by embedded finance and artificial intelligence: A one-stop shop right from your smartphone. Snap a picture of the item, and you can find it within seconds. You can also pay with a touchless payment and have it shipped right to your door. All from one app. Apps will be integrated with QR or NFC codes to make the payment systems automated.
Prediction 7 – AI will streamline financial transactions
This will happen very quickly: AI will scan contracts such as ISDAs (International Swaps and Derivatives Agreements), and flag unusual clauses for lawyers. Instead of paying a lawyer 20 pages to go through, it’s going to be a quick process. While there will always be things in contracts that can be modified that only a lawyer/law clerk can detect, AI, natural language processing and optical character recognition will make legal documentation much simpler.
A machine learning algorithm can flag unusual information and help you save money on legal fees. Claira is a document intelligence tool that is taken into consideration for the analysis of complex documents. It will help in the process of streamlining and managing negotiations, risk management, strategic investing, and projections. This is more than what we think of smart contracts. They are rooted in Blockchain. This is document intelligence fintech. It will have a profound impact on every aspect of a company’s operations.
It’s clear that fintech will revolutionize the financial industry and financial institutions way of service in many ways. This includes increasing the use and availability of payment gateways, providing credit, and helping people around the world conduct personal and business transactions under COVID-19. Fintech will help boost ecommerce customer experience worldwide with its easier account setups, and no-fuzz transactions all you need is the assistance of reliable fintech software development company.
Fintech will continue to grow due to the steady population growth in countries like India and China. If you add in the fact that fintech is growing at a rapid pace and increasing internet penetration, there is a real possibility that the next generation will see fintech very different than it is today, in five years. This is why the demand for FinTech software development services is getting higher. You can connect with the experts and get all the assistance to make the most out of it.
Alicia is a technical content writer and is associated with A3logics for over a couple of years. She has been in touch with the Mobile App Development Company and is often found struggling with some unique topics for her upcoming projects. She is often found discussing the latest developments with the technical team. When not working on any of her writing projects, she is either reading any of the Agatha Christie mysteries or busy gardening.