Top-5 fintech innovations you can't ignore in 2020
The modern technical revolution has affected not only the information sphere itself, but also the economic one. Significant changes in the field of finance are associated with need to reduce costs, improve the security of financial transactions, as well as ensure that the services sector is in line with a constantly developing society.
The financial market in recent years has been largely affected by technological progress, which is associated with the introduction of online services and the use of blockchain in the economy. First of all, innovations are introduced in the banking sector, where almost all operations are based on modern technologies. As you can see on the Finances Online chart, in recent years, the percentage of consumers using fintech innovations has become really huge.
In conditions given, consumers are accustomed to expecting the hassle-free use of digital technology when handling their funds. Financial companies should provide such services if they want to stay afloat. Because of this, partnerships and mergers between well-known companies and fintech innovative startups are becoming more frequent because in this way they can offer their technology to large companies and gain access to huge pools of customers.
According to Marketscreener, it is expected that by 2022 the fintech innovative services market will reach nearly 26.5 trillion. US dollars, significantly increasing growth rates of about 6% over the forecast period. The growth in the financial services market is driven by an increase in demand for insurance, loans and end-user investments and global economic growth. However, the fintech services market is expected to face certain restrictions due to a number of factors, such as security issues, tight government regulations and interest rate fluctuations.
However, enough of statistics. Let's get straight to the meat and consider the most current trends and tendencies that the innovator in the field of fintech should pay attention to in 2020.
1. Automation of fintech processes
Nowadays, almost everything can be automated. Bots can keep records and make transactions, carry out calculations and work with requests. Even if it is not possible to automate all processes, robotization allows us to provide better support for customers. In particular, thanks to the development of technology and AI, we have already had the opportunity to much better:
- detect patterns in huge data sets and quickly see deviations from normal values.
- predict the probability of the occurrence of certain events.
- customize products - fast development of rules for different customer profiles.
- make decisions - thanks to a set of rules that is generated as a result of mining significant amounts of data, and not the old fashioned way - based on the same experience of generations.
In addition, in the field of fintech innovations there is a widespread introduction of RPA systems. RPA (Robotic Process Automation) is software that automates business processes. The system performs tasks better and faster than humans at all stages, so you will soon be able to forget about manual data entry and processing. This should increase the efficiency of banks: employees will not waste time on primitive and repetitive tasks, but rather focus on complex and important issues.
In recent years, RPA systems have achieved phenomenal growth. According to Gartner forecasts, in 2020, the RPA business will grow by 57%. The system has a number of important advantages:
- error-free data analysis
- reduction of labor costs from 25% to 60% (many employees are replaced by automated systems).
This is stated by leading AI expert Andrew Ng and confirmed by Deutsche Bank CEO John Cryan. In addition, fraudulent operations will be minimized, and the speed of solving problems will increase.
2. Using Fintech to Protect Users
Cyber threats are coming. According to Security Magazine, last year 61% of US companies experienced cyber attacks (compared with 41% a year earlier). Losses also increased from 229 thousand to 369 thousand dollars per company on average.
According to experts from Forbes magazine, these numbers will only increase. In October 2019, Google announced the achievement of quantum superiority (a state when quantum computers can perform calculations radically faster than traditional machines), having performed calculations on a quantum computer in 200 seconds, which would have taken an ordinary supercomputer about 10,000 years. In the long run, quantum computing risks will ruin modern cryptographic security. Currently, the main trends in cyber security in the fintech innovations industry relate to the changing nature of threats, the increasing use of biometrics, the increasing role of security service managers in financial services institutions, and new categories of security innovations.
Despite the fact that thanks to technological innovations, it becomes easier to make transactions, but at the same time, security issues are becoming increasingly clear. A huge number of applications allow users to complete transactions with one or two clicks. However, it is this simplicity that makes transactions more insecure, and the issues of user authentication and fraud protection are becoming much more complex. While in response to the rapid development of fintech innovations, banks are joining forces to create a powerful network, fraud protection and identity authentication companies also work together to provide the best possible user experience.
It is logical to assume that in fintech, one of the key trends will be solutions that protect vulnerable consumers, such as older people who are targeted by scammers, or teenagers who study financial management. As an example, a new technology for Visa prepaid cards, blocking certain purchases that seemed suspicious.
3. Implementation of insurtech solutions by large insurance companies
One of the most important trends in the fintech innovations area will be the use of it by large insurance operators of technologies that simplify the writing and signing of a life insurance policy. Several fintech startups have successfully implemented such policies for up to $ 1 million without a mandatory medical examination. They check the history of prescriptions written on the client’s medical card for approval of insurance.
In 2020, it makes sense, instead of creating and selling products that seem relevant and classic, to work with the needs of customers and their expectations. The main thing to consider is that customers seek digitalization: according to a Bain & Co study, 79% of consumers in the world say that over the next years they will primarily use digital channels to interact with insurers.
4. Decentralized finance growth
Before the advent of blockchain-based solutions, the term fintech was widely applied to companies that provided modern interfaces, but at the same time worked on the basis of outdated financial technologies used by banks (ACH, SWIFT). Newer developments are not associated with these technologies and can reduce costs and save time. In 2020, we can expect new solutions that use decentralized financing (DeFi) to reduce commissions.
DeFi (Decentralized Finance) is a decentralized finance industry, also called "open finance." According to the Binance report, the foundation of DeFi's principles is the creation of an innovative ecosystem of fintech services that is accessible to everyone without exception. However, it does not need permission from any central authority to access financial services. Also, the main difference between the DeFi ecosystem is that the user of decentralized financial services acts as the custodian of his money and completely controls his assets. It is worth noting that, in the opinion of the decentralized finance community, developers should adhere to a number of principles. First of all, products must be open source and compatible with each other, as this allows products to interact openly within the ecosystem from a technological point of view.
5. Acceptance of cryptocurrency by institutional investors
According to analysts, in 2020 we will see a surge in the adoption of cryptocurrencies by institutional investors (these include investment funds, pension funds, insurance companies, credit unions). They got those solutions that meet the complex, high requirements of modern financial institutions.
For example, in early May 2019, the financial company Fidelity Investments published a study demonstrating the high interest of institutional investors in digital assets. The survey was conducted among 441 institutional investors. 72% of respondents said they prefer to buy investment products containing digital assets, while 57% bought them directly. At the same time, Fidelity launched a platform for trading in digital assets last year; in March, it launched a soft start of a repository of such assets for institutional investors. Bloomberg later reported that Fidelity plans to expand its crypto asset services.
In addition, due to the growing interest in cryptocurrencies and blockchain, new technologies and proposals for converting cryptocurrencies into cash are expected. Currently, there are many restrictions in this segment, but experts are sure that where there is confusion in regulation, there are new opportunities, said Anthony Holder from C&H Financial Services.
So, now you know what the most relevant trends of 2020 in the field of fintech innovations will be. But, no matter how tempting the prospect of starting to implement your fintech innovation seems to be, remember the importance in the process of fintech innovation development the role of a good performer, or rather a company that will develop an innovative solution for you. You can find out how to find such a contractor from our article How to choose software development company. And how to start the direct process of introducing innovation, read our material Idea Development: How to Create and Implement Innovative Ideas.