Over the last decade, we’ve seen major technological advancements in every industry, fintech included. With the rise of artificial intelligence, cryptocurrency, and contactless payments, the fintech industry is, in particular, growing and changing at a rapid speed.
Our research has identified seven fintech innovations that promise to revolutionize how we manage, invest, and transact.
AI in Personal Finance
Artificial intelligence (AI) is revolutionizing every industry it touches, and personal finance is no different. AI-powered financial apps are slowly becoming our virtual financial advisors, as they’re able to quickly analyze our spending patterns and then, based on this information, offer us tailored financial advice, helping us save, invest, and budget.
In the not-that-distant future, we’ll all have AI-powered personal finance assistants designed to understand our spending habits and patterns (that not even we can sometimes see or understand), as well as our unique financial goals, so they can offer us practical personalized insights into our finances.
Contactless Payments and Digital Wallets
The unprecedented convenience that contactless payments offer has become an everyday occurrence for most people, a process that we don't even think about anymore. From using your smartphone to make purchases to tapping your card on a point-of-sale terminal, the era of physical wallets is slowly waning. The prediction is that we’ll replace our physical wallets with their digital counterparts in the next decade.
This is because digital wallets are not only more convenient (why carry a wallet and a phone when you can take only your phone with you?) but also easier to use. Who wouldn’t want all their financial assets, including traditional currency, stocks, and cryptocurrencies, neatly organized in one digital wallet?
Whether you're juggling various payment methods or eagerly awaiting your tfl receipt for contactless payment, the digital wallet will streamline practically all your financial interactions, making them more efficient and user-friendly.
Decentralized Finance
Decentralized finance, or DeFi for short, is a new financial technology that aims to eliminate intermediaries like banks and brokers, and reduce fees, while facilitating peer-to-peer transactions. To create decentralized financial systems and streamline cross-border transactions, it leverages blockchain, the technology underpinning cryptocurrencies.
In the coming years, this technology will revolutionize traditional banking systems while enhancing security, transparency, and efficiency. We are, of course, already headed in this direction, but expect even more reliance on cryptocurrency and blockchain technology in the future.
Embedded Finance
Embedded finance is the integration of financial services into nonfinancial infrastructures. Think of a department store offering its own credit card or a ride-sharing app offering micro-loans for your trip. This fusion of financial services with everyday activities is another trend we expect to grow rapidly over the coming years.
The best thing about embedded fintech is that it greatly enhances convenience and accessibility for customers (its implementation is a different, more complex story). As this technology grows and evolves, expect various financial services to seamlessly embed themselves into your daily interactions.
While embedded finance is known for its convenience, there's another exciting advantage – it can be a powerful tool for learning how to prevent payment fraud:
Greater Control over Transactions: Embedded finance platforms have a wealth of data about their users' typical spending habits and behavior within their ecosystem. This allows them to identify suspicious transactions that deviate from the norm much faster than traditional banks.
Real-time Risk Assessment: Embedded finance systems can leverage real-time data and machine learning to assess the risk of a transaction instantly. This can help prevent fraudulent activity before it happens.
Frictionless Authentication: Many embedded finance solutions utilize biometrics or other multi-factor authentication methods for secure logins and transactions. This makes it harder for fraudsters to steal and use stolen credentials.
Robo-Advisors for Investment
Investing is no longer reserved for finance professionals. Robo-advisors, powered by algorithms, are already making investment strategies accessible to everyone, and the future looks even brighter for these artificially smart machines.
In the near future, you won't have to navigate complex financial jargon or spend hours researching investment options; with robo-advisors, you'll be able to set up an investment portfolio tailored to your risk appetite and financial objectives with just a few clicks.
These automated platforms will become better and better at analyzing market trends, risk tolerance, and your own financial goals. The plan, as we see it, is to make the world of investing more inclusive and user-friendly.
Enhanced Cybersecurity
As financial services become increasingly intertwined with various technologies, ensuring the security of personal and financial data is paramount. We predict this decade will witness a surge in innovative cybersecurity measures designed to stay one step ahead of evolving threats that are bound to come with evolving technology.
Biometric authentication, such as facial recognition and fingerprint scanning, is bound to see various advancements as we'll need more secure and user-friendly ways to access financial accounts as time goes on. Of course, AI will also play a key role in cybersecurity, namely predictive threat analysis, identifying and neutralizing potential risks before they can compromise sensitive information.
Blockchain, the same technology transforming finance, will continue to bolster cybersecurity as its decentralized and immutable nature makes it inherently resistant to tampering and fraud.
As for quantum computing, it will bring both challenges and opportunities for cybersecurity.
While quantum computers have the potential to break current encryption standards, researchers are actively developing quantum-resistant algorithms to thwart any malicious attempts.
In Conclusion…
There’s no doubt that the fusion of finance and technology is set to redefine the way we interact with our money. From AI-powered personal finance assistants to blockchain-driven security, it's shaping up to be an exciting journey and we anticipate a more accessible, transparent, and efficient financial future.