2019 was an excellent year for fintechs in terms of exposure and raising awareness among the majority of the population about what fintechs are and what potential they hold for the regular citizens. In 2019 we saw a major spike in the number of fintech, in the funding of these fintechs and the collaborations between these startups and the larger, more traditional institutions. 

The collaborations between the two and the increased adoption of technologies provided by the new companies has earned the industry a spot on the 2019’s most talked-about industries.

While fintechs are becoming even more decentralized and the new and innovative ideas are now coming from all four continents this seemingly positive development doesn’t come without a cost. 

This was also a year when the authorities started to question the legitimacy and the risks connected with these companies. There were a plethora of challenges for fintechs and their services to overcome and the pressure from the regulatory bodies doesn’t seem to have plans to change its attitudes towards fintechs anytime soon. 

Despite these challenges and controversies surrounding the industry, a lot of which was largely due to the newness of the sphere and the many misconceptions about what fintechs fo and what they plan to do in the future, the year was definitely a success for this particular financial sectors.

We’ve seen the overall spillover of the industry into all other major businesses and economic sectors. While at the beginning of the year conversations around fintech were still somewhat reserved and uninformed, at the end of the year fintechs managed to become somewhat of a necessity for any company and service provider wishing to stay relevant and live up to the customer expectations. 

As we go into the new decade questions regarding the future of the industry are starting to rise up. By the end of the year, we’ve had conversations around the relevancy of banks in the era of fintechs and all the security concerns that the authorities can’t seem to overcome or as well as dialogues between the two and who they often seem to end up in a deadlock.

Whether or not fintechs have the capacity to withstand all the advertiser and challenged coming at them from every angle is up for debate but the fact is that fintechs have now built a strong and loyal customer base which is not something most banks can be proud of these days since the majority of their customers would probably ask for a better services.

Fintechs have opened many doors for those who don't have access to regular banking or the process is too complicated to even begin to understand it and deem it useful. It has become somewhat of a dilemma for the banks who can’t help but wonder whether or not they will soon become less relevant in the face of the new, easier infrastructure.

While the overall reception from the public has been largely positive, there is a lot of room for improvement there. We will discuss some of the main qualities and challenges that fintechs will probably have to focus on in the following year, along with some experts’ analysis of the industry and its long term future. 

There are 3 major predictions that are seen through and route industry professional regarding the following year and even the long-term development plan for the fintechs

Europe will finally catch up with the rest of the world

It has often been said that while Europe can be praised for a lot of achievements, becoming a full-fledged participant of the fintech revolution is not something the continent can brag about. Forbes dedicated an entire article this year to the potential of the European startup and why the continuously failed to establish themselves in the process. Europe has definitely produced many technological innovations, Skype coming to mind first but they have failed to create a hub within the continent that would consistently generate innovative technologies and most important stay within Europe after the company or the technology starts to take off. Too many European fintech startups have been purchased by companies outside of the continent and far too little entrepreneurs and innovators focus on keeping the innovation localized and taking credit for their work.

This might all change in the years to come according to the co-founder and CEO of TaxScouts, Tram Abramov. For the last decade or so, London has stayed at the top of the fintech game across the continents. According to last year’s stats around 50% of fintech startups come from the UK and this is the dynamic that needs to change in order for Europe to establish itself among industry professionals from all over the world. According to the predictions, Other countries will start to catch up with the UK, maybe even surpassing it in the number of fintechs and in the next year, we might finally see the real innovation and many success stories happening in Europe’s fintech scene. The fact that Europe wasn’t in the leading positions in this regard has baffled many industry professionals. Europe has continuously prioritize the legislative frameworks and data regulations, which were, of course, necessary but has largely derailed Europe from providing actual innovation and technological advances. We’ve seen a major shift at the end of this year is not only the amount of European fintech but also the venture capital investment in Europe. This time around European fintechs have the chance to develop and grow the startups and won’t need to sell-out and look for the home elsewhere. The full development of the European startup scene will probably begin in 2020 and by 2021 we might have an entirely different picture. Based solely on the changes we’ve seen at the very end of this year is a great starting point to deliver on the potential and the capabilities of European innovators and hopefully, we’ll see this prediction come true by the end of 2020.

The services will become even more personalized

One of the major flaws of the traditional financial institutions is the approach is very transactional and is focused primarily on banks. In Southeast Asia, one of the major complaints is that the services are not only inefficient but the process of filing paperwork for hours, waiting in never-ending lines only to get mediocre service is one of the most dreadful activities for most citizens. There is a reason why traditional banks and people behind them are so often villainized in the communities because the service they deliver is almost never to benefit the customer in any way. The modern banking system is very much based to fit the needs and the wants of the banks and very little attention is paid to customer experience. Now, this does not concern all banks since there are some who value their customers and are after their loyalty, but this would mostly be the case in the developed countries where the clients have the choices to go to another bank if one does not provide the proper services. In most of the world though, the banks know that the options for the people are limited so they take full advantage of that and do absolutely minimum for their clients. A major reason why fintechs took off so fast in the east and the southeast is that there was a severe lack of financial services available for these people that would fit their profile and lifestyle. API technologies and Open banking standards are what pushed the fintechs into their success, according to the CEO of Investment I Yodlee, Stuard DePina. According to his predictions, this trend of personalized offerings will only grow in the future and will become more mainstream even in traditional banks, who now have something to worry about. Offering personalized services goes far beyond just having access to the client’s data. It requires a careful examination and the proper evaluation of what the client might be looking for that they can’t get anywhere else. Fintechs did an amazing job of the African continent as well as SouthEast Asia and managed to create a very loyal user-base for themselves. Another aspect of this prediction is that we’ve seen the increased access to machine learning and the viability of full-stack, vertically-targeted banking platforms. AI which is already used in most fintechs will likely become even more widespread within the industry and since the trend doesn’t seem to be going anywhere and AI has now become an essential part of our everyday lives, Fintech won’t be an exception either. Fintech will have the easiest time with personalized information this following year according to the head of data analytics and strategy at Kabbage, David Snitkof. There’s a chance that banks will likely increase the AI adoption as well, but fintechs will definitely lead the process in this direction. Personalized financial services are the best way to keep the customers loyal and to attract new ones, even those who have multiple precautions regarding fintechs. 

Prediction about Banks-Fintechs relationships

There are different opinions regarding this particular aspect of the financial industry. The two major forecasts are that either banks and fintechs will embrace each other and develop meaningful partnerships or that banks will fail to catch up with fintechs in the technological aspect and will slowly become less and less relevant. Probably the most realistic result will be somewhere in between. While the discussion about the direction this dynamic should take has been happening all around the world in different public events, conferences, and forums the consensus is not there. We aren’t even sure if banks, in general, want to get involved with fintechs. 

This relationship is particularly hard to generalize because we’ve seen some successful collaborations with the financial giants like Goldman Sachs but then there are the middle tear banks who dont even want to hear about working with fintechs or giving them a helping hand.

Since not all banks follow the same strategy it’s hard to predict what will come out of this, but the general trend might lean towards collaborations rather than straight-up adversaries.

But the peace offering must come from the banks. We’ve seen some banks who have outright blocked fintechs from accessing the customer information, even though the client has issued a right to the company to access the information. There is a lot of tension, mostly coming from the banks who don't want to see the financial world shift so drastically. They want to get to know the technology used by these startups by they don't necessarily want to have to sacrifice anything. Be that the way they deal with some of the customer information or changing their approach to some aspects of financial transactions. They have proven to be very stiff and inflexible in this regard. 

In 2020 the two will need to find a way to coexist and to embrace each other’s advantages. There are some security concerns around fintechs that unite banks and the governing bodies. 

Otherwise, the banks will have to face the harsh reality that a lot of their customers might not stick around for much longer. Banks have the safety net of long-time customers who don't trust the newly introduced fintechs and only ever want to do transactions through traditional banks. But Soon enough the banks will have to start looking for new customers and if they isolate themselves from fintechs it is not likely that the younger generation will choose banks that are associated with slow procedures, extra fees, and complicated procedures. Instead, they will probably take the risk of lesser security, accompanied by easy services where the information is already analyzed and services are personalized. It is very likely that for the banks to stay relevant they will have to give up some aspects of traditional banking, at least by the end of next year.

Most of the prediction regarding fintechs is very favorable for the industry. The fintech startups don't show any signs of slowing down their development. Their customer base has been continuously expanding and it is likely that we will be hearing about fintechs even more in 2020.