Over the past decade, fintech has greatly disrupted the way people and businesses interact with financial services. In the future, fintech trends will continue to improve the livelihood of people with meaningful and valuable technology-based financial services. This post is all about the key drivers leading fintech into the future.

Innovation trends in any industry are dependent on the evolving needs of customers and the lifecycle/stages of the products that are serving those customer needs. That said, there are four core facets to explore here. These facets are the bridges that transport us from one trend to another in building a tomorrow that’s more inclusive, equitable, and built for improving financial wellbeing. 

1. “Why not?”; “How might we?”

These two simple questions, ‘why not?’ and ‘how might we?’, are the most powerful questions, especially when raised by individuals and communities that constantly seek out opportunities. When courageous minds come together to discuss problems and discover better solutions, the whole industry is pushed forward.

Advancements in one domain of the industry also boost other domains. For example, Blockchain was built to support the building of alternate currencies. While this technology was primarily used for building currencies such as Bitcoin, the underlying data structure/infrastructure is used by other verticals in the industry such as maintaining smart contracts, tracking ownership, regulating and auditing, etc. In the same vein, these advancements continue to push other industries such as the supply chain. 

Even technologies produced or advanced in other industries can improve the fintech landscape. As an example, chatbots and messaging systems, while built for improving customer service agnostic to any industry, are now being tailored to financial services for providing automated personal finance assistance.

At the root of any key change is the group of people who are willing to push the boundaries and think big. With continuous support in funding, talent, and technology, these daredevil entrepreneurs will continue to advance the financial ecosystem.

 2. New Use Cases

In this rapidly changing environment, we continue to expect new things to satisfy our ever-growing needs. Old solutions to common problems are no longer enough; when Alexa, Google Voice, and Siri came into being, the heightened expectation was that these services could understand our questions and provide answers. Now, that’s not enough, and quite arguably so – we need these services to get better at understanding not only individual users but also group users/usage; we also need them to help us understand our context and evolve to back and forth dialogue – not simply answer individual questions. In the same way, once upon a time, taking a photo of your check and depositing it digitally via a mobile app was revolutionary, but now it has become another industry-standard: what was once a major differentiator is now an expected requirement in order to remain competitive.

Greater Mobility:

The new use cases will include international mobility (although COVID-19 has shrouded this domain in uncertainty). People want to be assessed fairly in terms of their ability and willingness to pay back their debts (i.e., their creditworthiness). The concept of global credit history has not yet been implemented, but with each new generation having a greater desire to travel and live in different geographies, global mobility is quickly becoming the norm, and the financial support system will evolve  to support this trend rather than hindering it.

Greater Participation:

New entities may start participating in the financial ecosystem in unexpected ways. For example, some have proposed the concept of autonomous cars participating in the economy in ways similar to humans: the vehicle could be a taxpayer, contributing to the economy by working day in and day out. If we imagine that these AI-powered machines will not merely be driving themselves around to transport humans, but could also enjoy life in their own ways, then perhaps we can also imagine that these new entities could become participatory members of the new economy. While this is perhaps far in the future, it’s easier to imagine more participation to come from new companies or people joining the digital economy. A new set of payments and infrastructure is being built to enable the gig economy, including tens of millions of users who are using the internet for the first time to fuel their careers or banking for the first time. The next million or billion users will have different expectations; their underlying emotional and social values regarding their finances are likely very different from those of current user bases.

Greater Choice & Flexibility:

The formation of a new, universal financial language is necessary due to the advent of alternate currencies and decentralized networks; more than simply being interoperable, this new language will need to open new doors such as carrying financial transactions without the need to exchange monetary value. Money is merely a way of democratizing finance by using a common denominator to assess the values of goods and services. However, with the advancement of technologies, the world might one day move beyond its current definition of money.

3.  Neglected Use Cases that are Now Worthy of Solving

There are circumstances where once-neglected problems become more important. When a new technology or support enables previously impossible opportunities to become realities – for example, imagine the following financial planning scenario: A typical financial advisor might try to fit a client into a set of financial templates when planning their retirement. The advisor may ask typical questions: ‘How much money do you think you need to support your lifestyle when you retire?’, or ‘What do you imagine your lifestyle to be?’, or more immediate questions about how many children you plan to have, where you want to send them to college . . . so on and so forth. These questions are hard to answer and often require a deep understanding of not only oneself and future expectations, but also a deep understanding of the immediate household, one’s environment, etc. And even if we try to answer these questions, we know that these factors continue to change over the life course; aspirations today may not be the same tomorrow. So how might financial technology adapt to the ongoing twists and turns in an individual’s life? Adaptable financial products and services that can provide stronger impressions of security and freedom will be an area of advancement based on growth in underlying technologies such as artificial intelligence.

4. Enablers and Infrastructure Providers

The growth of infrastructure providers in the financial services industry has created opportunities for startups as well as existing players to build newer, faster, cheaper, and better services. The resurgence of services that specializes in each vertical of the banking stack has empowered companies to do more with less. This ongoing trend of API-fication of functions will fuel further growth in the industry.

As an example, Banking as a service – In order to support the ever-growing need for digital building blocks as legacy systems are being jettisoned, banking as a service for each of the layers in the banking stack is on the rise. B2B/enterprise companies are transforming businesses and making it very easy to interact and operate in a once complex environment.

5. Big events (aka black swans)

Events such as the onset of the global COVID-19 pandemic are black swan events; no one planned for this sort of pandemic, to develop in 2020, let alone all of the associated financial ramifications. Black swan events often accelerate or decelerate certain aspects of our lives, modifying the underlying financial imperatives.

1. Rapid digitization – While the neo-banks were already shaping the industry by eliminating unnecessary brick-and-mortar bank branches, events such as COVID-19 have accelerated the need for banks to digitize their entire range of offerings and services. Financial institutions across the world have experienced a rapid acceleration of investments to aid in digitizing their business operations.
2. Contactless payments – COVID-19 has contributed to the rise of contactless payments because of the urge for customers to avoid using traditional point-of-service (POS) systems and potentially spreading/contracting the virus. But in my opinion, even NFC payment methods such as Apple Pay are less sanitary than they could be. When using Apple Pay with Face ID verification, you must remove your mask so that the device can recognize you; if you use a passcode instead, you must  use your hands to push in the code, the very same hands that you don’t want to use without cleaning because you used it to touch different surfaces when shopping. Every time I use NFC payment at a retail store, it’s still a hassle. I may not have asked this question if not for this black swan event. There are virtually infinite similar questions brought about by the pandemic for different people, environments, and situations.

In summary, while the fintech ecosystem will continue to evolve, it’s vital to know the driving forces behind the innovations in this space. Most notably, the five driving forces are – ‘Why not’ and ‘How might we’, New Use Cases, Neglected Use Cases that are Now Worthy of Solving, Enablers and Infrastructure Providers, and Big Events.