Preparing for 2024: FinTech developments for payment innovators

The new year brings interesting areas to understand and prepare for, especially if your business is positioned to take advantage of innovation in payments. By no means exhaustive, here are some developments in the FinTech sector I think will be worth watching in 2024. 

Payment rails development:

The infrastructures behind different payment solutions need to begin interacting. Moving away from traditional card networks, the development of A2A (account-to-account) payments using Open Banking (OB) standards is likely to become much more mainstream and take a substantial share of transactions. 

End users are not interested in how payments are made, only that they are cheap, quick, easy to use and safe. OB solutions are still to reach mass market adoption, but this is likely to change as more vendors offer easy-to-use applications that demonstrate the speed and cost advantages of OB. 

Change is driven by merchants engaging with consumers directly, by allowing initiation of payments directly from bank accounts. This likely does not signal the beginning of the end for Visa and Mastercard, since they are also investing heavily in this area and are expected to capture a significant portion of these transactions.

BigTech and FinTech:

The trend of large tech and e-commerce companies playing a direct role in offering financial services will continue. This is driven not only by the fact they already have the user engagement where offering embedded payments makes sense, but also by the opportunity to generate new revenue streams. 

The big question is where traditional banks and lenders fit, as they risk being disintermediated from the customer. A growth in white-label and co-branded financial services offerings is likely, as the complexity of regulation means only very large tech firms will be able to handle this themselves. 

Innovative banks should develop specific partnership solutions to be attractive partners in this environment. This will create interesting growth opportunities for these banks, and perhaps open up new markets that are otherwise too expensive to reach. 

We will see some large tech platforms becoming licensed entities, offering financial products in their own right. Keep an eye out for Apple, X, and perhaps even TikTok for moves in this direction.

Artificial Intelligence advancements:

Artificial intelligence will undoubtedly play a major role in 2024 as the adoption of applied AI tools really takes off. We are very optimistic about the positive impact this will have on banks and FinTechs as well as their customers. 

Of course these advancements may also cause concern, for example, generative AI tools can help fraudsters create more realistic phishing scams, making them harder for consumers to spot without the once characteristic spelling and grammatical errors. But the benefits are just beginning to emerge and will be almost universal. 

Outside obvious areas of better customer service and more accurate product matching from AI chatbots, there are huge internal processing and workflow benefits for banks and lenders because of their heavy use of documentation and data. 

Encouragingly, there is real potential for AI to do good by increasing financial inclusion - for example from better, more accurate credit scoring making financing more affordable, and from proactive financial management and alerts highlighting better choices for consumers and SMEs without the financial literacy to pick this up themselves.

Other exciting areas to watch:

In-car payments are rapidly evolving and can transform how we use our cars. Soon, the car will be used as an e-commerce and payment device. 

Central bank digital currencies (CBDCs) are likely to see significant progress this year, making their way to your digital wallets much like bills that used to be in your pocket.

Apple’s new Vision Pro headset may finally make AR/VR a mass-market product, creating interesting opportunities for payments. Particularly, peer-to-peer payments might serve as a convergence point for Open Banking, account-to-account transactions and central bank digital currencies or cryptocurrencies, potentially bringing these elements together in a unified system.