FinTech is a dynamically developing industry that includes financial institutions and modern technologies.
The scale of investment in financial technology is in the hundreds of billions of dollars. Moreover, the costs of fintech are growing every year since technological leadership has become the main priority of global companies today.
In 2019, fintech companies around the world received more than $135.7 billion in investments. In 2021, global investments in fintech amounted to more than $200 billion.
For example, Visa made two major fintech transactions in 2021:
1) Bought Swedish Tink, a platform that allows banks and companies to access the financial data of customers;
2) Entered into a deal to buy Currencycloud, a British fintech startup. The startup has developed a cloud platform that allows banks and other financial institutions to provide currency exchange services, including currency transaction notifications, multi-currency wallets, and virtual account management.
Last year, more than half of the 100 largest banks in the world by assets invested in blockchain, according to Blockdata. The main areas of investment have been the development of payments, capital markets, protection and security, trade finance, regulatory technologies (RegTech), data and their analytics, finance and banking, energy, logistics, and identification.
In the fintech market, tech startups and emerging companies are innovating on products and services that were previously offered only in the traditional financial services sector. Thanks to this, the fintech segment is growing rapidly. Large companies that have been stripped of their monopoly on financial transactions and services are forced to innovate and offer classic products with new technological solutions.
Almost 90% of existing large financial institutions and companies believe that in the next 5 years, part of their business will be lost in favor of independent fintech companies and startups.
Consider the main trends that determine the further development of the financial technology market in 2023
- Transformation of the cross-border payments segment
E-commerce in 2023 will further transform the cross-border payments segment.
Currently, companies prioritize internal process optimization and cost reductions. New business models and innovative payment systems enable less expensive and more efficient cross-border payments to meet current industry needs. It is noted that such transactions are key for international clients. According to the study, shoppers in many regions are buying online from international retailers.
- Innovations in payment systems
Using cryptocurrencies and blockchain as a means of payment has several advantages over traditional methods, but financial institutions and regulators have adopted these methods only in a few countries.
Effective regulation is required to increase the credibility of the crypto industry and meet the need for uniform oversight of compliance across crypto markets around the world.
- Ensuring the safety of consumers and payments
Payment methods, both traditional and completely new, are gradually being digitized, requiring additional security and preventing online fraud.
According to Statista, the global e-commerce market lost about $41 billion to cybercriminals in 2022, and this figure is expected to grow to $48 billion by 2023.
Therefore, businesses must be able to effectively identify issues so that customers can make secure online purchases. In particular, it is important to have a robust anti-fraud solution that complies with local laws and uses advanced security protocols.
- Transparency of payments
The fintech industry continues to provide transparency in its products and services, especially in lending transactions. Moreover, the importance of lending has increased in the current macroeconomic environment.
Experts say that it is necessary to introduce transparent, innovative lending schemes to protect clients from bottomless debt pits.
It is noted that 2023 is expected to be another year with continued inflationary pressures and an increasing cost of living. The fintech industry will have to deal with these challenges.
In 2023 and beyond, innovation is expected to be critical to empowering consumers and ensuring that businesses continually raise their online shopping experiences and expectations. Analysts note that in 2022, there was a slowdown in growth in many fintech sectors, including banking and insurance. This is explained by global macroeconomic difficulties, high inflation and general uncertainties. At the same time, a recession often encourages innovation and the emergence of strong players.
Which technologies have become fintech market drivers?
- Digital currencies: the rise of digital currencies such as Bitcoin and Ethereum, and the growing acceptance of blockchain technology as a means of secure transactions and asset management;
- Robo-advisors: the use of artificial intelligence and machine learning algorithms to provide personalized financial advice and investment strategies to customers;
- Open banking: the emergence of open banking platforms that allow customers to share their financial data with third-party service providers, leading to increased competition and innovation in financial services;
- Mobile payments: the growth of mobile payment platforms such as Apple Pay and Google Wallet allows customers to make payments using their mobile devices;
- Cloud computing: the use of cloud computing to store and process financial data, leading to increased efficiency and cost savings for financial institutions;
- Cybersecurity: the development of new technologies to protect against cyber threats, such as biometric authentication and blockchain-based security protocols.