Fintech has drastically changed the way we see and utilise payment. Fintech refers to the effective use of technology and innovation to transform the delivery of financial services. In India, the industry is currently valued between $50-60 billion and is expected to reach ~$150 billion mark by 2025.
However, this is just the start of the story since there is much room for Fintech to evolve further. It has brought much-needed ease in terms of transactions, payments, savings, investments and insurance.
Some of the top disruptions to watch out for in 2022 in Fintech are:
Digital Only Banks
Bringing banking to the final mile has proven to be a difficult task for many developing countries. Thanks to smartphone and digital transactions, banking doesn’t have to be done at a branch anymore. Windowless banking is becoming more popular. Even sophisticated processes like KYC and activities including account opening, transactions, cash transfers, and utility bill payments may now be done digitally through video.
Blockchain in Global Finance
Blockchain is on track to completely transform the face of financial transactions globally because of its speed, global access, and low processing fees. Blockchain, a distributed ledger technology, is increasingly used by financial services companies. Financial services companies may now reduce the cost of cross-border remittances and money transfers by using blockchain-based transactions. Blockchain also makes it possible to assure that records are not tampered with, making it useful for financial compliance, securities trading, and so on. It also enables a transaction mechanism based on digital currencies, which provides a highly secure payment method while reducing transaction costs, cash handling, and other costs.
Data-Driven Micro Lending
Today, data-driven microfinance has taken centre stage. Fintech businesses can now assess client behaviour and spending patterns via apps. They might not even need a bank statement or a credit score to reach out to these clients, many of whom are unfamiliar with credit.
This is where smartphone interfaces, engaging customer experiences, and data analysis come in to help fintech businesses underwrite successfully and digitally transfer micro-loans to the country’s most distant regions.
Banks are now fine-tuning their AI solution plans to go even further. This will accelerate the use of AI in financial services. However, getting to this point of view isn’t easy. Like the rest of the world’s businesses, banks are facing a scarcity of AI experts. The current trend in Human Resources suggests that AI specialists are simply the tip of the iceberg for worldwide labour.
AI is ideally positioned to cope with the rising frequency of cybercrime, including financial fraud concerns, because of its capacity to work with unstructured data. AI is already a hit with the top customer service software with chatbots and other smart systems. Financial institutions will be no exception, providing speedier transactions and the ease customers expect.
CBDCs gaining popularity for financial inclusion and making payments more accessible
Central banks worldwide are eager to contemplate rolling out Central Bank Digital Currencies as digital payment methods and infrastructure become more solid. CBDCs may help banks improve digital payments and make last-mile payments more convenient. It can also assist central banks with reducing the cost, effort, and time spent on producing currencies, maintaining physical money, and monitoring and tracking counterfeit notes, among other things.
The benefit of digital currencies is that they are always available, i.e., whenever a consumer requires them. It can also cut out intermediaries who handle cash transactions and prevent criminal activity involving money transfers and remittances while cutting remittance costs.
The Fintech disruptions that we’ve seen so far are only the beginning. Contactless payments, cheap broking, minimal fee-based wealth management approaches, and super-fast insurance product delivery are all on the horizon. These changes are substantial, but there will be much more in the following years.