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When the world was under some form of lockdown in the past 2 years, it finally gave consumers the push to adopt new digital financial services, and this move encouraged financial institutions to respond to the consumers’ need for fast, secured, and seamless banking solutions. This is evident as the Fintech industry has experienced dramatic growth with the global Fintech investment reaching $44 billion in 2020.
So, what does the future have in store for 2022? Here are some top Fintech trends to look out for:
1. Artificial Intelligence (AI) and Machine Learning (ML)
The Fintech industry is a pioneer in adopting advanced technologies including Artificial Intelligence (AI) and Machine Learning (ML). More companies and businesses are adopting AI and ML in their operations due to the ability to manage and process a huge volume of data on a daily basis. Some examples of applications of AI and ML in businesses are customer onboarding, risk assessment, forecasting, data management, automation, and more.
Let’s look in-depth into an example of how AI and ML help businesses. AI works with machine learning and biometric authentication in identity verification such as facial recognition and voice recognition during the customer onboarding process. With the help of AI, biometrics can create data-driven safety protocols, thus being effective in preventing fraudsters from manipulating the verification process, turning it into a reliable verification system without any human intervention.
Besides, AI undeniably outperforms the human capacity in certain areas, especially in processes that are repetitive, heavy, performed manually, or highly laborious. Therefore, Fintech companies that make use of AI in their operations will gain a competitive advantage as AI plays a prominent role in reducing processing time, increasing efficiency, and also minimising errors.
2. Open banking
Open banking is a banking practice that enables the sharing of financial information through electronic and secured means with the consent of customers through the use of application programming interfaces (APIs). The beauty of open banking is that customers’ data will cross-pollinate to an entire ecosystem of related services. Hence, licensed third-party financial providers and Fintechs will be able to access these valuable data which will enable them to develop tailored financial products and services that meet the customer’s needs – ranging from providing relevant financial advice to faster and more transparent payment solutions.
Customers can also benefit from this by having more ownership to manage their own financial data and actions, as they have greater control in sharing their information with other third-parties at their discretion in exchange for receiving customised product or services offerings. Thus, with open banking, banks and financial institutions can work together with Fintechs and third-party financial providers instead of competing against them.
3. Big Data
According to Statista, the global big data analytics market is expected to grow with a compound annual growth rate of almost 30% in the coming years, with revenue reaching over USD 68 billion by 2025. Data is a significant part of digitalisation as more and more companies are striving to provide a more personalised experience to their customers by utilising customer data to deliver tailored offers on the right platform, at the right time. This will be further enhanced with the assistance of Artificial Intelligence (AI) and Machine Learning (ML). With AI and ML’s ability to process and manage a large amount of data, not only are they able to make more accurate predictions, but also provides businesses with a broader understanding of their customers through data-driven insights.
Of course, with more data, it is also becoming increasingly challenging for businesses such as Fintechs and financial institutions to manage them while ensuring the security of customer financial information, especially with the rise of cybercrimes such as fraud and hacker attacks. Therefore, these companies should start investing in solutions that will further enhance the quality of their internal security system.
4. Cybersecurity Mesh
The world is shifting towards a new normal, the future of the workplace is reinvented and a hybrid working model is already taking place. According to Forbes, cybercrimes could cost USD 10.5 trillion annually by 2025. Many financial companies have important customer data such as personal information and monetary transaction information on hand, making them an attractive target for malicious activities.
To stay secure, Fintechs and financial institutions will need an always-connected defensive posture and understanding of the business risks that come with remote working such as cyberattacks and ransomware, as assets and users can be almost anywhere. Since the traditional security perimeter is not applicable to users working remotely, this is where cybersecurity mesh architecture (CSMA) comes into play. Gartner defines cybersecurity mesh as a modern conceptual approach to security architecture that enables the distributed enterprise to deploy and extend security where it’s most needed. CSMA aids in providing an integrated security structure and posture to protect all assets regardless of users’ location.
Whether you are a financial institution or a company in the Fintech industry, it is best to start looking into integrating CSMA into your security tools to further enhance data security and reduce cyberattacks.
5. Total Experience (TX)
As businesses around the world are becoming more remote and virtual, a strategic Total Experience (TX) plan is necessary in order to ensure their survival post-pandemic. Gartner defines Total Experience (TX) as combining customer experience (CX), employee experience (EX), user experience (UX), and multi-experience (MX) with the goal to transform business outcomes by driving greater customer and employee confidence, satisfaction, loyalty, and advocacy. It recognises the four key elements as critical pieces of the puzzle that intersect with one another, instead of considering them as individual components.
Figure 1: Total Experience interlinks the customer experience, employee experience, user experience, and multi-experience disciplines.
Source: Gartner, 2021.
Total Experience is important to businesses around the world, regardless of the industry. Poor user experience may lead to unhappy customers, which negatively impacts the customer’s experience. Meanwhile, a healthy employee experience will enhance the quality of products and services, thus providing a positive customer experience. A total experience focused company is going to be the key that differentiates a business from its competitors in a way that is difficult to replicate, resulting in a long-term competitive advantage.
The bottom line
Recent events have broadened our grasps of what a digital economy would look like in the future. The pandemic has caused massive disruption to all industries, including the financial sector. Consumers are now expecting financial institutions to provide services that are high-quality, secured, and accessible from anywhere, at any time. If financial institutions do not respond, they will potentially lose millions of customers. Thus, Fintechs and financial institutions need to start looking into investing in innovation and new technologies in the years ahead in order to maintain a competitive advantage and continue staying relevant even in the future.
JurisTech is a leading Malaysian-based Fintech company, specialising in enterprise-class software solutions for banks, financial institutions, and telecommunications companies in Malaysia, Southeast Asia, and beyond.
As one of the Fintech pioneers in Malaysia, our vision is to enable financial inclusion for the financial industry with our diverse range of solutions. Check out our latest AI-powered technology Juris Mindcraft, which helps banks and financial institutions to transform their digital landscape.
Application security is one of our top priorities, hence our solutions are built to uphold security measures and encrypt important customer information against vulnerabilities and threats. Click here if you are interested to know more about what we are capable of.