For the past couple of years, the FinTech industry has risen into the spotlight of the startup world. This ascent is not a mere trend, but the effect of major changes undergoing the financial world which, by embracing technology, begins to transform and shift. New players enter the room, while traditional institutions need to keep up the pace and tune in to a new type of customer.
So what is new?
We are all aware of how life is impacted by communication technology, smartphones, apps, IoT, AI, VR, you name it. What do all these have in common? Speed and ease. Everything happens in the now, with as little effort as possible. A tap of a button and you get a result, an order delivered, important information, a call.
Most of the today’s entrepreneurs and consumers belong to the Millennial generation. Chances are you are too. People born between 1980 and the mid-1990s are also known as Generation Y or Generation Serious or Generation Ni-Ni or Ken Lao Zu or Nagara-Zoku, depending on the country; what is interesting is that they are almost as numerous as the baby boomers, though very different in terms of mindset, priorities, behavior, lifestyle. People of this generation are not only highly connected but also well educated and tech savvy. This means that today’s consumer trends are very much influenced by how Millennials interact with technology in every aspect of their lives. These are the people that don’t conceive to queue in front of a counter, nor to waste hours to get simple errands done. This leads to the development of faster, more connected services. Institutions and companies alike need to develop availability and flexibility when interacting with the consumer.
Not only the market drives the need for technological change, but the legislation as well. We spoke here about the implementation of Payment Services Directive 2 in Europe, which is meant to liberalize access to payments and bank accounts in favor of the consumers.
All that is to say that even traditional services as are the financial ones are bound to this shift in consumer approach. Hence, fintech startups enter the market, along with their solutions to speed up and ease people’s access to money.
What to expect in the future
Automation of banking services
Online banking is not a novelty anymore and probably every bank that matters provides such a service for its customers. But things go even further and there are already a large number of online banks out there and they won’t stop here. Automation makes cross-border money transfers and currency exchange easier and banks are already looking at new ways to automate their services. With the EU legislation coming into force in 2018, the European financial market will become more connected and open.
Advanced Security Management
This high connectivity and openness, however, attracts the need for enforced security measures. Digital payments, online transfers, and other bank services require protection, which will be a challenge for fintech startups and established financial institutions alike. For money transfers, it is the blockchain technology that appears now as a cheaper, safer solution. New authentication solutions are also emerging; such is a device developed by Nymi that identifies the user’s heart beat rate.
Investing and Trading Go Mobile
With such a large generation not at all into money saving, investment and trading companies are considering to get closer to potential customers by making it easier. The tendency towards cheaper and more accessible solutions applies to this area, too. We’ll be seeing an increasing number of apps designed to make investment and trading accessible to more financially non-savvy people.
The Blockchain Technology
Originally designed for Bitcoin – the digital currency, the blockchain technology has developed to a greater extent of uses. It has come to the attention of financial institutions that employ it more and more for digital transactions due to its efficiency. The higher the demand, the more sophisticated the blockchain software will become in the following years.
Legislation Will Have to Change
Such disruptions into how financial services are delivered to consumers need a shift into the regulatory system. Governments, central and national banks will have to adjust their requirements and rules in order to offer the necessary protection in the context of the new technology, as well as clear guidelines for the implementation of new methods of payments, money transfers, loans or investments. Data confidentiality and taxability are issues that need to be addressed given the emergence of digital transactions.
These are some of the trends that take shape for the following months and years. Although it is still uncertain how exactly the financial services will evolve in the digital era, it is sure that they will become digital. New players emerge on the financial market; while some come up with disruptive technology, most of them just offer added value for the consumer, which is equally beneficial. The fintech scene gets a lot of attention this year; in Europe only, in Q1’17, investment in fintech companies rose up to $667M across 73 deals, according to CB Insights data.
Whether it will come to the disappearance of the credit/debit card or getting cash from the grocery store instead of an ATM, it is sure that people will have easier and faster access to money. We can only ask ourselves to where will this lead?