Fintech Trends To Watch Out For In The Second Half Of 2020

The question surrounding how fintechs will scale their businesses is a topic of the past.

Fintech companies have established themselves as innovators in the space, from the likes of Plaid to Robinhood, these multi-billion dollar companies are among the many that are changing the way we see finance. So, the question isn’t how fintechs will find mass adoption, but when?

In 2020, fintech will continue to influence sectors such as banking, mobile payments, and artificial intelligence. And with that, here are the four fintech trends to watch out for this year.

The AI Takeover

While this isn’t the kind of takeover that philosopher Nick Bostrom would argue for — as he views the rise of true artificial intelligence as a human-extinction catalyst — the takeover referred to here has proven to be a positive influence for the fintech-sphere.

Artificial Intelligence had upped the data entry, review, and verification process for financial institutions helping financial professionals save time and increase customer satisfaction through faster turn-around times.

In addition to saved time, AI is projected to reduce bank operating costs by 22% around 2030. This leads to an estimated savings of $1 trillion dollars.

For example, companies like Even Financial utilize machine learning in combination with their open API to enable their partners to match consumers with personalized financial products, with only a soft pull on their credit. This has led to lower acquisition costs and delinquency for financial institutions — all while saving them money by bringing quality consumers to the bank’s digital doors. 

Blockchain Blocking Bad Guys

In tandem with AI’s ability to fight against increasing threats of cybercrimes, are blockchains. 

Blockchain has long surpassed its cryptocurrency use and has become a pinnacle for multi-point verification security. Its use in financial institutions has helped to protect against cases of fraud and identity theft as it works in a decentralized network.

Major banks like JP Morgan Chase & Co JPM recently reported their intended integration of blockchain, outlining the benefits of its application, as well as its potential for widespread adoption.

“The number of participants in Blockchain projects provide an indication as to the level of adoption seen—which we expect to grow in the medium term through positive feedback loops," they said. 

Online Banking

Digital banking was already starting to gain steam prior to 2020, but the spread of COVID-19 has kicked the shift into overdrive. 

According to the Evolution of US Neobank Market Report, 89% of U.S. respondents say they use mobile banking channels, and 70% say that mobile banking has become the primary way to access their accounts.

The plague of added fees has also pushed Americans towards online banking, as most online banks offer no-strings checking accounts. These digital accounts don’t charge extra fees for lower balances and even offer fee-free withdrawals from any ATM.

The classic brick-and-mortar bank has also lost its high-interest savings account draw, with most traditional banks offering dismal percentages. Online savings accounts like Ally Financial Inc ALLY, Marcus by Goldman Sachs Group Inc GS, CIT Group Inc. CIT, and the Wealthfront Cash Account offer some of the highest interest rates available today.

With banks and their costumers forced into digital lending by necessity, it's hard imagine that in-person banking ever goes back to the way it used to be. 

Mobile & Noncash Payment Integration

This is also a trend that's been accelerated in recent months thanks to the spread of coronavirus. With many people trying to avoid physical contact at the point of sale, mobile payments have seen a dramatic increase in popularity. 

Even though physical forms of payment, such as credit cards, are still utilized by 80% of U.S. consumers, there is no doubting the gradual integration of mobile payments.

“The number of B2B noncash transactions continues to grow thanks to two major factors: (1) general economic growth, which varies by region and market, and (2) businesses’ continuing adoption of digital payments,” according to a report from Mastercard Inc MA. “Global B2B noncash payments are expected to increase at cumulative average growth rate (CAGR) of 6.5% through 2020, reaching 122.4 billion transactions.”

Mobile payments like Paypal Holdings Inc PYPL have already witnessed mass integration with 44% of U.S. consumers utilizing their services, with Apple Inc. AAPL Pay following behind at 9% integration.

Photo by Clay Banks on Unsplash