Top 10 Trends That Will Reshape The FinTech Sector in 2022
February 9, 2022
7 min read
Top 10 Trends That Will Reshape The FinTech Landscape in 2022
The end of 2021 is here! With the ongoing Covid-19 pandemic, the last couple of years has been primarily dominated by the challenges of digital transformation. 2021 was a game-changer for the FinTech sector as it has come up with innovative payment gateways, and also has a significant contribution to the GDP.
FinTech is a combination of technology and financial services that have transformed the way businesses operate. In the last few years, the FinTech sector has emerged considerably, resulting in the modification of business to a customer-centric approach. With a demanding approach, banking, financial institutions, and technology companies have taken a reciprocal approach and progressed with innovative and disruptive techniques in a continually changing business environment.
The global FinTech market is expected to grow gradually and reach a market value of approximately $324 billion by 2026. With growth at a compound annual growth rate of about 23.41% over the forecast period 2021-2026, according to the Market Data Forecast.
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AI adoption in the FinTech industry was quite slow before the pandemic. When the world locked down due to the Covid-19 pandemic, it finally pushed financial institutions around the globe to automate their banking operations and service and make them more customer-centric.
FinTech companies specifically have seen a boom, during the pandemic. We have witnessed a drastic increase in firms swapping traditional systems to digital platforms, working remotely, and devising user-friendly products and services that retained customers during the lockdowns.
What does the future hold in store for FinTech in 2022? This blog talks about the trends for the FinTech sector, as the coming year might reshape the industry and put it on the road to ultimate success. Here are top 10 FinTech trends to keep an eye on.
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Most Prominent FinTech Trends Of 2021
With the new year just around the corner, this is the right time to take a moment to reflect on some of this year’s most prominent FinTech trends, before sharing some trends and predictions for what is to come in 2022.
2021 had some of the biggest FinTech valuations to date. According to Boston Consulting Group’s Q3 2021 report on FinTech, the majority of investment can be segmented into two categories – payments and accounts products. These two categories each received more than $7.5 billion in investments and accounted for 45% of all total investments made in Q3.
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The Rise Of eCommerce and Digital Payments
The events of the pandemic have accelerated FinTech trends that were already in motion. From the way, businesses interact and sell their products and the ongoing demand for eCommerce and digital payments.
Since eCommerce has gone more digital, the need for fast, reliable, and robust cross-border transactions has become top of mind for merchants who are considering or already operating business around the world. The pandemic really demonstrated the adaptability of businesses that reacted quickly and shifted their operating model to a digital-first approach as well as the payment solutions.
Interesting FinTech Facts
- The global financial services market is projected to reach $26.5 trillion by 2022.
- The global fintech market is expected to grow at a CAGR of 23.58% from 2021-2025.
- 96% of global consumers are aware of at least one FinTech service.
- Blockchain and regulatory technology are the fastest-growing segments of the FinTech Industry.
What Does The Future Hold In Store For The FinTech Industry In 2022?
Will 2022 reshape the industry and put it on the road to ultimate success? Will digital transformation still be massive? What’s going to happen with global payments etc.? Well, we don’t know exactly; it’s not like we have a crystal ball in the office to predict the future of FinTech. Instead, we analyze several market research about FinTech trends and industry growth shifts, and we have summarized just a few in this article.
1. Banking-as-a-Service (BaaS)
In recent years, Banking-as-a-Service (Baas) platforms have significantly emerged as a cost-effective and efficient means of delivering financial services based on open banking ideas. Banks and monetary institutions must adopt a service-oriented and composable/modular architectural approach in delivering new and innovative digital services.
BaaS is a critical component of conventional banks and financial corporations on their digital transformation roadmap strategy. However, many more legacy financial institutions are expected to collaborate with FinTech companies to integrate BaaS services to bring innovative technologies in-house and enhance their services and offerings.
BaaS will also play an important role in accelerating the growth and development of the financial industry, as well as enabling companies to enhance consumers’ growing expectations.
2. Decentralized Finance (DeFi)
Decentralized Finance (DeFi) is a notion that is dominating almost every discussion about the concept of FinTech. DeFi is a system through which financial products and services are made available on a public decentralized blockchain platform. This makes them open to anyone to use, rather than going through middlemen like banks or brokerages.
More specifically, DeFi refers to a system by which software written on blockchains makes it possible for buyers, sellers, lenders, and borrowers to interact peer to peer or with a strictly software-based middleman rather than a company or institution facilitating a transaction.
While DeFi began as an alternative financial tool to support cryptocurrency, industry analysts believe that it will continue to be at the forefront of FinTech in the next few years. As of October 2021, the market value of DeFi that allows money transfers without the intervention of a central authority is set at $99 billion. DeFi has come up with self-executing smart contracts, that are all set to reshape financial operations. 2022 will be the year when most of the banks and other financial institutions will embrace DeFi.
3. Open Banking
During the pandemic, there has been an increase in digital payments and the idea of self-service banking showed that the need for conventional banks to become more digital. In this sense, banks and financial institutions are getting digitized to meet their customers’ expectations.
Open banking is an API-enabled technology-driven approach that effectively allows banks and other financial institutions to seamlessly deliver monetary services using aggregated and authenticated customer data. Open banking principles are being incorporated into the products and services of FinTech firms globally.
In 2022, banks that feel hesitant or don’t embrace open banking will limit their capabilities to provide better services to their customers as well as limit their growth opportunities.
4. Improve Customer Experience
Almost every financial institution is joining hands with technology or digital banking after the pandemic. FinTech companies are continuously bringing in some new technologies, not only to engage with their customers but also to offer them more efficient products and services as well and enhance customer experience. In 2022, customers can expect immediate responses to their queries related to banking operations and services.
5. Artificial Intelligence and Machine Learning
Data is a significant part of digitization. Artificial Intelligence (AI) and Machine Learning (ML) applications enable the processing of large amounts of data sets and render out better insights and improve the analytics with a border understanding of customers’ requirements. The digital insights by machine learning applications can reach valuable conclusions, by using its algorithms, can drive effectiveness and provide efficiencies, including time-saving opportunities.
ML models analyze patterns in real-time, enabling quick decision-making. Today, many banks and financial institutions are already using AI and ML capabilities for fraud detection, lending approvals, and anti-money laundering screening to risk monitoring and investment predictions. ML is constantly evolving, and FinTech will continue to be one of the leading sectors to benefit from the power of AI.
6. Cross-Border E-Commerce
In the last couple of years, the most significant changes were as a result of the pandemic – work from home and social distancing norms have radically altered the concept of a hometown business. According to a study by Accenture, the global cross-border payment flow is expected to reach $156 trillion by 2022 with expected growth at a CAGR of approximately 5% each year.
Due to the exponential growth of eCommerce, global transactions provide huge growth potential for small and medium retail businesses. In 2022 there will be a spike in cross-border eCommerce, where customers will expect an easy and secure payment solution from such businesses.
7. Rise Of Digital and Neo Banking
Historically, conventional banking has been a monopoly with sustainable barriers to market entry. However, the insufficient set of rules and regulations in countries across the globe has paved the way for neo banks to take the opportunity to take the lead. Neo banking attracts customers with the promise of lower fees, convenient mobile banking, and an improved customer experience that eliminates the need for traditional banking.
According to Statista, the neo banking sector was valued at more than $30 billion in 2020 and is expected to grow at a CAGR of 47.7% over the next eight years. As the world’s population gets online, becomes more connected, digital banking is expected to overtake traditional banking services in 2022.
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8. Anti-Money Laundering (AML) Screening
Money laundering has become one of the prevalent issues in the past few decades. And the FinTech sector is one of the primary targets of financial criminals. According to UNODC, “The estimated amount of money laundered globally in one year is 2 – 5% of global GDP, or $800 billion – $2 trillion. Due to the clandestine nature of money-laundering, it is however difficult to estimate the total amount of money that goes through the laundering cycle.”
Online payment gateways, for instance, are widely used to launder money or fund unethical or illegal groups. In the coming years, FinTech firms will be concentrating more on Anti-Money Laundering (AML) screening services during account opening to fight the rising issue of online money laundering.
AML screening is one of the methods used for risk assessment of a company’s existing or potential customers under AML guidelines. With AML screening, businesses ensure that their existing or potential customers are not present in any of the sanctions lists, PEPs, banned or wanted lists, and adverse media data.
Screening every customer against global watchlists will filter high-risk entities on time and necessary actions can be taken to prevent financial crimes and non-compliance penalties.
9. Blockchain Technology
Blockchain is undoubtedly the most significant financial innovation for digital transactions because its management is distributed. Meaning, Blockchain can’t be controlled by a specific individual, bank, company, or government. According to the Cision PR Newswire report, the global blockchain market is forecasted to reach $39.7 billion by 2025. However, many companies worry about the security issues of the cutting-edge FinTech, Blockchain’s growing acceptance as a way to create a secure digital ledger cannot be ignored. Know more about blockchain development services.
10. Robotic Process Automation (RPA)
RPA is a software technology that makes it easy to build, deploy, and manage software robots that emulate human actions interacting with digital systems and software. According to Grand View Research RPA is valued at $1.40 billion and is expected to reach $11 billion by 2027. Read more about RPA services.
People are increasingly turning ‘digital’. They want to make payments, transfer funds, invest money, or obtain loans, as quickly as possible in a hassle-free way. FinTech firms prove highly useful here, guiding traditional financial establishments in the usage of RPA.
Financial analysts forecast a promising future for the FinTech industry. FinTech trends will surely never be the same in the future. The tragic events of the pandemic during the last couple of years have broadened our understanding of what a digital economy is going to look like moving forward.
The finance sector is swiftly changing due to which digital services are progressing, therefore fintech companies must utilize new technologies to develop innovative financial solutions. Cybersecurity will be a top priority area for monetary institutions. Anyways, 2022 trends will put the industry on the road to success. Make sure you keep these latest fintech trends on your radar screen so you can maintain a competitive advantage by transforming the future of your business finance.
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