In the last couple of years, we’ve experienced a ballooning fintech sector – talk about blockchain technology, internet banking, mobile banking, just to name but a few. And 2019 is expected to be no different as the sector continues to be redefined by cutting-edge technology.
Fintech is a term that refers to advanced forms of technology in the financial sector. The financial industry has been one of the fastest growing pillars of the economy in all parts of the world, and this has largely been attributed to the commendable milestones achieved in both the tech and financial fields.
Below are five key trends in the fintech sector today.
Conventional Banking Has Evolved
Initially, the relationship between banks and fintech companies was purely based on their competitive nature. Banks perceived fintech firms as competition bent on wiping them out. Today, banks have embraced financial technology and are at the forefront of growing the sector.
Mergers have also been formed between banks and fintech companies such as PayPal, Skrill, Apple Pay, and many more. The objective of most fintech companies is to channel their technology towards meeting the needs of the consumers rather than the companies themselves, which has resulted in major improvements in the banking sector.
It is now possible to access banking services right from your home or on a bus, all thanks to technological advancements in the financial sector.
The Blockchain Technology Penetration
The rise of blockchain is being experienced in a number of sectors, but perhaps the most popular product of this technology is cryptocurrency. In fact, to many, blockchain is a “twin” to Bitcoin since they were established at almost the same time.
While the cryptocurrency sector has been troubled in recent times, blockchain is here to stay and is expected to shape the financial sector even further. Today, banks around the world have incorporated blockchain technology in their operations to benefit from its dynamic functions including high transaction speeds, improved transactions credibility, increased security, and much more.
"Fintech companies are increasingly expanding to many parts of the world. Other than the major ones such as PayPal, Payoneer, and Skrill, more firms are warming up to the global space"
Grupo Santander, the largest Spanish banking group and also one of the market leaders in the UK, has been one of the pioneers in the implementation of the blockchain technology in banks. One such system implemented by the group is One Pay FX, meant to optimize payments between South America and Europe.
PSD2 Changes Everything
The Revised Payment Service Directive (PSD2) is set to alter the operation of retail banking as you know it. The new clause in the banking regulations limits the extent to which banks can use customer data.
With PSD2, banks can kiss goodbye to the monopolization of their customers’ account information and payment services.
The directive by the EU set the stage open to anyone looking to eat the bank's lunch.
The regulation allowed consumers to use third-party platforms to access banking services. In the near future, you can expect to use platforms such as Google or Facebook to make payments, analyze your spending, and so on. And even as you do that, you can be sure that your money will still remain safe.
Fintechs Are Going Global
Fintech companies are increasingly expanding to many parts of the world. Other than the major ones such as PayPal, Payoneer, and Skrill, more firms are warming up to the global space.
One of the fastest growing fintech firms, Ant Financial, is a startup owned by e-commerce giant Alibaba. Known for its global digital payment platform Alipay, Ant Financial currently commands a minimum market cap of $60 billion, making it the highest valued fintech in existence today.
In addition, Ant Financial also operates the world’s largest money market fund called Yu’eBao, as well as Sesame Credit, a provider of credit rating services.
Oscar is yet another fintech firm keen on banking on the global market. The startup that is associated with former POTUS, Barack Obama’s Affordable Care Act (Oscar Health Insurance), operates in the insurance space and essentially provides individuals with health plans. The firm that also enjoys the backing of PayPal co-founder Paul Thiel recently announced that it would be providing small businesses with health insurance in many parts of the world.
Regulatory Wind is Blowing
Countries around the world are starting to put in place regulations for fintech products and services such as ICOs and security tokens.
The exchanges that operate cryptocurrencies are being netted in some countries such as China and the US.
In the US, for instance, there is also a regulatory framework for the exchanges trading digital currencies. Such exchanges are required to meet certain standards set by state bodies including the qualifications for listing various assets, which has made the sector much more tenable. ICOs too are slowly being regulated in the US and China.
The future of the financial space is bright and with each new dawn comes a new wave of change geared towards improving the sector. In the years to come, we will continue to see a reduction in traditional financial services while experiencing a sharp increase in modernized financial processes.