In 2021, the effects of the COVID-19 pandemic put significant pressure on the financial sector. However, solving the challenges has fostered technological upgrading and improvement that allow banks to provide enhanced customer services.
According to the latest research, the global financial services market is expected to reach $26.5 trillion in 2022 at a CAGR of 6% due to the fact that the pandemic starts winding down and companies are rearranging their operations.
The evolution in customer behavior, remote working, and the emergence of new needs encourage the financial technology industry to embrace a wave of changes and innovations to stay relevant.
There is a list of the top fintech industry trends that center around 15 technologies with the most potential to transform the market in 2022:
- Open banking
- Big Data and Analytics
- RegTech (Regulatory Technology)
- Virtual Cards
- Cloud Computing
- Defi (Decentralized Finance)
- Artificial Intelligence
- Machine Learning
- The Internet of Things
- Robotic Process Automation
- Biometric Security Systems
- Voice Technologies
15 Fintech Trends for 2022
1. Open Banking
The open banking concept of using open API technology drastically changes the customer’s experience and boosts value to financial service. 3.9 million people use open banking to manage their finances but the number of users is increasingly growing and is expected to reach 63.8 million by 2024 as this financial technology becomes more popular.
The biggest convenience is that users can accumulate and manage all of their account data, operations, transactions, expenses on one platform. Another advantage is that an application helps them monitor costs and keep to a budget, which contributes to increased savings.
The benefit of one of the hottest trends in fintech at the moment for the financial companies is that by gaining access to this data, they can conduct a deeper analysis of the financial habits and behavior and provide users with more customized products and personalized offers that best meet their needs. Additionally, the open banking concept brings significant profitability, in particular, increasing customer engagement and retention.
2. Big Data and Analytics
In 2022, businesses continue to see big data and analytics as one of the top three fintech trends. Most organizations are trying to capture all possible data streaming inside and apply all kinds of analytics to it.
There are numerous positive outcomes achievable, for example:
- Faster decision making: various analysis tools allow making instantaneous decisions based on immediate data streams
- Cost reduction: it helps to find better ways of doing business by scrutinizing individual aspects of everyday operations
- Customer satisfaction: having the opportunity to analyze the customers’ behavior over time, organizations get a chance to develop new products to meet their needs more effectively
3. RegTech (Regulatory Technology)
Combining a subset of financial technologies such as ML, natural language processing, predictive analytics, the RegTech phenomenon is one of the key players in the rapidly evolving fintech world. The purpose of it is to help both financial companies and banks to comply with all regulatory requirements more efficiently and much faster, reducing the level of costs and risks.
Even though Regtech is often considered a technology in the finance industry, it is applicable in a range of different fields. According to recent reports, this booming industry is predicted to bring in $21.73 billion by 2027.
Being the most significant innovation in the financial technology industry, Blockchain has continued to influence the banking industry by ensuring end-to-end data security, preventing cyber-attacks, providing fast transactions, and reduction in operational costs.
At the end of 2021, the global cryptocurrency market cap reached $3 trillion, according to a recent study. However, the potential of blockchain isn't limited to cryptocurrencies, and this financial technology could provide fertile ground for future fintech developments offering new ways of handling information.
5. Virtual Cards
As cybersecurity attacks are on the rise, it has become necessary to develop a new way to protect account data when making online payments. That's how virtual 16-digit cards, which are usually valid for a short period, emerged as an alternative payment method that aims to help users protect their sensitive information.
Virtual cards are safe, sustainable, and expire as soon as you complete the transaction. Besides, they might be used as a backup payment method if a standard card gets declined or lost. The rapid advancement in financial technology led to the increased use of virtual cards for businesses as they are easy to receive and use.
The total value of virtual card transactions is forecast to reach $6.8 trillion by 2026.
6. Cloud Computing
In the world significantly impacted by the COVID-19 pandemic, even the most traditional organizations have to find ways to interact with their customers digitally.
More importantly, they need to build a system allowing them to access, manage, analyze, and control massive data storage in a reality where managers and analysts cannot physically reach their offices.
As Americans were forced to live under official social distancing guidelines, a vital need to move organizations to the cloud as quickly as possible emerged. Leaders should undertake a few essential steps to achieve a smooth transition:
- Providing sufficient funding to ensure the employment of all the required technology
- Integrating the cloud to the business model to reflect its widespread and long-lasting impact
- Attracting well-qualified engineers and IT-specialists to support the technology’s everyday performance effectively and to avoid any disruptions
The cryptocurrencies occupied headlines quite often in the previous year, as their underlying technology holds tremendous potential. According to recent reports, crypto borrowing was the largest single segment of DeFi in 2021.
Blockchain opens up a series of opportunities for protecting any kind of data, not just financial transactions. For instance, payment reconciliation, identity protection, and data access are significantly benefited through the use of this technology.
Caption 1. Primary challenges when implementing blockchain technology
One of the new fintech trends, decentralized finance or DeFi, is about creating autonomous protocols (set of rules) for money to operate; no trusted party is needed. The hottest topic is lending, namely yield farming.
With the COVID-19 world facing the rise of online activities, cybercrime constantly expands its endeavors.
Since the beginning of the pandemic, cloud-based and phishing attempts have increased substantially. According to the CPR, companies around the world witnessed a 40% growth in cyber-attacks in 2021. Additionally, it is projected that the number of cyber-attacks will double by 2025.
9. Artificial Intelligence
Organizations are paying more and more attention to Artificial Intelligence power. AI has been named the most disruptive technology by managers and IT leaders worldwide, exceeding big data and analytics.
The latest statistics show that by 2025 about 95% of all customer interactions worldwide will be fully powered by AI, and the industry is forecasted to reach $31 billion in revenue.
10. The Internet of Things
The giant ecosystem of the Internet of Things is multiplying. IoT devices are everywhere, from voice assistants to slow cookers.
The IoT market is expected to expand to $1386.06 billion by 2026, having systems integration and data center and analytics as its biggest segments.
Caption 4. Reasons for technology usage
Caption 2. Reasons for technology usage
11. Machine Learning
Machine learning is often seen as synonymous with artificial intelligence. It is a subset of AI, making the former perform faster by reinforcing its learning abilities.
These make machine learning a key component of AI, a fact confirmed by the latest machine learning statistics.
The machine learning market has been rapidly growing. The most significant segment of this market is the deep learning software set to reach about $1 billion by 2025.
Current machine learning market research has shown that the market for AI-powered hardware and assistants is expected to grow at a high pace.
12. Robotic Process Automation
The latest reports show that about 23% of factory jobs will be automated by 2025. The range of collaborative applications offered by robot manufacturers continues to expand.
Currently, shared workspace applications are most common: robots and people operate together, completing jobs simultaneously. They enable this by voice, gesture, and recognition of intent from human motion.
Caption 3. Service robots for personal/domestic use
Neobank is another great example of the fintech developments that deserve your attention. Due to quarantine restrictions, companies are actively switching business processes to online mode, and banks are no exception to this process.
Banks that operate exclusively online are gaining more and more popularity and are innovative competitors of conventional banking institutions. According to Statista, the digital-only banks' sector is projected to grow and reach a market size of $722.6 billion by 2028.
Neobanking technology in the finance industry offers a plethora of plans and options for customers. This includes a variety of services such as international remittance, fee-free transaction operations, obtaining loans, etc.
14. Biometric Security Systems
It is vital for the fintech industry organizations to take all possible security measures. And biometrics is the best way to lift security to the next level, ensuring users’ confidence that their information is protected.
The world biometrics market is expected to reach $45.96 billion by 2024 as the partnerships between tech and biometric companies will be growing.
The range of solutions is set to grow bigger to utilize such biometric data as fingerprint, face, iris, vein, voice, DNA, palm prints, hand geometry, signature, and several behavioral features.
15. Voice Technologies
Chat-like platforms keep arriving for everything customers need to deal with on an everyday basis. Voice assistants are being developed to provide support for various issues. Voice technologies have evolved to tell the weather forecast or stream sports and improve customer service in the banking sector.
Voice technologies are divided into two main groups: the phonetic recognition of different words and the interpretation of the actual language as spoken, also known as natural language processing (NLP).
The global voice technology market will rise to $20.9 billion by 2026.
As we can see from above, the banking industry trends and technology trends in financial services are here to optimize the working processes by saving money, eliminating all human errors during operation, securing personal information, and delivering satisfying and safe customer experiences.
Feel free to contact Intellectsoft experts to find out more about the key fintech trends for 2022 and the wide array of financial software development services we offer. Our experienced specialists provide clients with business solutions that will improve team performance and business efficiency.