The Evolution of Fintech: Global Trends and Future Prospects

The fintech industry is growing by leaps and bounds, making headway into both consumer and B2B.

In 2023, the fintech industry boasted a valuation of $179 billion. It is projected to hit $492 billion by 2028 — at a 16.8% growth rate. Deloitte reports that the global fintech industry revenue has nearly doubled since 2017.

Evidently, fintech investment and consumer adoption are experiencing a significant upswing. But by how much? And where is this industry headed next?

Let’s unpack some top trends in the fintech space.

Embedded Finance to Witness a Boost

Embedded finance is set to flourish. Largely since it allows customers to seamlessly access banking-related services from non-banking businesses without disrupting their customer journey. For example, you can pay for goods and services online or through a merchant within the service provider’s app. By 2025 the estimated value of embedded finance will be $141 billion. This will be driven mainly by demand from traditional companies like vehicle manufacturers and hotels.

One of the stand-out examples of embedded finance solutions is embedded payments. Prominent companies like Amazon, Uber and Walmart have embraced embedded payments. They allow customers to order seamlessly and complete payment within a single application. Uber is an excellent model of a company that has seamlessly embedded finance into its technology platform. Initially, their primary focus was on creating a marketplace to connect individuals in need of a ride with those willing to provide one.

In a strategic move, Uber incorporated financial elements into their offering by automating the payment process. Thus ensuring that riders can conveniently pay drivers at the exact moment required. This enhancement significantly improved the payment experience for all parties involved.

Neobanking will Become Hyper-Focused

Another prominent trend could be the hyper-personalisation of Neobanking services. Neobanks have witnessed a remarkable surge in global prominence, with their market valued at $66.82 billion in 2022. Analysts are forecasting substantial future growth. They are projecting the neobank market to reach an impressive worth of approximately $722 billion by 2028, boasting an annual growth rate of nearly 50%.

Companies like Personetics are at the forefront of this trend. Personetics analyses data in real time and categorises data using ML. This data is then shared with Neobanks who use it to offer more personalised suggestions to their customers. Neobanks are using this data to determine the “next best action”- a customer-centric strategy quickly becoming the new norm in banking.

Hyper-focus or hyper-personalisation in Neobanks will help them address the specific needs of new-to-credit customers, students, retirees, and salaried women with tailored solutions.

Cyber Security and Fraud Prevention

The ascent of neobanks, embedded banking and digital payment ecosystems have simplified money and capital movement across geographical borders. However, this mobility comes with cybersecurity risks. Fintech firms worldwide fell victim to 2.5 times more cyber attacks in Q1 2022 than a year back.

Malware attacks constantly evolve and exploit multiple entry points making detection challenging, while identity theft remains a significant concern. The anonymity of cryptocurrencies presents money laundering risks and third-party vendors can introduce unexpected vulnerabilities.

As data breaches and identity theft continue to threaten people’s personal information the need for a safer and more secure ecosystem has never been greater. This is where Scallop Chain comes in, offering digital self-sovereignty and a groundbreaking feature that sets it apart from other blockchain ecosystems. Using biometric bridge technology for authentication Scallop Chain connects a user’s biometric data to their digital identity on the blockchain.

Thus, cybersecurity assumes a pivotal role in ensuring the stability of the fintech ecosystem. Hence, companies are allocating substantial resources, exceeding $70 billion, towards cybersecurity research and development.

In future, fraud prevention, a critical facet of cybersecurity, will be fortified with advanced algorithms and machine learning. These technologies will detect fraudulent activities and proactively prevent financial losses. Real-time fraud detection systems, monitoring of account activity, and the flagging of suspicious transactions will become standard practices in the industry.

Rise of AI in Fintech

Eminent financial advisers concur that AI technology is poised to revolutionise financial planning by 2023. AI-powered software will be able to analyse extensive financial data. This will help craft personalised investment strategies aligned with an individual’s preferences and risk tolerance.

AI-driven chatbots will take customer service to new heights. These are capable of identifying customer issues and addressing them in various local languages and dialects. For example, Active.ai is a Singaporean fintech startup that offers an AI-driven conversational banking solution. This platform empowers banks and financial institutions to engage with customers using NLP and voice recognition technology. Active.ai enables AI-assisted transactions, balance inquiries, alerts, service requests and delivering financial guidance.

Moreover, enterprises are harnessing cutting-edge technologies such as neural networks for image recognition and gradient boosting for credit risk evaluation. This could yield remarkable user acquisition and significant market influence.

The Return of DeFi and Blockchain

In the world of fintech, blockchain technology is proving to be a game-changer for financial institutions. It’s speeding up transactions, making them inexpensive and safe. However, as mentioned earlier there is a growing risk of cyber fraud and identity theft. Existing identity systems are fragmented and lack security.

Blockchain technology offers a more secure means of managing and storing digital identities. It offers a unified, interoperable and tamper-resistant infrastructure. This brings substantial advantages to enterprises, users and IoT management systems.

As fintech continues to evolve and revolutionise the banking industry, Scallop Chain stands out as a unique and innovative solution. Known as a “bank on a chain,” this blockchain offers banking capabilities to both retail and business customers. What sets Scallop Chain apart is its robust regulation and control which ensures that users can manage their digital assets securely. Scallop Chain is also the first regulated blockchain. It integrates KYC and AML modules in its consensus mechanism. Thus ensuring that financial regulations are met. Additionally, the network’s Byzantine fault tolerance patch and ZK-Rollups make it both fast and scalable.

The decentralised finance (DeFi) ecosystem, particularly in developing countries, is poised for exponential growth. We anticipate many innovative DeFi applications catering specifically to the needs of the unbanked in Southeast Asia and Africa. These applications could provide access to financial services like microlending and insurance thus bridging the gap between the traditional financial system and the underserved.

Final thoughts

Despite the challenges posed by volatile geopolitics and economic downturns the Fintech ecosystem is poised for a promising future. The fintech sector exhibits relentless evolution galvanised by groundbreaking technological advancements and dynamic shifts in consumer behaviour. The horizon is set to be dominated by the dynamic and transformative forces of digital banking and the financial revolution sweeping across the globe.