It should come as no surprise that fintech is one of the fastest-growing industries in the world. Even prior to the pandemic, companies and customers relied on digital transactions. These days, financial technology makes the world go ‘round.
As the pandemic continues to change consumer needs’, fintech will continue to change as well. While not all of those are predictable, many of them are already showing up in how, where, and when people manage their money.
Fintech companies are using technology to flex with the market. Here are six fintech trends that you can expect to take center stage in 2021:
1. Online-Only Banks
Covid-19 has transformed the way people bank. The virus caused banks to close and led consumers to start managing their money online. Many who switched to online debit cards and savings accounts won’t bother changing back.
Because they have fewer overhead costs than brick-and-mortar banks, online-only financial firms can offer better rates and fewer fees. Many even reimburse customers for using other companies’ ATMs, given that few online-only banks have their own.
Social distancing may be the final nail in traditional banks’ coffin. The number of branch locations in America has declined by 7% since 2015. Expect that number to keep declining in 2021. Don’t be surprised if the bank on the corner of your block is defunct by the time the next decade rolls around.
2. Robotic Process Automation
Like online-only operations, robotic process automation (RPA) helps fintech companies reduce their labor costs. Technology can check forms for errors and make lending decisions more efficiently and accurately than human beings can.
In 2021, fintech companies will use RPA to make it easier for customers to open and manage their accounts. Many forms will be filled out automatically. Tax records will be sent out by software, not human bankers. Just about any process that can be automated will be automated in 2021.
3. Artificial Intelligence
AI fuels not just RPA, but all sorts of systems fintech companies use to stay secure and efficient. According to a report by the Autonomous, financial institutions can save 22% by the year 2030 simply by integrating AI.
Beyond increasing efficiency, AI can identify and cut off criminal activity. It can suggest new target audiences, personalize content, and even conduct first-round interviews with potential new hires. All of these uses will make it possible for fintech companies to pass on savings to their customers.
A particular hotspot for AI is customer service. Fintech companies will double down on chatbots to answer commonly asked questions. And if a chatbot can’t answer a question, it can triage the query to a human customer service representative who can.
According to a report by Business Insider Intelligence, about 48% of banking representatives think blockchain technology will have a big impact on banking in 2021. The other 52% risk being left behind.
Blockchain uses a public ledger to store and authenticate data via other devices connected to the network. No one entity controls the data, making forgery difficult if not outright impossible.
For fintech companies to succeed, people need to trust their product is safe. Banks and financial institutions can use blockchain to create trust through transparency. No blockchain-linked transaction can be lost or unrecorded.
Blockchain can secure physical assets, too. Assets like mortgages and fine art can be assigned blockchain identifiers, making it easier to track and authenticate each one.
5. Biometric Authentication
While mobile banking is convenient, it also creates security risks. Since the pandemic began, credit and debit card fraud has risen as people rely more heavily on digital transactions.
In 2021, fintech companies will have to enhance their security options to keep cybercriminals at bay. One way they’ll do so is with biometric security options.
Biometrics are physical or behavioral characteristics that can be used to identify a person and grant them access to a digital device. For example, many phones use fingerprint sensors to unlock a user’s device. This same model can be used to log into a bank account.
Biometric authentication methods are more secure than passwords. If a cybercriminal gets their hands on a user’s password, they easily try to use that password on other sites. But to capture their iris pattern or fingerprint, they’d need a high-resolution image of that body part — a much higher bar of security.
6. Financial Inclusion
Almost 1.7 billion adults are unbanked. In other words, they don’t have an account at a bank or financial institution. A majority of those people live in a developing economy, but millions of them live right here in the U.S.
The good news is, many members of the unbanked population do have access to a smartphone. This opens the door for the fintech industry to reach people without bank accounts.
Most fintech apps are easy to use and accessible in multiple languages. Plus, fintech services are often less expensive than those offered by traditional banks. Providing unbanked people access to fintech tools will improve financial inclusion, making it possible for the less fortunate to protect and grow their money.
No year has shifted consumer expectations quite like 2020. Because business trends respond to those on the consumer side, 2021 is the year when many such expectations will make their mark on the market. Whatever happens with the pandemic, there’s no question that next year will be an exciting one for the fintech sector.