Major FinTech Trends 2020: Which Will Bring You A Golden Ticket?

Published On : 01/27/2020

By Hugh Simpson Global Solution Leader, Data, Fintech & Financial services Vertical Lead at Ciklum

It’s been 32 years since London’s “Big Bang” brought all-electronic trading to global stock markets. Today, technology continues to dominate finance.

Even though human decision-making will always evaluate the definitive difference between success and failure, FinTech developments are breaking down barriers and reducing the ingrained advantages the biggest firms used to hold. Here are some of the key trends to watch in your quest to harness FinTech’s potential.

Intelligent Automation

Even the most hardened financial market traders are ultimately vulnerable to the human limitations of concentration and emotion. Look for more and more companies to emphasise fully automated investment and trading decision-making, particularly in managing funds. Perhaps the most interesting factor to track is the increased power and value of experts who write algorithms used by such robo-advisors.

As FinTech operations continue to evolve, technical advancements will cover more traditional banking functions. To compete in this automated industry, the financial sector should build the right mix of talent and embrace the new risk culture.

Big Data

Big Data refers not just to the sheer quantity of data that’s now available, but also to technology that fosters more incisive analysis of patterns in that data. It also involves the increasing availability of access to this processing and analysis on a “pay-per-use” basis rather than requiring a huge up-front investment. That puts smarter decision-making in more investors’ hands.

According to a 2019 study by IDC, the worldwide revenue for Big Data analytics is expected to hit $260 billion by 2022. In 2019, the projected numbers were expected to reach $166 billion, up 11.7% over 2017.

As Financial Times writer Kamalika Some notes:

“Banking is an industry which generates data on each step, and industry experts believe that the amount of data generated each second will grow 700% by 2020.”

A 2019 survey by Oracle offers some illuminating insights when it comes to Big Data impact on the financial services as it relates to opportunities in providing individualised solutions:

60% – Leverage customer behavioural data to make the right offer at the right time

47% – Improve the cross-channel customer experience to take the customer off the market as quickly as possible

40% – Frictionless service at a lower cost

37% – Enablement of flexible product/service bundling

37% – Maximise use of social media to connect with customers on an individual level

How can the financial sector increase customer intelligence?

• Collect and manage Big Data to get a 360-degree view of each customer.
• Work out one-to-one targeting and personalised offers in real-time.
• Leverage predictive analytics to detect fraud and reduce business risks.
• Personalise retention offers and achieve greater customer loyalty.

Blockchain

Blockchain has already disrupted the payment industry, and 2020 will see this technology become commonplace across the financial sector. Blockchain will launch a more efficient, secure experience. In fact, the underlying blockchain concept is expected to show off its muscle in FinTech. Deployment of blockchain in Fintech will spark game-changing potential for ultra-secure payments and transactions without the need for intermediaries and their often-exorbitant fee structure.

A recent World Economic Forum report predicts that by 2027, 10% of GDP will be stored on blockchains or blockchain-related technology

By 2025, 58% of respondents expect this tipping point to have occurred.

“Unlike other traditional businesses, the banking and finance industries don’t need to introduce radical transformation to their processes for adopting blockchain technology,” notes blockchain expert Dr Ahmed Banafa.  “After it was successfully applied for the cryptocurrency, financial institutions begin seriously considering blockchain adoption for traditional banking operations.”

A PWC report predicts 77 percent of financial institutions will adopt some form of blockchain technology by 2020. In addition, a recent study revealed “the banking industry will derive $1 billion of business value from the use of blockchain-based cryptocurrencies by 2020.”

With the growing investment and enthusiasm around blockchain, digitally mature companies cannot afford to be left behind. With so much at stake, companies must start learning, testing and implementing blockchain technology. Here are a few ways it may transform finance and banking:

• Reduce fraud
• Automate trading processes
• KYC  (Know Your Customer) – independent verification of the client
• Smart Contracts
• Secure payment processing

Mainstream Acceptance

Personal accounting and tax preparation software have already moved into the mainstream. Until recently, the concept of using tech tools to research, analyse, and execute investment decisions has been perceived to be strictly for Early Adopters. However, emerging data shows Fintech services are fast becoming the norm.

Consumers and FinTech

As Global FinTech Adoption Index 2019 reports:

96% of global consumers are aware of at least one money transfer and payment FinTech service

33% of global consumers often use a fintech services other than their main bank first

74% of global consumers use a money transfer and payments FinTech service

48% of global consumers use an insurance FinTech service

The report’s author, Gary Hwa of EY Global Financial Services, notes:

“Looking ahead, newly developing ecosystems will encourage industry convergence as FinTech challengers continue to mature, as more incumbents offer credible FinTech services, and as non-financial services companies expand their customer offerings into financial services.”

Sharing Economy

While the sharing economy covers all manner of transactions between individuals, it’s investment and lending that may super-charge the FinTech world. The potential is there to bring small investors and growing businesses together with an alternative to the traditional stock and bond issues that are dominated by major investment banks. There’s even talk that — subject to regulatory issues — peer-to-peer lending could extend to consumer finance such as mortgages.

According to Marketwatch, the global peer-to-peer lending market was valued at $34.2 billion in 2018 and is expected to hit $589 billion by 2025 with a compound annual growth rate of 50 percent.

Major FinTech players in the sharing economy include Lending Club, Zopa, Prosper and SmartyPig.

The sharing economy is estimated to grow to $335 billion by 2025

The Consequences

As projected FinTech trends grow, new challenges and opportunities will open. As Hwa notes:

“FinTech has redefined the rules of the game in financial services. What was considered new and disruptive in 2015 has since become a prerequisite for all players. With so many participants now offering similar services, each company must strive to differentiate itself to attract and retain customers, whether by brand, price or execution.

Security will continue to rank as the principal challenge even as rogue nations begin to hint at future cyber-warfare. The rise of FinTech as an economic disruptor – especially automation – will, no doubt, spur increased regulatory scrutiny as bureaucracy tries to catch up with innovation.

However, the growth of FinTech has proven equal to these challenges as emerging tech continues to outpace cyber-enemies and collaborate successfully with regulators.

If you’re looking to make your company’s financial services more efficient, Ciklum’s specialists can guide you in recognizing and developing the “Golden Ticket” that’s right for you.