Key opportunities to take advantage of in Fintech and more

The pandemic has changed the way people live and do business. While many industries had to adjust their processes to adapt to a new normal, some thrived thanks to their digital model. A good example of someone who thrives is financial technology, or fintech, which uses technology to provide banking and financial services.

Fintech was a growth area before the pandemic, with growth in the use of services from the sector jumping from 16% in 2015 to 64% in 2019. Although fintech players were not immune to the effects of Covid-19, they were generally able to to recover faster due to their agile model and their increased use of digital channels.

Related: Fintech companies have the power to promote financial inclusivity

Key factors driving growth in fintech

Given the trend towards digitization, let’s accept that fintech is here to stay. With this in mind, let’s talk more about the emergence of this space and some of the exciting opportunities that lie ahead of us in this sector.

1. Accessibility to an underserved market

One of the main reasons for the massive growth in fintech adoption is that the sector was able to take advantage of underserved markets that traditional banks often overlook. These include people who do not have bank accounts or smaller businesses with lower profit margins. Many fintech companies have appealed to these segments by providing easier access to banking services, including money transfers and microloans.

2. Increased contactless payments

Contactless payments increased during the pandemic as personal hygiene security became a major concern. Quarantines, closures and rules for social distancing also led to the emergence of e-commerce, telemedicine and teleworking, which all pushed online payments further.

You can expect these contactless methods to be part of the new standard because of their convenience. In fact, businesses are now exploring more diversified payment options such as QR codes and voice-activated payments to respond to changing consumer behavior.

3. Technological advances

Of course, given that technology is at the core of fintech, technological advances have also been a significant industry driver. Artificial intelligence (AI), machine learning (ML) and cloud computing are technologies that have driven fintech development and will continue for the next decade.

Related: Digital Twins: AI & ML Transforming the Fintech Landscape

Future opportunities for fintech companies

Fintech has grown impressively in recent years. But given the breadth of this area, it is important to focus on the most important opportunities that show the most potential. Some of these in my opinion are:

1. Built-in economy

Embedded Finance refers to integrating financial services or tools into a non-financial corporation’s offering. Built-in economy also helps to streamline the shopping journey and eliminate purchase barriers, creating a more seamless customer experience. Some examples of embedded finance include online stores that offer loans or “buy now, pay later” (BNPL) options on their website or app.

Given the growing demand for embedded finance, fintech players are starting to offer banking as a service (BaaS) solutions. Although you can quickly deliver these services through APIs, you need to build a strong risk and compliance strategy as a built-in corporate finance partner.

2. Artificial Intelligence (AI)

The Fintech sector is known for handling large amounts of data, making AI technologies valuable for the collection and storage of such information. Depending on your needs, you can take advantage of different AI applications to help your operations. For example, by analyzing user behavior, you can offer personal financial services or advice that suits each customer’s needs.

Alternatively, AI algorithms can help you make predictions to drive intelligent business decisions. One example is making risk assessment predictions, which allow you to detect potential fraud in transactions and minimize the likelihood of human error.

Related: Fintech in 2022 and Beyond: ‘Balloon’ or ‘Bubble’?

3. Sustainable finance

With the growing emphasis on environmental protection due to climate change, sustainable or green finance is another great opportunity you can embrace. The banking sector has actively implemented environmental, social and governance initiatives (ESG) – and now the fintech players are catching up.

More specifically, companies in the industry are looking for ways to incorporate sustainability into their business, whether it is through increasing climate-friendly investments or reducing carbon emissions. In this way, they can encourage individuals to be more aware of their environmental impact and act.

4. Decentralized economy

The concept of decentralized finance, or DeFi, gained traction in the fintech area due to the popularity of cryptocurrencies and blockchains. DeFi refers to an emerging technology that uses a distributed ledger to manage financial transactions, eliminating the need for intermediaries. Fintech has already begun to incorporate DeFi into interfaces, so we can expect this to play a more significant role in the future.

Fintech is undoubtedly here to stay, as demonstrated by its massive growth and resilience during the pandemic. In today’s digital age, consumers are looking for convenience and security – and fintech is helping to bridge this gap in financial services. So going forward, I think we can expect more innovation in the space to deliver available solutions to more underserved audiences.