The post-pandemic future of fintech
The financial sector is one of the most highly regulated and scrutinized industries globally. Naturally, this sector must keep up with changes to regulations, legislation, and other conditions. These changes make things more complicated for fintech companies and require them to adapt their strategies accordingly, leading to speculations about the future of fintech.
The good news is that there are some opportunities here for innovation and growth. Here are seven trends emerging from these post-pandemic changing conditions which may lead to a whole new future for fintech.
Traditional financial institutions will integrate fintech into their business models
The use of technology that consumers have grown accustomed to is becoming an increasingly important factor in attracting new customers and retaining existing ones. Banks who want to stay ahead of the game must quickly, efficiently, and seamlessly incorporate these changes.
Integrating fintech will increase the overall value proposition for fintech companies or other similar organizations. These organizations can then help banks or other traditional financial institutions adapt to the future of finance, even if they lack internal resources to make it happen themselves.
Blockchain technologies like smart contracts will disrupt peer-to-peer (P2P) lending platforms
Another industry that has seen incredible growth over recent years is peer-to-peer (P2P) lending platforms. Companies like LendingClub have made it possible for people to lend money to strangers with the help of technology.
These lending platforms have created many opportunities for individuals looking for various types of loans, but this industry is also ripe for disruption by blockchain technologies like smart contracts.
This could allow P2P lending platforms to function without human intervention, which would be more secure and transparent while simultaneously lowering costs associated with operations.
The fintech sector will increase as some smaller companies are acquired or merged into larger ones
It is becoming more accessible and straightforward than ever before for fintech companies of all sizes to get funding through venture capital (VC). However, others may struggle to stay afloat or grow if they cannot find adequate funding to support their needs.
As a result, some of these companies may merge with similar organizations or even more prominent industry players to achieve the growth they need to compete locally and globally.
Digital currencies will impact traditional banking whether there are regulations put into place or not
It is pretty clear that digital currencies like Bitcoin (BTC), Ethereum (ETH), etc., are here to stay for at least the foreseeable future. The rise of cryptocurrency means banks that do not adapt quickly could risk losing visibility and relevance.
As more customers turn towards cryptocurrencies instead of traditional banks for various transactions, banks will be forced to evaluate their old policies.
Some countries have already established non-binding legislation surrounding digital currencies, while others still feel they should remain unregulated. Future finance will likely change through legal changes or technological advancements regarding blockchain technology.
Blockchain technologies for managing customer identity will make it easier to comply with KYC/AML regulations
Know Your Customer (KYC) and Anti-Money Laundering (AML) are two crucial parts of any financial transaction that must be completed by all parties involved for banks or other traditional financial institutions to remain compliant with the law.
However, this process is becoming increasingly complicated as more information about customers becomes available digitally. Fortunately, the use of blockchain technologies could help streamline these processes while making them more secure at the same time, thanks to their immutable nature.
Regulators may finally support digital currencies once they become regulated themselves
Some significant countries may eventually issue digital currencies of their own. The integration of digital currency would be similar to how the US dollar was introduced by the Coinage Act of 1792 after being authorized by Congress earlier that same year.
If this were to happen, it could increase interest in non-government issued digital currencies, which would give customers more choices during any given transaction or process.
Various alternative lending platforms will compete with P2P lenders for market share
Another area where fintech companies have made a significant impact is providing alternate sources for loans other than traditional banks, whether through peer-to-peer (P2P) lending platforms like Prosper and Lending Club or through non-bank lenders, which are often called “neo banks.”
This is excellent news for consumers, as there will be many more loan options available to them, which indicates increased competition between companies hoping to attract new customers. This competition will likely result in lower borrowing rates and fees for the most part, but the downside is transparency could become an issue if too much choice becomes overwhelming.
Wrap up
It’s safe to say that fintech trends for the future of asset management are promising and cannot be stopped by naysayers. Thanks to continued advancements in technology, more people will have better access to a wide variety of choices regarding how they make financial transactions or manage their money.
Banks that stop innovating or fail to keep up with these new changes may find themselves at risk of becoming obsolete, while others who embrace these changes from the start will likely prosper instead.
