Financial technology (or “fintech”) is where banking and big tech intersect to provide quick banking, investing, and payment services for clients. The last ten years, blockchain and artificial intelligence dominated headlines with everything from e-payments, arranging loans and insurance, wealth management, and just your day-to-day banking.
Despite seeing great strides over the past few years, we still have further to go before we can truly say: “the financial future is now!” But it’s the dawn of a new decade and we can expect a lot of things to change alongside the rapid shifts in technology – including how we approach our finances.
What are some upcoming trends the fintech industry can expect this next decade? We took the dive, so you don’t have to.
5G will be a game-changer
Imagine a network that’s instantaneous, keeps you connected everywhere you go, and faces minimal technological hiccups. That’s what the 5G network promises, and 2020 is expected to be the year where we see a full roll-out, as reported in many business headlines. According to Qualcomm, 5G browsing responsiveness can run 23 times faster than regular 4G networks.
For fintech companies like Ant Financial and Adyen, it means having a wider coverage of services and more connectivity with customers and clients. What this means for you is that your phone won’t just be a calling and Candy Crush-playing device, you’ll also have constant, uninterrupted access to payment, banking, and wealth management services right in the palm of your hand.
People may not get rid of their physical wallet once 5G is active right away, but this technology lays the groundwork for a cashless society.
Profit will become a priority
To keep investors’ interest, fintech companies will have to do a lot more than just sport the flashiest new tech for shareholders – they need a strong bottom line.
Economic and political instability in the markets make it more challenging for new businesses to find their footing, especially if these businesses are growing through a relatively new industry. Fortunly found that in 2016, the priority was to get these startup businesses on the market rather than establishing a strong profit, with insurance tech start-up companies peaking in development. A report by AltFi identified a few companies coming out of the gate with profits, like Assetz Capital, iwoca, Lendvest, OakNorth, and Transferwise.
Jobs are at risk
Throughout the decade, fintech will be less of a ‘new kid on the block’ and will enter a more mature phase of its market development. What this could mean is more Darwinist mergers and acquisitions where only the most successful fintech companies thrive.
In a field where automation is already poised to replace human workers, the added threat of two companies margining into one and making some cuts to the workforce is a potential trend that fintech workers should keep an eye on.
Old financial institutions need to learn new tricks
Speaking of Darwinism and getting the axe, traditional banking institutions will have to pull their services out of the Pleistocene and into the 2020s if they expect to compete with this new crop of fintech companies.
U.S. companies with a long legacy like JP Morgan-Chase, Bank of America, Wells Fargo and Citi will likely ramp their online and mobile services to stay competitive. In Canada, it’s up to the Big Five Banks (RBC, TD, Scotiabank, BMO, and CIBC) to keep pace with the rapid changes in the fintech space.
Privacy and security are a real issue
With the hyper-personalization that these services provide and their ability to track client habits to create the best financial plan for them, there will be added pressures on fintech companies to guard the privacy and security of their client base. Last year, companies like Capital One, Desjardins, and First American faced their own data breaches.
According to CIO Dive, financial services are 300 times more vulnerable to data breaches than any other industry. Updating the infrastructure they operate in and proving to their would-be clients that they can effectively safeguard their data will be a critical strategy move.