Fintech has been taking the business world by storm for several years. However, digital adoption rates have increased significantly recently, especially since the start of the pandemic. The increased adoption was fuelled by the heightened necessity for a digitized marketplace and a greater push towards frictionless transactions. Customer expectations have elevated, and payment processing, wealth tech, and Neo banks are rising to meet them, offering convenience, security, and a better customer experience. Increased interest and investment make way for greater speculation in fintech innovation, which is what we’ll be talking about in this blog.
Fintech Innovation Attracting Speculation in 2022
In the current landscape, where FinTech continues to leverage ecosystem digitization, data analytics, and multi- organization partnerships, management of data and ensuring proper compliances become increasingly important. Adopting a robust enterprise DG framework will enable FinTech to accommodate the changing data requirements both from a business and regulatory point of view and ensure data privacy and security. A trusted FinTech data ecosystem is thus essential.
The scope of innovation in payment processing encompasses emerging trends in student loan payments, retail payments, and person-to-person (P2P) payments, as well as in credit and debit card transaction processing and settlement. In addition to new payment processing methods, companies should consider emerging methods of payment structure. Buy Now Pay Later (BNPL) is a short-term lending option that allows customers to pay the balance of purchase in interest-free installments over a set period instead of the full-cost upfront. According to an Amex Trendex survey, 39% of customers have opted for BNPL in the past year. 19% of companies plan to adopt BNPL in the next 12 months and an additional 28% are considering it.
Blockchain eliminates the middleman by establishing peer-to-peer networks for fast and transparent transactions and enables bank-less fiscal management, providing users a sense of ownership. Blockchain also fits seamlessly into the increasingly interconnected world by supporting borderless transactions. As cloud migration climbs the list of priorities, wealth managers will likely shift to a remote advisory model, which allows them to offer more personalized services. The shift from a linear, industrial financial services value chain towards modular backends, open platforms, and embedded financial services will erode the line between the originators and distributors of financial products. Traditional institutions recognize the urgent need to tackle their transformation efforts to generate new net revenue growth.
Wealth management firms are migrating their data to the cloud and reaping the benefits. The cloud offers firms a scalable environment conducive to today’s selection of data-intensive analytics apps. It also streamlines data sharing within the organization, giving more employees access to relevant information. Firms that embrace the cloud can perform more accurate data analysis and draw from artificial intelligence-backed insights. Cloud adoption also helps them save money in the long-term, as legacy systems are expensive to maintain and leave data vulnerable to potentially costly breaches.
A driver of cybersecurity investment over the past year has been the need for more effective and customer-centric access controls. Financial institutions are beginning to recognize the importance of providing an exceptional client experience. As a result, they are beginning to rethink their cumbersome identity management processes. This drives investment in Fintech companies offering innovative access management solutions, including biometrics and behavioural analytics. In some jurisdictions, like Europe, the focus on Know Your Customer (KYC) and Customer Due Diligence (CDD) is widening to include advanced data management, analytics, and interpretation to drive more efficient regulatory compliance procedures and address cybersecurity issues.
Many RegTech providers use the agility and are exploring how advanced analytics and assessment techniques can start to ‘learn’ and support in accelerating the assessment of new and emerging regulation based on what has been seen previously and how that has been interpreted. In the short term, RegTech will help firms to automate the more mundane compliance tasks and reduce operational risks associated with meeting compliance and reporting obligations. In the longer term, it will empower compliance functions to make informed risk choices based on data provided insights about the compliance risks it faces and how it mitigates and manages those risks.
InsurTech, an important part of fintech innovation, is bringing an old, slower-moving industry up-to-date, for the benefit of both customers and companies. If top InsurTech companies can match customers to more tailored policies, then fewer people will be paying more than they need to for insurance. That makes managing the risks of day-to-day life while protecting your financial future much easier. There’s also the convenience of being able to manage your coverage from your smartphone, so you can get insured while on the go. The rapid adoption of InsurTech services by traditional insurers in the UAE is rapidly altering the industry landscape. According to the Capgemini World InsurTech Report 2020, 67% of UAE-based insurers are keen to collaborate with InsurTech, while 85% want to partner with technology providers. The move towards Insurtech services has been partially driven by the COVID-19 crisis.
In the coming months and years, as technology and markets mature, fintech innovation will continue to pave the way for new business models and development in financial services. These platforms create global opportunities for banks and fintech companies to collaborate and extend their offerings regarding payments, lending, digital banking, instant credit and more.
Curious about Fintech in MENA?
Read the rest of the blogs in this series by clicking on the links below:
- Key Fintech Initiatives Shaping the Sector in the UAE
- 5 Fintech trends that will change the landscape of the financial industry
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