With innovations in blockchain, Robo-advisors and mobile banking, 2020 will prove to be a landmark year for fintech. Here are the top five trends to consider and why they will have an impact on the financial sector.
With the New Year just a few months away certain tech trends will have an inevitable impact on the financial market. This will also affect the types of jobs, skills and experience that employers look for. As financial services continue down the path of hyper-innovation, everything from the cryptocurrency market to how financial advisors interact with customers will change. What are some of the biggest trends for Fintech in 2020? We have compiled a list of the top five to consider.
Mobile Banking/Online-Only Banking
In recent years the popularity of mobile and online banking has sky-rocketed. First, TransferWise began offering customers the ability to send money internationally while avoiding the high fees that most big banks charge. Shortly after, Monzo began offering clients a bankless option, managed via mobile or online, with the added option of no exchange rate fees for international purchases under £200.
2020 will likely prove to be a definitive year for the merging of innovation and banking. With some banks still using an outdated or overly complex system of financial management, they will be forced to face an ever more streamlined, online banking market. Banks such as NatWest, who continue to require card readers for online payments, may find themselves at odds with mobile banking that offers comparable security with a much more slick, easy and instant service.
Another bonus of online/mobile banking is the ability to data-mine customer service expectations. Third-party companies are given the ability to gain access to data from APIs in an attempt to better serve their customers and improve their services. The future of banking looks very mobile-friendly, easy to use, and instant.
Robo Financial Advisors
With every year our technology appears to advance at an exponential rate. 2020 will be no exception as ‘Robo-advisors’ begin to integrate themselves to a greater degree within financial services. Robo-advisors are a form of investment services that employ wealth management algorithms and can be either fully automated or partially automated. After the customer signs up with the particular financial platform, inputs all their information and answers a short survey regarding their investment goals they are presented with a portfolio that they can then manage and track in real-time. This option is typically cheaper than the traditional manner of financial investment, where a customer works with an advisor over the phone or in person.
This algorithm would match portfolios it feels align closely with the customer's needs, all while analysing millions of data points. This ability to data-mine is one of the key advantages of these wealth management algorithms. Some financial banks suggest that this may also have a positive overall effect on the market as decisions are made on more rational calculations and data. Private investors in 2020 will surely look to expand on the profitability of algorithmic wealth management. It’s estimated that Robo-advisors will manage more than $8 trillion in global assets by 2020.
Data has been growing in both importance and impact within the banking world. It also comes off the back of the mobile/online banking trend. As more digitized forms of financial services emerge, the greater the need will be for possessing vital data points. For Fintech businesses looking to create seamless and effective software, this will mean having a large software engineering team and talented data scientists at their disposal. That's why it is no surprise the demand for more skilled Data Scientists will be common in 2020.
Data mining will be crucial not only for financial institutions looking to stay ahead of the innovation curb but it will also educate companies on the needs of their customers. Along with this, how companies harvest and interpret user data will become paramount, especially with a constantly evolving and narrowing of data regulations.
What will perhaps be most interesting in 2020 with regards to data will be its sheer size. As a 2019 Mary Meeker report indicated by the year 2025, there will be more than 200 zettabytes of original and duplicated data. Making sense of this gigantic volume of data will be a task in itself. However, the ability to effectively capture said data, make sense of it and implement software to meet the demands of the customer may prove to be the deciding factor in which companies will dominate the financial sector and which will lag.
Blockchain Technology Matures
With Blockchain being a decentralised technology that is aimed to power much of the Fintech sector soon, many have their eyes set on how it will influence financial markets. While it is mainly attributed to cryptocurrency such as BitCoin, Blockchain can be a benefit to many different products and services that rely on contracts. It is essentially a shared, open ledger that can report/record payments and other types of transactions between two individuals rapidly and securely. This has proved to be a popular strategy for people trying to avoid larger financial institutions as middlemen. The proof for this is in the statistics, as Blockchain wallet users have increased by 100% year-on-year for the past several years.
It is not a matter of “if” Blockchain will transform the financial landscape, but “when” and to what degree. As a result, countless business across numerous sectors are already implementing pilot programs that deal with everything from financial services to health care services. Asia is an especially positive case-study as several banking institutions in Singapore and Thailand conducted successful international transfers within seconds. With Millennials and Gen Z's wanting greater security, freedom, and speed between their transactions, Blockchain importance in Fintech can only grow in 2020.
Greater Investment in Blockchain
2018 saw a massive increase in capital spending in Blockchain as almost $40 billion was raised by venture-capital-backed businesses. This is a 120% increase from the previous year. It would be no surprise if 2020 saw continued investment growth from varying sectors. Larger tech companies are also growing more confident when it comes to experimenting in the financial market. Apple, for example, has initiated a new credit card system to help deal with customer security concerns. This has many larger financial institutions wondering how it will impact the market, considering apple is renowned for its quality user experience.
Amazon has also begun lending to smaller companies to develop their consumer experience via Blockchain technology. Facebook meanwhile is looking to launch its own currency, Libra, although granted it is facing a slight backlash at the moment due to their recent regulatory debacle. The real question is how the current European regulatory climate will affect businesses implementing new cryptocurrencies. The EU has proposed a unified cryptocurrency regulation which may also impact the UK once Brexit comes into full swing. Nevertheless, if there is one certainty for 2020 it is that big banks will be forced to consider that brands such as Amazon, Apple and Facebook may pose a real threat to traditional forms of banking.
While hindsight is 20/20, these five trends seem to be inevitable, based on recent history. The question is really, to what degree will these trends impact the overall market? There may well also be new innovations which we have not even considered. That remains to be seen. What do you think are the five biggest trends to watch for in Fintech in 2020?