Globally, the first half of 2018 saw fintech attract $57.9bn of investment. With the UK attracting $16.1bn (£12.3bn) – the predominant chunk of the European Union’s $26bn – to overtake US-based fintech investment for the first time.
There are now 29 members in the fintech unicorn club. Spread across 4 continents. With new growth areas arising across Europe, Asia and South America outside of the main funding hotspots (the UK, US, China and India).
These record levels of investment suggest more growth is on its way. KPMG’s recent report on Q2’18 highlights much of this growth, identifying key investors and specific growth areas.
Following this research, we wanted to take a step back to analyse the broader trends governing the rapid rise of fintech.
The central underlying strengths behind almost all fintechs are their flexibility and reach. Something inevitably demanded by an increasingly digital world and consumer base.
Taking finance mobile and opening it up to the world as a whole has allowed far better applications and delivered far greater benefits for users.
With these advancements, the need for physical banking has been drastically reduced, changing the way we handle and think about our personal finance.
At the outset of the fintech era, fintech was in direct conflict with financial services. With fintech brands jumping on open banking regulations to take advantage of the mistrust surrounding traditional banks following the financial crisis.
In 2018, fintech and financial services are less distinct, with fintech often collaborating with financial services to make banks more accessible and 24/7. Which brings us nicely onto…
Collaboration and reciprocity have always been at the core of the fintech spirit – aiming to overcome the failures of the previous status quo in the financial world.
By working together, sharing resources and networking in new innovative ways, Fintech brands have been able to develop and deliver exponentially better services for everyday consumers.
Innovative technologies have been key to mutually beneficial collaborations between all kinds of businesses with some cross over in their ambitions.
Also, the rise of fintech has brought far greater collaborations, allowing international corporations to come together more easily to do business in new ways.
This has allowed barriers between industries to be overcome and paved the way for new breeds of services that are able to enhance lives’ in ways traditional financial services simply could not.
Payment is a key area where Fintech has shown its capacity to tear down a long-standing barrier to open up new space for increasingly innovative services to evolve into.
The most pivotal evolution within this space has been frictionless payments.
Frictionless payments are instant, direct and (as sold) entirely frictionless, allowing both consumers and merchants to have immediate access to the funds that arrive in their accounts. As you can probably guess, this has changed the way business works in a huge way.
Given its many benefits, frictionless payments have grown in popularity very quickly, changing consumer expectations and ultimately changing the way individuals and business send and receive funds.
For businesses, this has set a new far-greater standard for payment services. With fintech brands like Nuapay offering next-level payment services that provide frictionless account-2-account payments on any scale.
For international corporations, these fintech services have been able to open up new markets, especially across subscription-based services where direct debits, reconciliations, refunds, etc. need to be processed on mass.
Mobile white-label fintech solutions such as this have the capacity to take any business global and still operate smoothly. Meaning startups can afford to think much bigger from their very beginning, adopting an agile approach to stay ahead.
AI and machine learning applications have been central to the rise of fintech services, allowing companies to process and analyse much larger quantities of data in a much shorter time span.
“In the UK, artificial intelligence and robotic process automation continued to be hot areas for investment” – KPMG Q2’18 Report
While still growing areas, AI and machine learning already support key functionalities within many fintech offerings.
Investment in AI and automation technologies has remained high this year. And we can expect to see a lot more growth and innovation at the hands of AI applications in the coming years.
Cognitive banking is one such example of AI making its mark in the world of finance.
Cognitive systems are able to handle large quantities of data and information in a situation in a dynamic almost human-like way.
Cognitive banking is the extension of this into the financial domain. Where AI solutions can be used to leverage big data for the benefit of the consumer and the business.
This way, more accurate predictions are possible, which helps to gain an improved knowledge of the business and ultimately leads to smarter and more innovative ways of interacting with customers.
With crypto, blockchain technology got it’s name up in lights. Yet it’s applications reach far beyond this often hyped area of finance.
Blockchain solutions are able to transform manual, time-consuming processes within finance, offering much quicker processing speeds, reduced costs and far greater security for business and banks of all sizes.
Blockchain tech is already a major investment area, underpinning most fintech solutions and already incorporated by most big banks.
Blockchain and distributed ledger technology have played a huge role in opening up the world of finance, dismantling borders, reducing risks and growing to become a calling card for innovation.
Gone are the days when payment processors and card issuers are a necessary part of the financial process, or when third parties were necessary to complete a transaction.
This is both wonderful news and another major impact of fintech’s growing influence on finance.
For businesses, this is a huge change. It has allowed for new levels of workflow efficiency and brought about new standards of convenience within customer experience.
By allowing businesses to work on their own time, and eradicating delays caused by banks, alternate banking solutions have set businesses free.
For individual businesses, this trend is an important one to stay on top of.
As more and more businesses replace legacy systems with innovative fintech solutions, those that don’t will quickly stand out. With slow customer experience and long-winded processes being the key failings.
Behind these 7 underlying fintech trends is the idea that finance should be easier, quicker and designed around the user.
Ultimately, this is the law by which fintech is governed. And the driving force behind the huge demand for fintech innovation.
So watch this space. As, according to KPMG’s head of technology Anna Scally, ”The real impact of PSD2 and open banking has yet to be fully realised”.
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