Lehman Brothers' filing for bankruptcy on September 15, 2008, ushered a major financial crises that rocked the world. Many trusted financial institutions were nationalized, went bankrupt, or were bought out to avoid collapse, and suddenly, confidence in these systems was gone. But as damaging as this crisis was, it enabled innovation, with the mistrust of banks worldwide arguably leading to the rise of Financial Technology (fintech).
Filling the void left by the failure of traditional banking, new fintech companies stepped in, providing an ever-expanding array of more convenient, affordable and secure options for individuals and any-sized businesses to manages their finances.
Now, we are facing new crises, including the impacts of the COVID-19 pandemic, a looming global recession, war and environmental issues. And while these problems are grave, they also provide an opportunity for fintech companies, which are well positioned to weather the storm thanks to their agility and willingness to embrace new technologies.
As the world economy is shaken and geopolitical upheaval continues, fintech companies are developing creative financial solutions to help people navigate these uncertain times. Below are just a few innovations and trends defining the fintech space amid today’s prevailing uncertainties.
The Rise of Neobanks
In recent years, we've seen the rise of neobanks—digital-only banks that offer all the same services as traditional banks but without the overhead costs associated with physical branches. This change is being driven by fintech companies that can provide banking services more efficiently and effectively thanks to cutting-edge technologies like artificial intelligence (AI) and cloud computing.
By theend of this year, the transaction value of the neobanking segment is expected to hit $1.07 trillion. More and more people in NorthAmerica are using neobanking as their primary payment method because it is easy to use and has advanced features. The neobanking market is expected to grow exponentially in North America through 2028 due to changing customer preferences, increasing digitalization in the fintech space, and the growing adoption of state-of-the-art technologies.
The market is also growing due to the increasing number of partnerships between banks and businesses to launch neobank platforms. These partnerships aim to provide a better customer experience with increased safety and stability. Some traditional banks are creating their own neobanking solutions. For example, Marcus neobank is backed by Goldman Sachs, while JP Morgan Chase created Finn in 2017 before closing it down two years later.
As traditional banks struggle under heavy regulation, neobanks are poised to take advantage of their nimbleness and lack of legacy systems. They're now expanding their range of personal finance products and services. Most notably, they have started to explore and integrate home loans and mortgages into their offerings– with the aim of offering lower interest rates than is possible with traditional banks.
The main difference that allows neobanks to succeed where old ones fail is their lack of brick-and-mortar locations. Because they don't have the same overhead costs, they can offer more personalized and cheaper loan packages than older institutions.
Financial Health Solutions
Inflation is at an all-time high due to worsening economic conditions, causing the prices of essential items like gas, food, and energy to rise. This makes it difficult for people to make ends meet, let alone save for the future.
Fintech companies are developing new solutions to help people manage their finances and stay afloat during these difficult times. These financial health solutions provide people with a way to track their spending, set budgets and goals, and get advice on improving their financial situation.
With fintech financial solutions, customers can get weekly, monthly, or yearly reports of their spending habits. This allows them to see where they may be wasting money and provides opportunities to control spending. This knowledge gives people power over money and helps them feel more in control.
Fintech apps offer money-saving features such as voucher and discount code finders, upcoming bill previews, subscriptions trackers, and bill monitors. With these tools, customers can easily see where they can save money, switch to better deals at the opportune moment, and plan finances confidently.
One example of a financial health solution is Mint, an app that helps people track their spending and set budgets.It also provides users with personalized tips on saving money and improving their financial situation. Another example is LearnVest, a website offering financial planning services and educational resources.
Fintech Is Becoming a Cloud-first Sector
Fintech is a booming industry with more unicorns than any other. With data that needs to be stored, analyzed, and managed securely, it has become important for fintech to use cloud technology. This aligns well with the fintech values of speed, scalability, and agility and the responsibility for storing sensitive information.
Cloud technologies have provided a one-stop solution to fulfill the requirements of fintech today. As such, now fintech is functioning as a 'Cloud First' sector, taking advantage of the apparent evolution and maturity of cloud technologies.With a track record of delivering scale, availability, reliability, agility, security, and favorable economics, there is no doubt why many fintechs have embraced the cloud.
Though fintech watchers and regulators were initially hesitant about security and data protection with the cloud, it has since been proven secure. This is partly due to fintech providers' safety precautions like zero-trust verification and encrypted data. So far, when these protocols are in place alongside measures such as employee education and access control, the cloud doesn't seem any riskier than traditional IT infrastructure setups.
The rise of cloud computing is transforming the financial sector. With the cloud, fintech companies can scale their operations quickly and efficiently to meet changing customer demands. They can also rapidly deploy new features and services without expensive hardware or software upgrades.
The move to the cloud is also helping fintech companies save money. With the pay-as-you-go model of cloud computing, fintech firms only need to pay for the resources they use. This contrasts with the traditional model of IT infrastructure, where companies have to make upfront investments in hardware and software, regardless of whether they use it all.
The cloud also makes it easier for fintech firms to comply with regulations. With the cloud, fintech companies can store data in multiple locations and implement security measures to protect it. This is vital for meeting the stringent compliance requirements of the financial sector.
When looking for cloud solutions, fintechs want providers that offer solutions around digital wallets, payment gateways, mobile banking apps, etc. This is what has made cloud providers like AWS and Alibaba quite popular with fintech companies. The solutions from these cloud vendors come with ML and AI integrations, allowing fintech companies to perform predictive analysis with their data.
Cloud infrastructure providers offer a sturdy, reliable platform with top-notch architecture. They also have many services that help fintech organizations provide customers with excellent experiences.
Fintech + Python = the Perfect Match
Python is the most popular programming language in the world, and it's no surprise that it's also influential in fintech. HackerRank places it at number one in fintech. Employers are increasingly looking for candidates who know Python, which ranks among the top three languages requested in finance interviews.
The programming language has been gaining popularity in the fintech sector due to its versatility and ability to handle complex data. Python is used by major fintech companies such as Robinhood, Square, and Stripe. Fintech startups are using Python for various purposes, such as building financial models, developing trading algorithms, data scraping, and machine learning.
Compared to other languages, Python code is more concise and less prone to errors, making it ideal for startups in the fintech industry. Transparency is critical when coding a financial service so that the startup owner and development team are on the same page.
Ultimately, the main advantage of Python is its short implementation time, allowing the product to go to market much faster than writing code in other languages.
Automation and Artificial Intelligence WillShape the Future of Fintech
The application of artificial intelligence (AI) and automation in the financial sector is set to increase in the coming years. These technologies can reduce costs, improve efficiency, and provide personalized services.
According to a Grand View Research report published last May, by 2030, the size of the global artificial intelligence in the fintech market is estimated to reachUSD 41.16 billion, having grown at a CAGR of 16.5% from 2022-2030. The increasing demand for AI-based solutions in fraud detection and prevention, customer experience management, and risk management are some of the main drivers of this growth.
Banks are already using AI to detect fraudulent transactions and will continue to do so to stay ahead of criminals. In the future, AI will be used to identify customer risk profiles and provide personalized services. Automation will also play a role in improving the efficiency of financial institutions.
The use of robotics in the financial sector is still in its early stages but is expected to grow in the coming years. Banks are using robots to automate repetitive tasks such as customer service, fraud detection, and account management. In the future, robots will be used to provide more personalized services such as financial advice and investment recommendations.
The increasing adoption of AI and automation technologies in the financial sector will shape the future of fintech. These technologies will help financial institutions improve their efficiency and provide better, cheaper services to their customers.
The financial sector is evolving, with new technologies and business models challenging the traditional players. Fintech startups are at the forefront of this disruption, using technology to provide innovative solutions to today’s problems.
Fintech is changing how people and organizations handle their money. It's making it easier for more people to get financial services, lowering transaction costs, and improving how individuals and businesses pay for purchases. With the ongoing war in Ukraine, the looming global recession, the unrelenting climate change threat, and the challenges of navigating the post-pandemic world, there has never been a more critical time for financial technology to show its value.