5 digital trends driving the fintech revolution in 2020
For businesses in the financial services industry, the disruption caused by innovation led changes has been non-stop. Not so long ago, financial technology was a trend in itself, driven by start-ups such as Paypal and Adyen. Today, fintech is a collective name for a variety of trends such as unbundling, open banking, online leasing and more. These trends follow each other up at a rapid pace and are responsible for transforming the entire financial services industry. However, there are 5 specific digital trends that are changing the fintech sector with more speed than any others. In fact, these 5 trends extend beyond industry borders and are redefining the way companies do business and the way consumers interact with brands as well as with each other.
Here are five trends I see shaping fintech into 2020:
1. Machine learning
Artificial Intelligence (AI) is not the next big thing; AI growth builds incrementally since banks - big and small - have been adopting it over the recent years. AI as a service (AIaaS) is now available from Google, Amazon and other companies, allowing smaller banks without data science backgrounds to incorporate AI into their business. Automation is changing the way banks are providing service, from identifying identity and fraud, to wealth management Robo-advisors evaluating risk and managing a person's money based on their investment objectives. According to McKinsey, machines will perform 10 to 25% of all banking work in the next few years. The money managers of the future are smart algorithms with a deep understanding of our personal spending patterns or investment preferences.
2. Customer-centric experiences
The last five years have seen explosive global growth in customer numbers of neobanks. These neobanks, which only offer full-digital financial services and extremely low fees, attracted mostly people from the millennial generation that felt that they were underserved by the traditional financial service providers. However, today most financial institutions have transformed their retail user experience, offering full mobile functionality with best-in-class design principles. Great UX is now the norm. So with Customer Experiences (CX) not being a key differentiator anymore, but a requirement for being competitive at all in fintech, it’s interesting to see fintech companies innovate on where the customer actually need help with. Design thinking methods helps companies to fix pain points like for instance the amount of documentation needed to get an insurance or not being able to ask simple questions about your financial products.
3. Hyper personalisation
There was a time when the banking industry could rest comfortably knowing it was solidly trusted. But trust in banks was badly shaken by the financial crisis and other more recent revelations and has been up and down since. Today, customers trust technology companies with money over banks. Companies such as Amazon and Netflix have demonstrated that comprehensive personalization strategies outperform static industry peers with Higher customer loyalty and trust. Various systems of engagement, those that look beyond personalisation, are successful within fintech that respond to increasing trust. Best practices are taken from the gaming industry to attract millennials to make financial trading more accessible. Driven by smart algorithms and a huge amount of data, Fintech companies will increasingly help consumers achieve financial goals with personalized experiences that blend into their lifestyles.
4. Differentiate for millenials
Millennials are of all generations the largest group on the labor market according to a 2018 study by the Pew Research Center. They are therefore an interesting target group for financial service providers. Millennials are growing increasingly comfortable with robots handling their cash. They grew up in the technological age with many uncertainties due to - among other things - a financial crisis and student debt. Money is not a primary for them, but the desire to constantly grow towards their life goals is. They grew up with advertisements and know that companies want to sell to them, therefore ordinary engagement strategies don't cut it, earning their trust is extremely challenging. Millennials set the standard with regard to how fintech providers approach their customers.
5. Tech giants entering fintech
Technology has accelerated the fintech revolution in recent years, specifically through a number of groundbreaking new technologies such as automation, AI, blockchain and mobile payment. While it seems as if the technology boom is over, it is interesting to see that major tech giants such as Apple, Facebook and Snapchat are moving towards the fintech market. Tech companies entering fintech should be a big concern for the industry because these platforms have huge, highly engaged user bases. The same innovative companies that are transformed communications and social networking are putting in significant resources to claim their stake in the fintech market.
‘Hey Alexa, pay for my gas’
All companies will eventually embrace the fintech trends
In the transition from 2019 to 2020 I see many movements for the financial service providers that make the dynamics in the industry very interesting. However, this change isn’t confined to the financial industry alone. In fact, the trends of the fintech sector are now large enough to impact the world economy and will ultimately settle on all companies.