The new era of fintech technology promises exciting prospects for the global financial sector with the matrimony of banking applications and technology to enhance the broader fintech ecosystem. For traditional banking sectors, the growth offers unprecedented opportunities to benefit from a wider consumer base.
With the evolution of Fintech over the years, the global financial sector has witnessed a significant transformation in the way financial technology products have been accessible for consumers around the world. The fintech sector has been catering to the fiscal needs of consumers that have not been adequately serviced by the conventional financial sector. The primary focus of this transition has been rooted in lost-cost technological solutions that are centred around established partnerships.
Conventionally, the focus was on creating financial infrastructure to explore new digital technologies like digital wallets, financial applications, and alternative lending options to offer a broader range of services to consumers.
Exploring the Changing Fintech Landscape in 2021
Since the conception of Fintech in 2000, the industry has significantly grown over the course of the past two decades. The industry has witnessed extensive growth. Aside from a significant increase in the global population, the number of internet users around the world has also increased considerably to cover the majority of people.
Research from the Pew Research Center estimated that up to 64% of the global population is connected to the internet based on a 2021 study. For the fintech sector, this increase in digital usage represents a significant opportunity. The growth in population has also exerted a significant impact on the global eCommerce volume, with the transaction volume increasing from $61.5 Billion in 2000 to $3.6 Trillion in 2021.
Account ownership in individuals has also increased significantly in individuals over the course of the past seven years. According to the World Bank, account ownership had increased from 50.6% in adults to 68.5% in 2018.
Subsequently, after the report, ownership figures have continued to increase at an accelerated pace due to the landscape brought on by the Covid 19 pandemic.
Impact of Covid 19 on Fintech 2.0
Even though the pandemic has exerted a significant impact on the global economy, the imposed lockdowns and social distancing requirements have led to a massive increase in digital adoption around the world. Fintech has become a vital part of the way global economies have managed themselves during the pandemic. Similar to the inception of Fintech coming from the previous downturn in market conditions, the pandemic has emerged as the trigger to push digital adoption and create the Fintech 2.0 era.
Based on the trends observed during the pandemic, digital shopping is anticipated to become the dominant form of consumer purchasing, with smartphone devices serving as primarily financial vehicles for individuals around the world.
For some banks, Fintech 2.0 represents a transition towards digital-only products. Even though digital-only banks are currently limited, the conditions of the pandemic, along with the growth of the smartphone banking segment, is paving the way to digital banks that focus on creating exceptional experiences for customers. These financial institutions are also being created by existing financial stakeholders to provide specialized services centred around cutting-edge technology and innovative product launches.
Exploring the Rebundling of Core Financial Services
To meet the optimal landscape, financial companies need to focus on customer-centric experiences while complying with regulatory requirements to adapt to the converging Fintech 2.0 landscape. To ensure that companies are able to have a seamless transition in the new era, it is important to focus more on the established customer relationships and capitalize on the technological growth to provide streamlined solutions in the broader financial experience. The formulation of the experience is supplemented with interactive elements that all play a key role in simplifying the financial sector.
A key element in dictating the new trajectory of the fintech sector is the sheer scale of the internet expansion that has been observed over the past decade. Billions of new consumers are now active internet users due to the rapid expansion of internet connectivity. This has paved the way for digital financial services through formal and informal financial institutions, including banks and financial companies. The scale of the market is significantly bigger in today’s landscape compared to the previous decade.
Building Blocks of the Fintech 2.0 Industry
Based on the evolution of the industry, Fintech 2.0 is based around progress in the following core areas to deliver exceptional customer experiences. The central building blocks of the Fintech 2.0 segment are based around evolutionary banking technology, including advanced technology stacks, connected data management, and digital currencies launched by central banks around the world. Even though the growth trajectory is evolving over time, the nature of Fintech 2.0 is being increasingly impacted by the sheer scale of internet access around the world.
Central Bank Digital Currencies
Following along the rapid adoption and growth in the digital currency segment, five of the world’s biggest economies have indicated a shift into digital currencies for consumers. This represents a significant shift from major economic centres with the adoption of digital currency as a significant asset form.
Super Agents Based Commerce
Cross-platform interactions are at the centre of the Fintech 2.0 experience, with super-agents representing up to 25% of the eCommerce transaction experience.
Data
Similar to the functional operations of leading operating systems today, data-driven progress is expected to be based around the development of new data-driven operating systems signalling a shift away from the conventional outlook on Big data.
Technology Stacks
The evolution of cloud technology is paving the way to a significant shift towards cloud adoption and open-source technological processing in the banking sector. This shift is primarily centred around the effectiveness of cloud technology and the broader requirements of multi-channel services in the digital banking sector.
Ecosystem
The interconnected nature of financial services and technology use will pave the way to the creation of a broader ecosystem that will allow fintech companies to harness the evolutionary growth of technology.
Paving the Way Forward for Financial Institutions & Banks
With the creation of the existing digital landscape, it is essential for financial institutions to adapt their policy directives and business model to intelligently progress forward during challenging conditions.
Managing Regulations
Key challenges for banks and financial institutions in the Fintech 2.0 landscape include the management of regulatory requirements, rearchitecting existing financial platforms, and establishing lasting partnerships to provide quality support to consumers. Fintech providers can also benefit from their regulatory experiences to enhance operational excellence and scale their existing services.
Customer Personalization
Maintaining personalized customer relationships in Fintech is centred around extensive sales and management efforts using critical data to understand the personal needs of customers. The maintenance of personalized relationships is even more important in the upcoming fintech landscape as customer relationships in the industry are hard to develop over time. Establishing effective loyalty efforts is key to fruitful customer relationships and navigating the challenges posed by other organizations striving towards the same customer base.
Fintech 2.0 means a change in expectations from your existing consumer base along with the need for a broader strategy for a newer customer base that will drive growth for the company. Key areas of focus for banks and financial institutions include advanced analytics and data-driven relationships along with improved customer contact and communication. Companies also need to upgrade their user experiences to match modern standards.
Fragmenting Products
To lead the path in Fintech 2.0, it is important for financial institutions to embrace new technologies and solutions across their products. This means giving teams the creative freedom to explore their key requirements and use new technologies within products. However, a key aspect that is central to the exploration of the technologies is the lack of fear of failure. Companies need to embrace failure as a cornerstone of innovation and shift to effective technological options. In the fintech context, the fragmentation of products must also maintain the balance of always complying with regulatory guidelines.
Even though product fragmentation is primarily linked to technology-based companies, leading financial institutions also need to embrace privacy, control, and security models to create emerging solutions that match the requirements of the existing market. This can come in the form of open-source partnerships with technology partners or broader industry-specific collaborations.
Maintaining Stable Policies
Customer trust is an important factor in an industry that is continuously evolving. As consumers start to explore digital financial products, it is essential for financial institutions to enhance trust by insulting customers against market conditions. Comments from authority figures and celebrities can have a detrimental impact on customer behaviour and adoption in the social media age. It is essential for companies to maintain a stable outlook towards the established policies so that customers can trust the direction of digital products moving forward.
The nature of the fintech industry is also transforming with Fintech 2.0. The industry is shifting from a niche technological service targeted towards existing digital users to a transformative financial force in the hands of the majority of consumers. This shift must be supported with stable policy directives to ensure that customers are able to consider fintech products a reliable solution for their financial needs.
Consumer-Specific Solutions
With Fintech 1.0, the approach was focused on expanding consumer convenience with smartphone integration across existing platforms and solutions. With Fintech 2.0, financial institutions need to take technology integration to the next level with integrated lending tools and financial options in personalized algorithms. These algorithms require institutions to offer embedded payment capabilities along with predictive technology to drive action. The seamless deployment of predictive agents using web bots, behavioural analysis and Internet of Things (IoT) connectivity are all key variables in driving action.
Reevaluating Fiscal Options with the Internet of Things (IoT) Based Commerce
Unlike the past, where product placement was the primary focus of marketing efforts, the prevalence of home assistants and smart devices means that financial companies need to focus on the commerce prospects vested in voice-assisted purchases and other consumer behaviour related to IoT products. Offering seamless integration of the complete range of financial products within smart devices is integral in creating the broader fintech ecosystem at the core of Fintech 2.0.
Embracing the Changes – Dealing with Unpredictability
Whilst it can be challenging to figure out the exact dynamics of how things will turn out in the future, the only constant in the fintech sector is change. Financial institutions need to maintain a positive attitude towards changing regulations, technologies, and market dynamics to have the best odds of succeeding in the Fintech 2.0 segment. The transformation will continue to move towards with contributions from leading stakeholders to define collective action. Continuous self-evaluation and recalibration are essential for banks and other institutions to identify applicable strategies in the short and long term.
Looking Ahead/Conclusion
Based on the trajectory witnessed in the financial sector, conventional institutions need to embrace the digitization of the industry as consumers increasingly shift to digital products. The transition requires consolidated efforts by the banking sector and associated stakeholders in terms of the policy directives and established frameworks.
To ensure viable placement in the connective era, it is essential for banks to amplify their rate of technological deployment and capitalize on the market gap currently present in the fintech sector. Fintech 2.0 is based around the connectivity of digital resources, and the marketing opportunity is subsequently much larger than the landscape witnessed during the initial phase of the fintech industry.
The next era of Fintech is poised to make waves across the financial sector with transformative impacts on the functional structure of the industry. It is essential for financial institutions to devise effective policy frameworks to address upcoming technological innovations and embed streamlined elements into the working structure to facilitate consumers. It is also essential to focus on key data variables, including data utilization, the efficiency of open-source management, and the role of currency in the future.
References
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