Top 7 Fintech Trends You Should Adopt in 2018Written by Nataliia on December 5th, 2017
Digital-only banking, better CX using big data, ICOs, chatbots - learn what 2018 has in store for fintech companies based on the insights from our team.
The rise of Bitcoin and other cryptocurrencies has been rather meteoric. From an ignored “fad” to a U.S. stock market value of up to $10,000 per token, Bitcoin has taken its place in the mainstream, as a major Fintech player, in the realm of digital financial transactions.
This is only one of the top fintech trends and predictions for 2018. Up until now, cryptocurrencies have been largely the means of transactions among individuals; now, such currency is moving into the financial transactions of companies and enterprises, especially global transactions. Indeed, CB Insight predicts that digital currencies will be the dominant currencies by 2020.
However, cryptocurrencies are not the only “hot” niche for the year to come. There are many other fintech trends and challenges in 2018. Here are some of the most prominent ones lined up by our team.
Blockchain Technology Will Enter the Mainstream
Originally developed as a means of securing cryptocurrency transactions, blockchain technology is a method by which all cryptocurrency transactions can be permanently memorialized and immutable. Because each transaction is a part of a “block” that is connected to the block before and after it, any attempt to change a transaction within a block would require massive approval by every stakeholder in the chain itself. Blockchain is a public ledger, but at the same time heavily encrypted with access keys only for stakeholders. Thus, it is considered impenetrable by hackers.
Because of its security features, legacy financial institutions are now taking notice and researching ways in which blockchain can be implemented in their institutions. Billions are being invested in this new technology, and some of the biggest legacy banking giants – Barclays, Credit Suisse, and HSBC, for example – are experimenting with it.
In a time when there have been security breaches of finance-related organizations (e.g., Equifax), blockchain technology may provide a solution and is certainly a trend that will become much more dominant in the financial services industry. No more reliance on human fallibilities and systems that can be hacked due to human error – this is huge as the banking industry moves forward and attempts to maintain public trust.
This year at Romexsoft, we spoke about how insurtech companies can benefit from the blockchain, whether or not it’s worth accepting bitcoin payments and what are the top payment gateways, and rounded up the most promising use cases of blockchain in fintech.
Asia is Becoming the Place for Fintech Investment
CB Insight reports during just one quarter of 2017, overall, VC investments in FinTech companies topped $5 billion. And In China alone, financial giant Tencent has backed 19 startups, now worth at least $1 billion each. Other players in fintech VC investment include Baidu and Alibaba.
This pattern of FinTech industry investments is growing the world over, but right now China seems to be the leading the pack. Forward-looking fintech innovators will take their lessons from China and begin to develop solutions for the finance industry in other parts of the globe. As they do, they can grab some of the investment market share too. Fintech startups that can “localize” their products and services will be in high demand.
Expect More ICO’s
In recent days, Bitcoin reached a value of $11,000. It is no surprise then, that the rise of cryptocurrencies will continue in 2018, and there will be many more initial coin offerings. An ICO, like an IPO, is an initial offering to investors, to get in on the trendy, yet risky, cryptocurrency market. They are attractive because there are not a lot of “regulatory hoops” for these fintech companies to jump through, although, in the U.S. at least, the SEC is now getting involved.
Another successful cryptocurrency technology is Ethereum. In 2014, it raised $18 million through its ICO, at a cost of about 40-cents per token. Today, an ether is worth about $200.
It’s natural for investors to look at cryptocurrencies. In fact, total investments to date top $87 billion. And between October, 2017 and January, 2018, there are more than 20 new ICO’s scheduled.
Given this trend, fintech startups have two options. They can enter the cryptocurrency industry themselves through an ICO of their own and raise funds with the help of blockchain; or they can “piggyback” on an existing successful cryptocurrency by developing systems and apps that allow customers to utilize that cryptocurrency in their transactions. A retail app, for example, that will allow customers to make payment via a cryptocurrency, will become increasingly attractive.
Legacy Financial Institutions are Getting on Board
Traditional banks finally see what is coming, and they must adapt or be left in the dust. In addition to a serious look into blockchain, they are partnering with fintech technology companies and fintech firms, to implement some of the latest fintech industry trends. Here are just a few innovations that forward-looking financial institutions are looking at:
- Digital-only banking. This is hot right now, and millennials are demanding it. They want secure, streamlined, and wholly digitally-based banking solutions. When they can get a loan in 24 hours from a digital bank that takes a legacy bank weeks to approve, something has to change.
- Machine Learning. One of the most prominent fintech predictions for 2018 is the use of AI and machine learning in finance. Banks are enlisting help from top data scientists to gain insights into the behaviors, expectations, and responses of their customers. The goal is to predict what specific demographics will want and to offer those products and services on a personal level. Additionally, machine learning paired with predictive analytics can be used to nearly eliminate credit card fraud.
- Next-Gen Chatbots. As a part of going digital-only, banks are also experimenting with bots to support customer interactions. Among the technology industry trends and challenges in 2018, chatbots will be in increased use with improved quality and speed.
- Automated Personalization with Big Data Analytics. Financial software companies are working with banks to personalize what customers see on their devices. Banking apps will alter their appearance based upon the actual usage by individual users. This will help customers feel more connected to their banks and also improve self-service options.
Mobile Technology Continues to Innovate
One of latest fintech trends throughout 2017 was the rise of mobile transactions, especially for consumer purchases. Fintech companies are integrating this technology into apps that optimize offerings via mobile platforms. And given the continued rise of consumption in developing countries, this will certainly keep going in 2018.
In fact, a recent prediction on mobile banking and payments is that this area of the fintech market will reach $92 billion sometime in 2019. Innovators who can develop ideas for financial technologies apps in this sector stand to make big profits.
Security, Privacy, and Trust Will Continue to Be Challenges
Fintech companies understand the high demand for digital solutions to banking and financial transactions. The top financial technology companies, in fact, are moving as quickly as they can to meet this demand, and new software is developed daily all over the globe. But with each fintech innovation comes the issues of trust and security.
Several events have given consumers a pause. The security breach with Equifax, announced last July, is just one of the most prominent data thefts, but they continue to occur regularly. Public trust is injured with each one that hits the news. And consumers have become much warier of their information being “out there”, both personal and financial.
Financial trends in digitization will include much greater efforts in the area of security. While data may be the “new oil” for fintech, cybercriminals are hot to acquire it. Until now, security measures of even the top financial institutions have been reactive rather than proactive. During 2018, companies that want a good fintech share of the market will need to be proactive, and security measures will have to be a strong part of their marketing.
An overview of security technologies appears to include combinations of encryption, biometric authentication, and OTP’s, as well as new tech that is certain to be developed. Fintech companies that can offer apps with the best security measures will do well. You can grab more insights from our post about the building a secure fintech app.
And this trend is not going away. It will be a matter of staying ahead of the hackers.
Fintech Will Continue to Disrupt
The one thing we can say for certain is that fintech is here to stay and will continue to challenge traditional financial activity. At the rate of current innovation, it is difficult to predict every “shiny new thing” that will enter the fintech industry, even six months from now.
What we can predict, however, is that 2018 will be just as critical a year in fintech as 2017 was. Consumers are increasingly open and demanding with respect to new banking innovations. And those forward-looking individuals and firms that can meet those demands will certainly get their market share. Five years from now, we may barely recognize the financial services industry.
Developing fintech software solutions is what Romexsoft does best. Get in touch and let us take your ideas from the drawing board to reality.