6 Financial Trends to Keep an Eye on in the Future
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Finance is modernising. This has been the case for some years now, with the rapidly increasing development of digital technology, but, admittedly, finance has been slow to adopt its possibilities. However, since fintech became its own technological subcategory combining finance and digital tech, once-staid financial institutions are getting a much needed technological overhaul.
The pandemic accelerated the speed of this overhaul, as businesses needed ways to remotely deliver products and services and to make sure transactions were smooth, fast, and secure. 2019 – 2021 saw massive developments in the fintech sphere, making 2022 a particularly exciting year to watch for new financial trends.
In this post, we’re going to look at some of the most exciting financial trends and challenges, to gain a better understanding of what our financial future is going to look like.
6 financial trends in a nutshell
- Mobile-first banking offers users versatility when handling their finances and is becoming the norm for neobanks and financial service providers
- Fintech is growing, but challenges such as data security, government compliance and internet access still stand in its way
- Finance apps are growing in popularity, making things like budgeting and investing much simpler
- As fintech becomes more widespread and complex, cybersecurity must grow to protect users
- Users expect more sustainability from finance sectors, and fintech can leverage this with impact investing and data transparency
- Decentralised finance can alter transacting on the internet forever, but web 3.0 is a long way off
Mobile-first banking experience
Mobile-first and online banking adoption is one of the financial trends that varies depending on region. Statista shows that while it has been steadily on the rise since 2020 and is projected to continue through to 2024, China and East Asian regions demonstrate a commanding lead in users over other parts of the world.
WeChat: the ultimate mobile banking?
The trend refers to banking and fintech apps which allow the user full control over their finances via their smartphone or portable device. Within mobile-first banking, users are able to:
- Check and manage savings
- Send money to others
- Make payments
- Pay bills
- Contact customer service
All from their device—going to a physical branch to do any of these things will become a thing of the past. Neobanks have heavily adopted this approach by obtaining banking licences without an existing physical branch customers will need to visit.
Mobile banking promises to do more than permanently cross bank trips off your to-do list. If demand keeps rising for the mobile first experience, more financial service providers and neobank apps are going to implement things like:
- Cardless ATM features to allow secure cash withdrawals from your smartphone if you’ve lost your card or left it at home
- Advanced AI customer service for the majority of customer concerns to be handled instantly by artificial intelligence software, while real people will always be on hand for more complex concerns
- More interconnected features including mortgage payments, applying for loans, and investing, all from the one app
Beyond this, as long as app technology continues to develop—while cybersecurity and fraud prevention keep apace—the future of mobile banking is up to the imaginations of its users and developers.
Fintechs: the new banking standard
Fintech stands to transform the banking sector because it gives users what they’ve been wanting from traditional banking models. Namely, more flexibility with banking options and specificity to one’s banking needs. For example, instead of trying to run their businesses on an account intended for personal banking, fintech has allowed the development of business banking accounts ideal for entrepreneurs and small business owners.
A world in which fintech solutions are the new banking standard is one in which users have more control over their finances. Traditionally, banks provide money protection at the cost of autonomy. With advances in digital security and growing concerns over investment decisions of certain banks in the past, fintech is emerging as an attractive alternative to this trade-off.
But what still stands in the way of the fintech revolution?
Crucial to the widespread adoption of fintech is reliable data security. Traditional banks use physical security measures such as guards, CCTV, and locking vaults to protect customers’ money, but because fintech is a remote digital technology, it must rely on other methods.
Existing security measures in fintech are things like:
- Two and three-factor authentication requiring users to confirm their login on one device with a code from another
- Biometric authentication which requires users to show a physical body part (face, fingerprint, eye, etc) which is identified as uniquely belonging to the user
- Notifications informing the user of a sign-in attempt on another device or strange activity
It goes without saying that, while the above security technology is advanced and effective, each of these can fall victim to fraud. And as fintech apps add other features (insurance handling, fine payments, rent management), more is at stake for the user.
Government regulation and compliance
Fintech is set to become the standard for banking around the world, but one of the huge hurdles is to abide by government regulations in as many regions as possible. Fintech promises a great deal of change to the financial sector, but finance and banking are heavily regulated sectors in most parts of the world due to the possibility of money laundering and fraud.
The task of regulation for fintech is referred to as ‘fintech compliance’, a complicated issue pertaining to specific laws in each country and the degree of success in fintech adoption in those economies. For the sake of brevity in this article, these are the main roadblocks for fintech compliance:
Each country has specific data privacy laws which its companies must comply with. Because fintech is dependent on customer data to improve its capabilities and develop new features, it collects large pools of data consensually. Companies must stay within the parameters of each region’s privacy laws while still seeking a global customer base.
A crime that costs governments trillions, strict money laundering laws are in place to prevent this as much as possible. Fintech companies must prove that they have security measures in place to stop these crimes from happening, and that they take the issue seriously when seeking to operate in a new country.
As fintech is a digital technology, it is vulnerable to cyber attacks. This is a major concern for governments, and so fintech companies must invest in top-rate software and employ experienced professionals, which they can present to governments as proof of their commitment to combat cyber attacks.
If fintech is to truly change the financial sector, then it must reach remote communities and provide opportunities for them to participate and succeed in the financial world of tomorrow.
A huge hurdle to this is the lack of internet access in many communities around the world. Fintech communities therefore must work with initiatives to bring the internet to more parts of the world and demonstrate the ways in which it differs from models that failed to assist these regions in the past.
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The rise of finance apps
The world of finance apps is bigger than customer banking accounts. As app technology develops and diversifies, with fintech becoming more accepted in today’s financial landscape, finance apps meet more needs of users and improve their financial literacy.
Within finance apps, there are a few different categories specific to what users might need.
These apps simplify one of the most complex and sometimes daunting aspects of both personal and business finance. Whether you’re budgeting to save for better holidays in the future or putting together an annual business budget, these apps can help make the process less of a headache.
When selecting a budgeting app, look out for things like:
- Paid and free versions
- Detailed instructions on how to use the app
- Responsive customer service
- Versatile portfolio creation
Stocks and investing
Faced with crypto crashes and a fluctuating market, the world of stocks and investing can seem a scary place to anyone looking to do a little more with their money. It’s enough to scare anyone into burying it in the backyard instead.
Fortunately, certain apps can help users wade into the stock market’s turbulent waters.
One of the most crucial preparatory moves you can make before investing is educating yourself on how the stock market works. Find news sources and read up on daily fluctuations, follow a few chosen company shares just to see how they move and what seems to cause the value of their shares to increase or decrease. Before a surfer wades into the water, she watches the waves from the beach.
Once you feel prepared to put some money down, choose apps that will let you put small sums down or play with fake currencies. This way, you can get a feeling for watching your money move, checking the market daily and knowing when to pull your money out or put more in.
Higher investments in cybersecurity and fraud mitigation
As this post has already made clear, finance technology and cybersecurity must develop concurrently if they are to progress and continue their widespread adoption. They should be viewed as two halves of a whole.
This is because as cybersecurity improves, so too do the ways in which it can be beaten. Thieves and hackers constantly find ways to circumvent the measures in place to stop them, meaning the security professionals must keep ahead of trends in cybercrime.
Fintech is changing the cybersecurity landscape in crucial ways. As fintech companies move away from centralised finance and DeFi models gain traction and popularity, the cybersecurity methods which protected banks and centralised financial institutions become irrelevant.
Below are some of the top risks in cybersecurity today pushing for higher investment and development in fraud prevention:
Broadening defence parameters
Global lockdowns forced an overhaul of working conditions for the majority of office workers, creating a decentralised workplace.
Public cloud usage among employees, remote setups, and highly-connected supply chains all present new challenges for cybersecurity professionals—while also creating new vulnerabilities. To tackle the problems, traditional approaches to centralised security have to be modified or abandoned in favour of brand new approaches.
Identity threat protection
Frequent in recent cyber attacks is the misuse and theft of credentials. Much of what we rely on to access sensitive information requires identification methods such as biometric identification and two-factor authentication systems.
More methods must be developed to further prove the identity of users, as identity theft and fraud continues to be a problem in the cybersecurity landscape.
A modern approach to cybersecurity architecture, the cybersecurity mesh enables security to be deployed and integrated into specific assets, instead of merely in the central hub. The promise of this method is that assets, whether in transit, stored on the cloud, or in a data centre, can now be fully protected on their own.
Security training overhaul
Human error is still a major factor in security breaches, whether it be through opening sensitive emails or giving access to fraudulent credentials or identities. This has caused leaders in the field to reconsider security training measures. Organisations taking the lead on this want to move beyond ‘compliance-based’ awareness campaigns and invest in holistic approaches, changing the whole culture of security training.
Increasing sustainability focus
COP26, COVID, and remote working have all pushed climate change solutions further into the spotlight. For the first time, companies are clearer on the things they can do to reduce or eliminate their carbon footprints, achieving carbon neutrality in their daily operations.
Finance is one of the institutions receiving a much needed sustainability overhaul and with the freedom and change offered by fintech, solutions are cropping up all over the place to decarbonise the finance sector.
Centralised finance has typically meant that customers don’t have a say over what happens with their money. Banks lend it to investors to generate interest and profit, and many of these investors are involved with fossil fuels, deforestation, oil drilling, and other polluting industries.
Fintech and alternative finance models, by reducing interference from banks and lending more control to the user, present the option to choose how money is invested. If users push for sustainable investing, then new fintech companies will develop with these concerns in mind.
Some of the most exciting new investments in sustainability which fintech companies can align themselves with include:
- Plant-based meats
- Electric transport
- Disruption of big oil
- Donation programmes for charity organisations
Transparency and data collection
Transparency is a much needed concept in modern finance. Through transparency, financial institutions can be held accountable for the things they do with customers’ money. Transparent collection of data means customers can make informed decisions about the banks they wish to involve themselves with.
Fintech should adopt this approach from formation to customer acquisition, guiding new customers through every step to make sure trust is established between company and customer. Only through understanding and trust can change be made in business.
Blockchain, DeFi, and Web 3.0
Depending on the online circles you visit, innovations like blockchain and decentralised finance are either going to change everything we know about finance, or fade into relative obscurity once their 15 minutes of fame is over.
The truth, as usually, likely lies somewhere in between those two predictions.
Blockchain and decentralised finance or DeFi present the possibility for a great deal of change in the finance sector. A world without centralised banks, in which security of assets is held by the user and transaction information is recorded on public ledgers, is a vision heralded as a new kind of internet proponents are calling ‘Web 3.0’. But with that potential for change is just that: potential.
Before we get to Web 3.0 and its relation to the financial sector, let’s clarify blockchain and DeFi.
What are blockchain and DeFi?
DeFi is dependent upon blockchain technology to solve the problems its developers have identified in centralised finance. Problems arise in traditional finance when money is stored by centralised institutions and lended to third parties because the information is private and users lend trust to banks to invest their money elsewhere. This has led to stock market crashes and plummets in value, as an extreme consequence.
As an alternative, blockchain stores information on a publicly available, digital ledger. The money is then easily tracked by the sender and receiver, and no third party is involved. Decentralised finance, then, is a concept enabled by this technology. No third parties, no hidden fees, no loss of control over one’s finances.
What does Web 3.0 have to do with finance?
Web 3.0 proposes an entire internet based on blockchain technology and decentralised exchanges. Coined by Ethereum founder Gavin Wood, Web 3.0 sees an online space in which transactions are made in tokens, there are no centralised banking institutions, and there is far less moderation of dealings between merchants and customers.
Many critics of Web 3.0 describe it as unclear or even just a buzzword, but the idea is to at least incorporate tokens and cryptocurrencies into every kind of trading you do online. The push for such a world comes from ‘over-centralisation’ of big tech companies exerting too much control and regulation over what users choose to do with their money.
If tokens and unregulated digital currencies were to replace traditional ones, companies will struggle to exert the kind of control they once could over these transactions, with blockchain technology continuing to ensure transparency.
Much of tomorrow’s financial landscape is already underway, demonstrating the staying power of the trends from the last few years. Key to understanding change in the financial sphere is accepting the huge hurdles it must cross and the gradual pace at which new technology spreads. It is developed and introduced quickly, but passing through government regulations, adoption from new customers, and demonstrating profit from new businesses all takes time.
That said, watching financial trends as they happen means equipping yourself with the knowledge needed to succeed in the future of finance.
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Frequently asked questions about financial trends
Financial trends are current developments on the financial market. They can affect both companies and you as an individual. While some trends are only temporarily popular, others result in long-term changes that have a lasting impact on the way we deal with money.
In principle, everyone can participate and contribute to financial trends. In particular, the rise of decentralised finance (DeFi), Web 3.0 & Co. are making a significant contribution to making financial markets accessible to all and breaking down conventional barriers to entry.
Financial trends can be a temporary phenomenon or a long-term innovation. The best way to recognise real financial trends is to see whether experts consider them serious and promising. But always try to do your own research and make up your own mind about financial trends before you put your money on them.