When it comes to driving innovation, today’s fintech environment embraces unprecedented opportunities. Fintech has revolutionized the financial services sector by introducing new ways for people and businesses to access and manage their money.
Being aware of the tools and technologies, or possessing an adept R&D software team capable of developing new products or improving existing ones, enables fintech companies to enhance operational efficiency, provide tailored experiences, tackle security obstacles, and accommodate the distinct business and customers’ requirements. In essence, having knowledge of the appropriate technological benefits empowers you to innovate with confidence.
In the wake of Money2020, one of the most reputable fintech events in Europe, our Zitec team had the opportunity to be in the middle of the event and discuss ideas on what’s next in payments, fintech, and financial services. Its thought-provoking agenda inspired us to weigh the latest innovative technology fintech businesses need to take into account in order to stay up-to-date with tech progress, satisfy consumers’ needs, and gain a competitive edge. From world-class insights, benefits, fintech developments, improvements, and strategies, we connected all the dots regarding what shapes the future of fintech and listed all in the text below.
Although technological acceleration has always been a constant up-rising trend in the fintech market, there is still opportunity for advancement. As fintechs have stretched their creative faculties and inspired the development of improved financial technology services, we will further dive into the most current innovations in fintech.
One of the cornerstones of the fintech industry is Open Banking, which transforms the financial sector by enabling customers to grant permission to share their financial information securely with multiple providers, all done on a single platform. Basically, Open Banking revolutionizes people’s interactions with financial institutions.
This financial technology enables third-parties, such as fintech companies and financial aggregators, to use banking infrastructure through APIs (Application Programming Interfaces). Application Programming Interfaces are a set of protocols, routines, and tools essential to Open Banking as API integration allows safe communication and data sharing, unprecedented transparency, and control over financial information exchange, even with non-traditional financial institutions.
Together, these two technologies are considered the backbone of the financial services industry. Through Open Banking, the possibilities for banks, payment companies, and fintech firms are limitless. In comparison to traditional banking systems, Open Banking and API connectivity bring several benefits and enable competitive edge and innovation in the financial industry:
Benefits for customers
Benefits for financial institutions
Open Banking APIs drive new collaborations between the banking sector and innovative technology companies. Besides prioritized transparency and flexibility, Open Banking APIs promise new opportunities for unlocking value, increasing financial efficiency, and creating a more inclusive banking experience.
While Open Banking has opened doors for account information (AIS) and payment initiation (PIS) service providers to broader secure data sharing, Open Finance aims to catalyze the benefits of Open Banking and create more opportunities and financial products and services, not just for banking.
With Open Banking, customers gain access to new financial products and services from regulated third-party providers. Namely, banks that built APIs following PSD2 standards and third-party providers who got licenses to connect to them. On the other hand, through Open Finance, third-party developers can build applications and services for a larger range of financial institutions, including mortgages, savings, pensions, insurance, and consumer credit.
Benefits for customers
Benefits for financial institutions
Open Finance allows financial institutions to build trust with their customers and provide them with a more holistic financial experience. Embracing Open Finance positions financial institutions at the forefront of the industry, ready to thrive in an era of interconnected finance and limitless opportunities.
The term “Embedded Finance” describes a new trend in financial technologies that integrates financial services (e.g., loans, insurance, debit cards, payment processing, investment instruments) into non-financial platforms, non-regulated entities, or businesses without a financial infrastructure.
Embedded Finance encompasses four main categories: embedded payments, embedded banking, embedded lending, and embedded insurance. However, via the Embedded Finance platforms, you can bypass technical infrastructure by providing “Plug and Play” functionality using APIs. Moreover, through these APIs, non-financial businesses partner with fintechs, which allows them to offer various financial services directly on their own website.
Benefits for consumers
Benefits for financial institutions
Buy Now Pay Later (BNPL) is the fastest-growing embedded finance model, and it allows customers to purchase items and split out their payments afterwards, over a certain period of time. Consumers find it quite simple to get authorized for BNPL loans when compared to regular credit cards and personal loans. The key benefit is that although the terms and conditions of BNPL programs vary, they typically provide short-term loans with fixed payments and no interest. BNPL can be a beneficial choice for buyers when inflation is high and interest rates rise.
The payments sector has seen significant upheaval, spurred by changes in customer preferences, legislative developments, and technology breakthroughs. The topic of modernizing payment infrastructures is relevant to everyone who has ever made or accepted cashless payments, including banks, payment service providers, merchants, and ultimately consumers.
But, while many organizations continue to employ legacy payment systems, given the increase in electronic financial transactions or the ongoing industry advancements, it is now inevitable that you incorporate modern features that are both essential for and demanded by the contemporary audience.
Digital wallets, smartphone payments, and contactless transactions are just a few examples of the convenient and safe financial transactions made possible by modern payment systems. Changing to these systems enables you to match customer expectations, boost sales, maintain competition in any market, or offer convenience, improved data security, and accessibility. We will further dive into some of the most current payment methods:
Payments made across international borders are referred to as cross-border payments. They are crucial for companies and people who want to access international markets, diversify their sources of income, or support family and friends who are living overseas.
Benefits
Mobile payments are becoming more and more popular in the fintech industry since they are quick, affordable services, and adaptable to the market changes and consumer demands. A mobile POS, smartphone, or any other device set-up with a credit card payment app that collects scan-to-pay or tap-to-pay NFC mobile payments can accept card or mobile wallet payments from practically anywhere.
Benefits
One of the earliest inventions to bring the ease of digital transactions is the digital wallet system. Digital wallets are convenient because they store anything a user would carry in a traditional wallet - money, bank accounts information, credit cards, shopping loyalty cards, IDs, driving licenses etc.
Benefits
Instant payments are credit transfers that make money available in the payee’s account. This process is complete within ten seconds of receiving a payment order; thus differing from real-time payments systems, which typically operate 24/7 but process the payments in a few hours.
Benefits
Fintech companies acquire and maintain sensitive personal and financial data, making them attractive targets for identity and asset theft. While cybersecurity threats and attacks have been evolving, fintech companies operate in an environment that is highly regulated. Therefore, there are often severe legal and financial repercussions for security breaches or other incidents.
This is why you must constantly revamp your data security best practices and cybersecurity posture in order to safeguard users’ funds. Yet, any fintech organization needs to balance innovation and risk management in order to stay ahead of new threats and adhere to legal requirements. If you are aware of the necessary app innovative features that must be upgraded, you can stay on top of the curve and reach many advantages:
As technology shapes the finance status-quo, the growth in fintech innovation highlights how fintech is only in the initial stages of bridging the gap between customers and financial services. From mobile banking to digital wallets, fintech has increased the accessibility, affordability, and convenience of financial services like never before.
However, working with a partner that deploys fintech software and services can help you scale quickly as you can innovate with confidence. This can lead your business to gain speed-to-market advantages, enhance security and compliance, and offer powerful customer experiences.
Zitec's operationally-ready R&D team has built custom financial products for 20 years. Digital banking solutions, online payment systems and digital wallet development, security and risk management services - these are just a few of the services our team can provide. Contact us and we can deliver on-time and on-target projects that generate a clear ROI.