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"Speed, Data...Crypto?: Fintech Trends to Watch Out for in 2022

Crypto Data

Published on Feb 03, 2022

Fintech, the marriage of finance and technology, is one of the world’s fastest-growing sectors. The fintech products and services market was worth around $127 billion in 2018. By next year, it is expected to well surpass $300 billion. 

Modernization is a win-win

However, even that estimation is conservative. Thanks to a bizarre and highly disruptive year, fintech services may grow faster than the 25% year-over-year rate our estimation suggests. What we are trying to get across is that the pandemic may very well have accelerated the sector’s growth. 

So, what has accelerated? In other words, what trends will drive the phenomenal expansion of fintech services in 2022? Let us take a look. 

1. Fintech services get extra modernized 

Well, it should not be a secret in 2022. Digital transformation is hitting industries and giving birth to a dozen new markets every year. The fintech industry is especially susceptible to such a disruption, given that technology lies at its core. 

Fintech services are already quite digitized and modern. Prime examples are mobile payment apps like Apple Pay and automated bill payments offered now also by mid-sized financial institutions. However, in 2022, modernization in fintech could take a step forward, further enhancing convenience and automation. 

Fintech services get extra modernized
“The fintech industry is especially susceptible to such a disruption, given that technology lies at its core.”

Modernization is a win-win on all fronts, for businesses, consumers, and financial institutions alike. Mobile payment apps, for example, are now integrating a whole new set of services, from allowing users to invest to allowing users to insure. In a few years, many could actually become superapps—a one-stop solution for all your financial needs. As for businesses and financial institutions, the modernization of fintech services is significant because it removes friction points between finding and purchasing. More on this later.  

Here is another reason why modernization is significant: Real-Time Payments. RTP is a network protocol developed by The Clearing House that makes for, well, real-time payments 24x7x365. What makes RTP pivotal? It is, according to JP Morgan, how the network “combines immediate funds availability, settlement finality, instant confirmation, and integrated information flows—all in a payment made in seconds.” RTP brings together “speed, data, and communication solves for longstanding challenges.” 

Embedded Finance Succeeds

The problem is, RTP has been a challenge to adopt. But in 2022, we expect change. Besides large banks, mid-sized and small banks are also looking to adopt the network. According to estimates, 15% of mid-sized financial institutions have already launched RTP. Around 26% more are expected to join them by 2023. 

Read more: Top ESG Investing Trends to Watch Out for in 2022 

For the investors reading this, take note. We have big hopes for how products will make the most of RTP. 

2. Embedded finance 

About those points of friction. 

Embedded finance describes the phenomenon of integrating financial services within non-financial services. Embedded finance is how you pay for your cab or cable. Bundling one with the other makes paying for services remarkably easier. It is a fantastic means to speed up transactions. 

Embedded finance
“Digital transformation is hitting industries and giving birth to a dozen new markets every year.”

That said, embedded finance is about to get a lot more convenient, making it even easier to transact. Take Buy Now Pay Later (BNPL), for example. Businesses now allow customers to split their spending into parts, most commonly, three. Even though BNPL is offered by PayPal, Klarna, and Pay Po, e-commerce websites, most notably Amazon, offer the service through their own wallet. 

In 2022, context is critical. Contextual finance is what makes Buy Now Pay Later so attractive. Customers today want shopping to be as hassle-free as possible, for instance. In general, embedded finance succeeds because it provides a seamless, contextual experience. It makes managing money, accessing credit, or paying for things delightfully easy. 

Read more: What Will the Economy Look Like in 2022? 6 Trends to Watch Out For! 

But this is just the beginning. Embedded finance, like RTP, has so much more in store. 

3. Crypto FOMO 

Next month, the US government is expected to detail its strategy on cryptocurrencies. What can we expect? Honestly, it is hard to know. Last year, China detailed its strategy, and no one could have seen it coming. The superpower outright banned its mining and trading. Soon, Russia would follow. 

Seccurity of BlockChain

Of course, what the White House decides will have a tremendous impact on the market. But, for financial institutions today, not betting on crypto could mean missing out on a massive opportunity. Especially when 60% of cryptocurrency owners wish that they could invest through their banks. 

Banks are now finally listening. At least some of them. According to a Cornerstone Advisory study titled What’s Going On In Banking, around 10% of financial institutions claimed to launch crypto investing services this year. About 13% said that they would do it next year. Yes, the figure is small. But the fact that traditional banking is embracing crypto is massive. 

And the estimation, like the estimation of how rapidly fintech services will grow, is also conservative. If the US government welcomes crypto, albeit, with some regulation, the number could very well go higher.   

Crypto Bitcoin
Next month, the US government is expected to detail its strategy on cryptocurrencies. What can we expect?

The industry’s most prominent vendors have already made the integration of crypto services relatively easy for banks. For example, Fidelity Information Services (FIS), Fiserv, and Jack Henry have partnered with New York Digital Investment Group (NYDIG) to enable even mid-sized institutions to integrate crypto services into their core strategy. Visa recently launched crypto advisory services for its merchants and banking clientele. 

Read more: Could ‘Stablecoin’ Save the Future of Digital Currency? 

Cryptocurrencies’ disadvantages, namely their extreme volatility and illegal usage, have given them a bad reputation. But cryptocurrencies also have their advantages. For example, the security of blockchain, the underlying technology, is unbeatable. With or without regulation, the market seems poised to grow in 2022. 

4. Look out for AI and more sophisticated data analytics 

Yes, more modernization and embedded finance will lead to more convenience and efficiency. But the two crucial trends will also lead to the creation of more data. And data is turning out to be the single biggest differentiator of the competition. 

AI is important

Data is vital to financial institutions because it provides them with other means to make money besides collecting interest. Based on the products you buy, fintech players can predict the services you may enjoy. Similarly, based on the services you enjoy, institutions can predict the investments you may make. They can offer discounts on insurance premiums. Or higher credit limits. 

And as more and more people prefer digital to traditional banking, the data space will only expand. That is why the adoption of AI and more sophisticated data analytics is inevitable. Financial institutions need the two to make sense of user data. They want analytics to be comprehensive, considering a large variety of user activity, so that predictions of buying patterns, insurance premiums, and credit limits are as precise as the data permits. 


Fintech Trends to Watch Out for in 2022


That said, AI has so much more to offer than just predictive analytics. It could improve fraud detection, risk monitoring, user data security, to name a few things. Weak passwords, for example, are by far the biggest cause of fraud. Which is why banks are now adopting other ways to authenticate customers. AI will be key in this development. 

Read more: Top AI Stocks to Watch Out for in 2022 

Fintech services impact our lives in more ways than you think. The four trends above represent the next stage in the industry’s evolution. Some breakthroughs, in fact, may even bring a revolution. Investors, take note. 

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