There was a time when the number of new fintech companies sprouting up was incredible, and the industry growth was something to be envied. However, in recent years, an array of factors has changed.
Fintech has stagnated somewhat, and because of this, many people are wondering what happens next and how the industry will progress. I want to look at why the stagnation has happened and what we can expect for the future of fintech.
Pushing Past a Tough Few Years
First, before we get to the entertainment factor and look at how fintech could grow, it’s important to assess what went wrong and what caused this blossoming industry to falter. The main reasons include:
- Covid-19 pandemic.
- Increased pressure from regulators.
- Rising interest rates.
- Rising inflation.
The global pandemic was a huge factor and rocked many industries. The fallout was severe, and this, in some part, has also been responsible for the rising interest rates and inflation as nations’ governments have struggled with economic recession.
It hasn’t helped that there has been increased pressure from regulators in fintech industries such as cryptocurrency, which has stifled growth somewhat and tempered investment and expectations.
What to Expect in the Near Future
That’s how things were and what caused the industry to halt – so, what does this mean going forward, and how can fintech companies recover? As the fallout from the pandemic eases, the outlook for fintech improves, and we expect a range of developments, including:
Fintech will shrink the ‘digital divide’
The digital divide is where the older generation hasn’t always lived with modern technological solutions and gets left behind. Fintech companies have helped reduce this divide by providing accessible financial systems and services to the young and old alike. This should continue, and the digital divide will shrink.
Economic conditions could boost fintech investment and funding
Although there are still plenty of global economic issues, many nations are recovering post-pandemic, which means the conditions for growth and investment are improving. The opportunities for new fintech companies to secure funding will receive a boost, which should hopefully accelerate growth in the industry.
New fintech companies will be mission or purpose-driven
In today’s business world, there is a greater need for ethical practices, sustainability, and consideration of the climate. This means many new fintech companies will emerge with a specific mission or purpose and emphasize these positive traits.
Companies will increasingly experiment with AI and machine learning
AI penetrates multiple industries, and it has been a hot topic throughout 2023. That isn’t expected to change and we can only expect more businesses to utilize its power. Indeed, we can also expect fintech companies to integrate AI and machine learning to offer better personalization and analytical power to their products and services as part of an AI implementation strategy.
Investment in security measures continues to be a focal point
Cybercriminal activity shows no signs of slowing down. Rather, cybercriminals are becoming more sophisticated as they also launch AI-enhanced attacks. This ultimately means that fintech companies must put security first and continue to invest in identity verification and anti-fraud measures.
Payment processing technology speeds won’t develop much further
In the last decade, payment speeds have accelerated significantly, and the fintech industry has played a key role in this. However, we don’t believe there is much more room for growth. Transaction speeds may have improved a little further, and it’s important to make sure to research the fastest payment methods on platforms such as online casinos, e-commerce sites, and banking, but this won’t progress much. For example, most online casinos offer instant deposits and withdrawals for your winnings, and it’s hard to improve on that.
There could be a shift towards traditional financial investments
Crypto investment saw an explosion in popularity pre-pandemic, and it often eclipsed traditional investing such as stocks and shares, forex, and savings accounts. The crypto industry is experiencing growth again, but enthusiasm for investment has cooled somewhat compared to a few years ago. As a result, we can expect fintech companies to reconsider traditional investment methods and support them alongside more modern investments like crypto.
Hopefully, the current climate for fintech companies was a mere blip due to factors like COVID-19, global economic recession, and rising interest rates. As the world recovers, national economies rebound, and investment opportunities increase, we should see a reemergence of fintech.
This will help reduce the digital divide, increase new fintech startups, and see more businesses becoming more focused, based on ethical premises and missions, particularly relating to the environment and climate change. We can also expect AI to play an important role, security measures even more, and traditional financial investment opportunities to rebound.
