The fintech industry has experienced remarkable growth and faced significant challenges, yet new trends are emerging that will shape its future trajectory. These trends, backed by research and data from various fintech sources, offer insights for fintech builders and service providers. Here are ten key trends that fintech companies should consider when planning budgets or launching new products.
1. Increased Consumer Adoption of Fintech Apps
The mass adoption of fintech apps during the pandemic has solidified their place in everyday life. Currently, 55% of consumers report that fintech apps are helping them navigate economic challenges. The average fintech user now has 3-4 apps, and this number is expected to grow as consumers seek more tools to manage their finances and make informed decisions.
2. Fintech as a Stabilizer in Uncertain Times
Economic instability in 2022 drove many to fintech apps for financial management. With 56% of users relying on digital tools due to economic factors, this trend is set to continue. Consumers will increasingly turn to fintech solutions to enhance their financial stability and health during uncertain times.
3. Normalization of Emerging Payment Technologies
New payment technologies are rapidly becoming mainstream. By 2025, an estimated 178 million US mobile phone users will make peer-to-peer (P2P) payments. The introduction of FedNow, a real-time payment system by the Federal Reserve, is expanding consumer options for instant bank-to-bank payments. Real-time payment growth is expected to have a compound annual growth rate (CAGR) of 33% by 2032.
4. Revolutionizing Consumer Credit with Alternative Scores
Traditional credit scores exclude around 49 million Americans from accessing loans, housing, and employment. Alternative credit assessment methods, using cash flow data, pay stubs, and utility bills, provide a more comprehensive view of a borrower’s financial health. API-based fintech tools enable lenders to access this alternative data, allowing faster and more informed loan decisions, and broadening financial access.
5. Growing Popularity of Bank Payments
Pay-by-bank options are gaining traction in the U.S. In 2023, Plaid powered over two billion bank payments, double the previous year’s volume. With 67% of consumers open to pay-by-bank, the adoption of instant payment rails like FedNow and RTP is expected to surge, driving significant growth in bank payments.
6. Innovation in Personal Financial Management Post-Mint Shutdown
The closure of the popular budgeting app Mint has created a gap in the market, prompting fintech apps to innovate. Newer apps or shifts towards personal financial enablement (PFE) apps, which offer services like robo-advising and online mortgage lending, are likely to emerge to capture this market.
7. Advancements in Identity Verification Amid Rising Fraud
Synthetic identity fraud is a growing concern, especially with advancements in deep fake technology. However, fintech companies are developing robust identity verification solutions. Tools like Plaid Identity Verification and Plaid Beacon are enhancing security by quickly verifying identities and sharing information about fraudulent identities, respectively.
8. Rebound in Loan Volumes
High credit card debt and the return of student loan repayments are expected to increase borrowing. As interest rates stabilize, personal loans and buy-now-pay-later options will likely see significant growth as consumers seek to consolidate debt and manage everyday expenses.
9. AI Transforming Financial Management
AI adoption is on the rise, with 55% of organizations incorporating it into their operations. Consumers anticipate AI will help them reduce expenses, negotiate better rates, and provide budgeting advice. Fintech companies are leveraging AI to enhance services and expand their offerings, aiming to revolutionize financial management.
10. Shift Towards Traditional Investing as Crypto Interest Wanes
While nearly half of consumers plan to trade stocks, use high-yield savings accounts, or invest in mutual funds, interest in crypto is cooling. Six in ten consumers do not view crypto as a sound investment in the current economic climate. Despite this, crypto remains attractive due to its low entry barriers and improving security measures.
Putting Consumers First
The driving force behind these fintech trends is consumer preference. Fintech’s growth has been fueled by its focus on serving consumer needs in innovative ways. To remain relevant and grow, fintech companies must stay flexible, adapting to new consumer demands and staying ahead of industry trends.