The fintech revolution is well underway as financial technology trends arise that make digital payments better, faster, more convenient and more widespread. At the same time, new fintech trends continue to emerge, transforming the financial sector year after year.
To remain competitive, it’s important for e-commerce merchants to be aware of trends that are disrupting the financial services industry and determine which tools and technologies might be appropriate for them.
Digital banking was already on the rise before the pandemic, but with biosecurity mandates keeping people away from physical banks, many people used online banking for the first time during COVID-19. While services vary, digital-only banks typically allow customers to open a bank account on their digital platforms without needing to go into a branch and fill out physical forms. Then, they can provide customers with physical cards or virtual cards that allow them to make digital transactions.
While digital banks offer some functions that are similar to mobile wallets, online-only fintech solutions like Bunq, Revolut, Monzo, Starling Bank and Number26 also provide other financial services that were formerly offered only by traditional financial institutions, including mortgages, credits and loans.
Similar to mobile banking services, digital wallets or e-wallets facilitate financial transactions and peer-to-peer transactions without any need to rummage around for a physical wallet. While the exact process varies from one provider to another, customers generally link their existing financial accounts and cards to the digital wallet for secure tokenised contactless payments.
To pay with a digital wallet, customers sign in to the app using their fingerprint or another kind of biometric identity verification, select the card or bank account that they want to use to pay and hold their mobile phone to the merchant’s reader. The reader scans the token on the mobile phone using near-field communication technology and completes the transaction.
Cloud-Based Merchant Services
Riding on the back of the digital-only trend, several merchant account providers now exist that operate 100% online. They work with a cloud-based computing system that allows merchants to access transaction data and reports and make changes to their settings from anywhere in the world. As global-oriented companies, online merchant account providers usually offer technologies that parallel those offered by mobile wallets and cross-border fintech providers, such as multi-currency accounts, e-wallets and automated transactions (such as recurring billing).
In Europe, Unicorn Payment is an example of an online-only merchant account provider that offers multi-currency merchant accounts and the full suite of merchant services through cloud-based software and an API-hosted payment gateway. Merchants can accept payments from customers located in 195 countries, using 164 currencies—instantly taking their businesses global.
As more financial data is exchanged online, cybercriminals are finding new ways to gain access to this information and commit payments fraud, identity fraud, money laundering and other acts of financial crime. This makes it more important than ever for e-commerce merchants and financial companies to ensure a high level of security and stay on top of new and emerging threats.
In addition to encryption at every step of the payments process—which is a requirement for PCI-DSS compliance—companies are turning to new technologies for advanced fraud protection, including:
- Blockchain technology
- Multi-cloud data storage
- Secure access service edge (SASE)
- Know your customer (KYC) tools
- Multi-factor authentication
Furthermore, fraud protection software helps merchant and fintech companies detect suspicious transactions as soon as they are placed, thanks to machine learning with large amounts of authentic transaction data and the merchant’s chosen fraud scrub parameters.
Other Financial Technology Trends
The financial technology trends covered so far are already commonplace—and even expected. However, other fintech trends are also on the rise that could be considered “basic” in the future:
- 5. Gamification. Gamification refers to customer-centric tools that enhance the customer experience with trophies, badges and other game-like mechanics to make banking fun and encourage healthy financial decisions. In e-commerce, gamification can be used to reward customers for accruing a certain number of loyalty points, rating a product or leaving a review.
- 6. Digital currencies. Various cryptocurrencies are currently being used in the private sector and niche industries, including online gaming. However, digital currencies could soon become a mainstay of the financial industry. According to a BIS survey, 60% of central banks surveyed indicated they had at least a proof-of-concept for a digital currency and 14% were conducting pilot tests.
- 7. Voice-enabled payments. Digital banking can now be conducted using voice commands directed at a smart speaker—similar to a voice assistant like Siri or Alexa. Users simply speak a command to hear their balance or make a payment. As well as offering greater convenience, this technology is particularly helpful for making digital banking services accessible to visually-impaired customers.
- 8. Robotic process automation. Software robots are being used to conduct routine back-end tasks such as data entry and information processing, freeing up humans to focus on more creative, high-order and value-adding activities. Because software robots only perform routine tasks, they don’t require artificial intelligence (see the next point).
- 9. Artificial Intelligence (AI). For higher-order tasks, artificial intelligence is becoming commonplace to reduce costs and increase efficiency. Chatbots, for example, can be used to replace customer service representatives outside of business hours and help customers find relevant products. Robo advisors like Wealthfront and Betterment use big data coupled with cognitive computing technology to suggest an advantageous portfolio of securities to investors.
- 10. Blockchain technology. Distributed ledger technology, or blockchain, is the technology behind cryptocurrencies, decentralised finance (Defi) and non-fungible tokens (NFTs). Blockchain technology is currently being used for cybersecurity and is expected to be used much more extensively for a range of applications in the future.
- 11. Regulatory technology. Regulatory technology, or reg-tech, refers to technology being used for the purpose of monitoring, reporting and compliance. One example of ref-tech in the fintech industry is fraud software that mines big data sets and real-time inputs such as news articles to predict potential security threats and block or flag suspicious transactions. Other examples of reg-tech include remote employee surveillance and programs used to detect insider trading in the SEC.
What Fintech Trends Mean for You
For e-commerce merchants, staying in the loop with innovations in the fintech industry is necessary because these innovations shape—and respond to—customer expectations when shopping online, including their preferred payment methods and transaction security.
Moreover, fintech trends offer many advantages in terms of your day-to-day financial management, including real-time reporting, analytics and assistance with making advantageous financial decisions for your company’s future.
The best fintech trends to adopt will be those that address challenges your company is currently facing and can be scaled as you grow. There are many companies in the fintech industry that are dedicated to helping merchants find the solutions they need, and these solutions could help you achieve—and even exceed—your current e-commerce goals.