Fintech Trends of 2021 Part Two

by Bianca |
Fintech Trends of 2021  Part Two

 

If you joined us last week, you’re already up to speed with a nutshell explanation of financial technology. We told you about how cryptocurrency appropriated the doge, and explained that the older generations are vastly untapped sources of demand in this space.

 

Take a gander at our second instalment...

 

Online-only banks

 

 

It’s a known fact that without a digital presence these days, most businesses will struggle to stand amongst the competition. Global e-commerce sales jumped by nearly one billion dollars between 2019 and 2020. The use of mobile and desktop devices to shop and execute daily tasks is emblematic of our gravitation towards expediency. Digital payments are set to be Fintech’s largest segment in 2021, with a projected transaction value of $6,685,102m.

 

Similarly, online-only banks are seeing a huge uptick in popularity. In the UK, a quarter of the population have opened online-only banks, with providers such as the hugely popular Monzo. That’s up 300% from 2019. And 6% of US adults with a checking account consider a digital bank to be their primary bank. Consumers are wooed by a brand image which seems transparent, contemporary and people-first. It’s a welcome shift from opaque corporations that earn at least some (ahem) of their money by capitalizing on a lack of financial literacy and size 4 font. Take Chime, a US company. With no monthly fees, their profits come from the merchant fees they receive when customers make payments. Who wouldn’t think that that’s fairer than most big banks? 

 

Further coerced by the global pandemic, a shift that could have taken a decade escalated over the span of mere months. Demand was concentrated by necessity. Risk dictated remote solutions. Customers had time to research competitors and realize that they could have better, more transparent banking relationships. 

 

According to 2020 Foresight Research, surveying nearly 11,000 customers in 44 markets, 27% of respondents intend to close their relationships with their current provider (in bank lingo, ‘churn’). This is a huge number, and up 15% from two years prior. The numbers don’t lie. Nor do positive press and word of mouth. Chime is now a Top 10 bank in the US. If the big banks find comfort in complacency, they’ll only have themselves to blame for getting buried by greed. 



Cyber Security

 

 

Last year, as in many recent years, data and security breaches made headlines. Lewd demonstrations by strangers in Zoom rooms. The revelation that Russian hackers didn’t target the 2020 election, but had a broader objective. The Florida teenager who hacked the Twitter accounts of Joe Biden and Bill Gates. With the world making a seismic shift to remote work during the pandemic, cloud-based technology has seen more traffic than ever before. Many companies have made this shift without preparation against cyber attack or data breaches. So what’s the knock-on effect of this combination of remote work and online banking? A boon for cybersecurity. The average cost of a financial services data breach is among the highest of any industry, at 5.85 million USD. Greater sophistication is needed as systems and hackers evolve. 

 

The Varonis Risk Data Report of 2021 for Financial Services worryingly states that players in this sector “take an average of 233 days to detect and contain a data breach, meaning that the industry average resolution time is eight months — enough time to severely damage reputation, revenue, and customer faith.” Companies simply don’t have the capital, personnel or time to solve this, not without technology. Banks are aware of this. According to the Deloitte Center for Financial Services Global Outlook Survey of 2020, 71% of bank leaders expect their organizations to increase cybersecurity spending. The greatest areas of focus will be cloud computing and storage, and data privacy. 

 

Robotic Process Automation (RPA) is also being more widely deployed, as it reduces the risk for human error in process execution. It can allow for consumer behavior monitoring, which can be vital in identifying markers for devious behavior. Erica, a Bank of America robot, is a personal banking assistant for customers, which is already being widely engaged with, particularly among Millennials and Generation X. The added bonus? These kinds of technologies have an ROI prediction of 40-100% within 3 - 8 months. 

 

Other Artificial Intelligence and Machine Learning tools are able to flag system anomalies ahead of time and implement automated counter-processes. With growing sophistication in these areas, we’re going to see a more widespread adoption. Other solutions we’ll see being pursued are Zero Trust Architecture, VPN-capable firewalls and multi-factor authentication as a baseline. For more information, see Benchmarks and Controls from the Center for Internet Security; the globally recognized standard for cybersecurity. 

 

Join us next week for the third and final instalment of Fintech Trends for 2021. We’ll be taking a look at the interesting relationship between expectations for companies to be socially responsible, and the greater technological connectivity of our world.