As the Fintech sector emerges from a COVID-19-ravaged 2020, it has seen exponential growth, new players, and significant change. The absence of physical contact drove a shift in the way companies conduct business. On the flip side, consumers also felt the impact. Many were forced to move to easy-to-use services to access and utilize their funds.
Driven by this and other factors, the Fintech sector's popularity has reached over 90% awareness of at least one Fintech product or service. What all of this means is that Fintech continues to grow and evolve at such a rapid rate, sometimes it’s hard to get your arms around what it really encompasses.
Here are three sectors that we believe are leading the way in driving Fintech's growth.
Embedded finance is the integration of financial tools or services in non-financial areas. As one example, companies like Amazon are offering on-demand financing at time of purchase. Another example lies in mobile apps streamlining the in-app purchase experience by embedding Venmo or other direct pay services.
The main benefits of embedded finance offerings for businesses are two-fold. First, it opens up additional revenue streams through new product and service offerings, either built in-house or through partnerships with fintech providers. Additionally, it lets organizations control and oversee more of their customer experience, which can streamline processes and deliver valuable customer data insights.
Open Banking and Open Finance allow a customer’s banking data to be securely accessed by third-party organizations and apps through published APIs. By providing this ease of access, they're giving traditional banks a run for their money by allowing consumers to use multiple offerings such as flexible high-income-generating investments, credit cards, and other offerings. Additionally, budget apps and price comparison tools are prime examples of the wide use of Open Banking applications.
While these services come with some security risks for customers, APIs are more secure than other data sharing techniques. Companies' benefits lie in greater access to customer data and an ability to provide insights and highly targeted and personalized services based on that data.
But it works both ways! Banking-as-a-Service allows the financial institutions to incorporate external Fintech services and products into their existing offerings without developing them in-house.
COVID-19 pushed traditional banks to expand their digital services more rapidly than they had planned, as many consumers could not physically get to the banks. This acceleration of services is excellent news for consumers and one of the positives that came out of a trying year.
Financial institutions are working hard to integrate more Fintech digital banking and payment services into their customer experience. While they may sacrifice some degree of control over services and customer data that was the norm for financial institutions, they, in exchange, can bring new products and services to their customers quickly and avoid the cost and uncertainty of in-house product development.
Fintech's growth is showing no signs of slowing down. With this in mind, many companies are ramping up their digitization efforts and scaling their development teams to maintain a competitive edge. Find out the 4 keys to scaling your development team!