Fintech covers a wide swath of companies that deliver technology innovation to the financial industry. Consumers have embraced fintech, also known as “on-demand finance,” thanks in large part to the rise of mobile devices and the shift to cloud computing. Billions of dollars in investments continue to pour into this space giving startups and legacy players alike a chance to shape the future of financial services.
Digital payment startups are among those at the forefront of the fintech movement, having disrupted the global landscape and continuing to grow. The following trends reveal key ways in which fintech space keeps evolving.
Fintech as a Service
While digital payments have already disrupted traditional finance, the market remains fragmented, leading to to what is known as a “silo approach.” This reflects businesses that are interested in integrating payment services selecting from a sea of providers. Often, this leads to technological and regulatory hurdles as the business seeks to expand internationally.
Fintech could soon experience a disruption of its own into what’s known as “fintech-as-a-service” which is akin to the shift toward cloud computing 15 years ago. Instead of building out proprietary data centers, companies now turn to the cloud and the solutions offered by industry leaders including Amazon, Google, and Microsoft, for instance.
Industry participants suggest that fintech is headed in a direction, where within a half-decade companies will use a larger yet nimble platform to deliver financial services across jurisdictions. This includes payments, where the fintech model must expand to include the 2.3 billion people in the world who are either un-banked or under-banked and don’t have access to debit or credit cards.
In payments, the gig economy is in focus for this model, as this model is able to perform identity verification such as know-your-customer (KYC) and deliver payments to recipients’ digital wallets via their “preferred payment options.”
Equity-Fueled Credit Card
Fintech-powered credit and debit cards are also taking financial services by storm. Gig economy giant Uber has its own credit card whose loyalty perks earn users “free food deliveries.” Amazon.com’s rewards come in the form of a gift card. These companies are trying to differentiate themselves, but it took a fintech startup to come up with an equity-focused debit card.
New York-based Stash Financial is reportedly launching a debit card with a “stock back” feature, giving users the opportunity to earn equity in the company at which they’re shopping—from Amazon to Netflix to grocery chain Kroger—for using the card. Equity rewards range from 0.125% to 5% of the total amount spent. And if the merchant isn’t a publicly traded company, the consumer will instead earn equity in an exchange-traded-fund with similar holdings.
Credit card companies need to innovate to compete with the likes of Goldman Sachs and Apple, which are moving ahead with a partnership for a co-branded credit card. Loyalty perks are usually the selling point for cards issued by major brands. Apple, however, isn’t typically keen on discounting, casting a potential shadow on the card’s debut.
Fintech Looking More Like Banks
Another emerging trend among newcomers is adopting more banking features.Fintechs are known for creating a la carte financial services with faster and cheaper products than their banking counterparts. Now that many fintech companies are maturing, having raised large sums of capital from big investors, they are expected to begin expanding the features of their products.
An app focused on budgeting, for instance, could begin to support checking and savings accounts, which provides a more holistic experience for the customer. This trend will usher in a “new generation of banking,” in which consumer’s financial services provider will say as much about their personality as their choice in music does.
With the first quarter of 2019 almost over, fintech companies are expected to continue attracting funding from venture capitalists this year. Big investors have reportedly closed funds worth billions of dollars over the past year and are looking to deploy it. Privately held fintech startups are an increasingly attractive bet, which will raise the valuations of these companies and allow them to expand and develop additional financial services and products such as those outlined above.