Gustav Korobov and his team over at finextra.com have analyzed six trends happening right now and over the next eight months that could have a major impact on the banking and fintech sectors. Familiarizing yourself now will allow you to be ahead of the curve and not caught off guard. The six trends are decline in fee-free banking, open banking, the crypto revolution, Decentralized Finance (Defi), Banking-as-a-Service platforms, anti-money laundering activities, and cybersecurity.
Fee-free banking has been on the rise over the past few years, with many digital banks opting to go with no fees to try to attract new customers. This is in contrast with some traditional banks actually increasing their fees for payments or account openings. Now we are seeing digital banks actually backing down from this early approach. Digital bank Revolut started out with no fees for its million plus base but has since began to hike its fees for international money transfers as well as beginning to charge customers to have their debt cards delivered.
New developments in open banking are bringing incredible new developments to the space. Open banking is a revolutionizing technology that brings fintech and banking together and enables data exchange across institutions. The problem here lies with the lack of coherent regulation around the world that makes it more difficult for fintech’s to enter the banking sector in different countries, this is allowing traditional banks to have a leg up on the competition. JP Morgan is an excellent example of innovative banking. In partnership with Marqeta, the bank now offers a virtual credit card to their corporate customers. On top of that, Visa has just introduced the Partner Connect program to develop partnerships with fintech’s on the rise in digital payments.
The next trend is the crypto revolution that is here to stay with the most well-known currencies like Bitcoin and Ethereum up 600% and 750% respectively over the past year. Though the train has lost some speed the revolution is here.
Decentralized Finance, or Defi, is one of the most sought-after trends this year. This is a pool of financial applications based on crypto and blockchain technology and used worldwide across banking, insurance, and other financial services. Some of the concepts you may have heard of such as Yield Farming, which is when users lock up their crypto currencies and earn interest on them, or maybe Non-Fungible Tokens (NFT), which are digital assets that spans both tangible and intangible assets like music, art, and even virtual real estate.
Next, Expansion of Banking-as-a-Service platforms is an industry that is likely to be valued at US $7.2 billion by 2030. Major players like JP Morgan have ramped up investment in the space and Goldman Sacs has announced its own new BaaS portal for developers.
Governments around the world have been stepping up the fight against anti-money laundering. The European Union has especially been at the forefront of this initiative. With the introduction of the 6th AML Directive, that all EU Member States must comply with by June 2021, there is to be a significant decrease in this activity.
Lastly, it should come as no surprise that the focus on cybersecurity is on the rise, especially in the banking sector. Due to the pandemic, there has been a surge in cybercriminals that have heavily exploited and attached themselves to financial institutions. As open banking gains more steam there will be an ever-increasing need for more, better, and secure way to deal with private data. To fight financial crime, banks need to implement new security measures and diversify the ways our financial data is stored.
Editorial Team. “Banking and Fintech in 2021: Discover Exploding Trends.” Finextra Research, 27 Apr. 2021, www.finextra.com/blogposting/20219/banking-and-fintech-in-2021-discover-exploding-trends.