Financial Technology Trends 2024

By TechDogs Editorial Team

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Overview

Do you remember the 2015 biographical drama, The Big Short? The movie follows a group of financial professionals who were able to predict the 2007 housing market crash. While the rest of the world was oblivious, it seemed like the protagonists of the movie had a crystal ball that allowed them to peer into the future. Being ahead of the curve, they quickly adjusted their financial portfolios based on the assumption that financial markets worldwide would face a crisis after the real estate market crashed.

The result? One investor saw his portfolio increase by 489% with an overall profit of over USD 2.69 billion! So, how did Michael Burry (hedge fund manager at Scion Capital), Greg Lippman (executive for securities trading at Deutsche Bank), Charlie Geller and Jamie Shipley (investors at Cornwall Capital) foresee changes in the financial world when no one else could?

Well, just like other analysts, they were armed with financial data and analytical insights – but that wasn’t enough. They had a keen eye on the latest financial trends and emerging changes in global markets. "The Big Short" is a testament to the power of being aware of the latest trends in finance and how it can lead to remarkable success. In today’s real-time, always-on financial world, trends can change in the blink of an eye and it can be challenging to keep up with what’s new.

No worries, we’re here with the top 5 Financial Technology Trends of 2024!

Finance – the most critical pillar of any business, right? Without proper financial knowledge and acumen, any business would likely fail. This is even more true in the new age of finance – think cryptocurrencies, De-Fi and blockchain that have all seen major adoption in recent years. However, 2024 will surge past these innovations and emerge in an unprecedented financial landscape. So, how can businesses adapt their financial strategies to what’s coming next? No, you don’t need a crystal ball!

One of the simplest ways is to understand the emerging technology trends in the financial realm and how they affect the industry. Financial technology is key in empowering businesses to adapt, compete, grow and thrive in an increasingly dynamic world. Trends such as business adoption of cryptocurrencies, smart contracts, contactless payments and AI integration defined the Fintech world last year.

This year, businesses will leverage more cutting-edge technologies to enhance their FinTech strategies. No spoilers here – read on!

Trend 1: Embedded Finance Will Go Mainstream

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Embedded finance is not a new trend as it has already allowed several businesses to integrate financial functionalities within their offerings. In 2024, it will continue to drive the FinTech industry by enabling non-financial, customer-facing organizations to integrate a bevy of financial features.

This year, businesses outside the traditional financial sector will increasingly introduce financial services into their existing products and platforms by adopting embedded finance. This strategy will be leveraged by businesses with an existing platform or app, enabling their consumers to perform financial tasks without the need to switch to another app or website. For example, retail giant Ikea is enabling embedded features such as mobile payments, interest-free credit, as well as debit and savings accounts within its services.

According to experts, the embedded financial services market will grow by 40.4% in 2024, reaching $7.2 trillion globally by 2030 with retail businesses accounting for over half the growth. Reinis Simanovskis, co-founder and CTO of lending service provider Finfra validates the trend saying, “Embedded finance will definitely continue to change the face of the industry so that we could see further integration and evolution of such financial services in non-financial sectors. Businesses outside the financial sector will increasingly integrate financial services into their existing customer experiences.” Adopting this trend will be crucial for non-financial businesses in the ever-evolving financial technology landscape.

TechDogs’ Takeaway: Embedded finance will no longer be optional in 2024 – after all, no one wants to be redirected outside the app they’re using! To this end, businesses aiming to integrate embedded features should ensure they collaborate with established fintech partners to leverage their expertise. As financial data, such as credit card information and biometrics, may be processed in-app with embedded finance offerings, businesses should prioritize robust data protection measures that help maintain user data privacy. Lastly, embedded finance solutions should not be deployed just because it’s trending – rather businesses should identify and cater to specific customer needs that ensure a seamless and friendly user experience.

Trend 2: Peer-to-Peer Networking Will Grow As Businesses Adopt Blockchain

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Last year we mentioned how businesses have started accepting payments in cryptocurrencies. Yes, we know that the cryptoverse is volatile and may need a few more decades to fully realize its potential. Hence, this year businesses will focus on the base technology that powers crypto – blockchain!

Financial organizations that have adopted blockchain infrastructures are increasingly using peer-to-peer (P2P) networking, potentially making it one of the most popular trends in the financial realm. In 2024, businesses will transact funds using blockchain, a decentralized network where investors and borrowers are connected via an online platform without the need for a third party. This will eliminate the need for traditional financial intermediaries (and transaction fees!) leading to reduced costs and more efficient financial solutions.

For instance, Citi, the banking giant, recently upgraded its services for institutional clients using blockchain technology to offer Citi Token Services. Additionally, JPMorgan Chase launched a blockchain platform called Onyx to focus on international trade. Ian Khan, renowned tech futurist and creator of the Future Readiness Score stated, “As revolutionary as it sounds, blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved.”

Hence, everyone from small businesses and enterprises in the FinTech space is seeking to adopt blockchain soon. We’re all for decentralized and secure peer-to-peer transactions!

TechDogs’ Takeaway: We expect many businesses to explore the integration of blockchain into their financial technology stack this year. If you’re one such business, start by investing time in understanding how blockchain technology and its potential applications solve specific problems or improve existing processes for your business. Once you have a roadmap outlining the P2P network application, you should select a blockchain platform that aligns with your business needs, such as scalability, encryption, etc. Talking of encryption, businesses need to prioritize the development of robust security measures and compliance protocols to secure transactions on the decentralized blockchain network.

Trend 3: FinTech Businesses Will Turn Their Focus Towards RegTech

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Although still a quite niche concept that has been adopted only by enterprises, RegTech is expected to become a mainstay in the FinTech industry in 2024. So, what’s this new trend about? Well, RegTech or Regulatory Technology, refers to the application of cutting-edge technologies that improve the way financial businesses manage regulatory compliances

The finance industry is among the most highly regulated in the world – and for good reason! To ensure that compliance is up-to-date as the financial frontier is pushed with the introduction of more disruptive technologies, RegTech becomes a necessity. For instance, many modern finance strategies include the use of Artificial Intelligence and cryptocurrencies (trends we covered last year!), both notorious for lax regulation and legal compliance. This is where RegTech will step in!

According to Juniper Research, the RegTech industry will experience 200% growth between 2022 and 2026. This growth will be spurred by financial professionals looking towards technology to help them better analyze, upgrade and optimize their financial compliance strategies. The RegTech sector has seen a lot of innovation lately and it is expected to grow as the need for financial institutions to adapt to the newest compliance laws is ever-present. Christina Ferreira, a regulatory affairs coordinator at Merck, says, “RegTech solutions are an enabler for us to manage efficiently large quantities of data. Managing all that data without technology has become humanly impossible, especially in terms of accuracy and timeliness.”

TechDogs’ Takeaway: The adoption of RegTech strategies will make it possible for companies to automate their financial, regulatory and compliance processes. If you’re looking to integrate RegTech for your business, focus on your financial data. RegTech relies on data-driven technologies such as machine learning, big data and data analytics which can only provide results with quality data. Next, recognize the fact that using legacy infrastructure can hold back RegTech adoption; it is essential to adopt modern technologies. Lastly, the key to a successful RegTech deployment is collaboration among various parts of the business ecosystem, so identify and bridge all gaps to stay compliant!

Trend 4: Sustainable Investing Will Be In Fashion

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Never before has ESG – that is environmental, social and governance – had so much say in the finance industry. With growing concerns over climate change and environmental decline, sustainable investing has emerged as a significant financial trend that will continue to gain momentum in 2024.

The factors driving the growth of sustainable investments are diverse: from regulatory changes and consumer demand to maintaining a good brand reputation. Owing to these reasons, in 2024, organizations, venture capitalists and investors will look for opportunities that enable them to invest sustainably. Stripe, a financial services corporation, for example, allows businesses to allocate a portion of their profits to ESG initiatives that reduce carbon emissions. Another financial behemoth, Mastercard, unveiled a carbon calculator tool for the global banking sector to promote sustainable investing.

Businesses with strong sustainability practices that align with Environmental, Social and Governance (ESG) principles will attract more funding, as well as brand recognition. According to a PwC report, asset managers globally will increase their ESG-related assets to $33.9 trillion by 2026 from $18.4 trillion in 2021, making sustainably invested assets 21.5% of total global assets under management. This not only helps businesses make a positive change towards the environment but also gives them a competitive edge over businesses that do not invest sustainably.

TechDogs’ Takeaway: The shift towards sustainable investing will help businesses improve their environmental and social practices, leading to a more resilient, eco-friendly economy. To leverage the trend of sustainable investment, asset managers and business investors need to incorporate ESG factors into their traditional investment strategies. Moreover, some investors continue to avoid sustainable investing as they believe their ESG portfolios will underperform their non-ESG portfolios. Yet, there is growing global consensus that sustainable investments can outperform non-ESG portfolios, with a lower risk factor. Hence, financial institutions must prioritize creating awareness about ESG investments. Lastly, sustainable investments need to emphasize long-term value creation for the best outcome.

Trend 5: Governments Will Introduce Central Banking Digital Currencies (CBDCs)

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How can we talk about financial technology trends without mentioning cryptocurrencies? Although crypto (as the cool kids say!) has been around for almost 15 years now, it keeps evolving into more practical use cases in the FinTech industry. A new trend that has emerged within the cryptoverse in 2024 is that of CBDCs, better known as Central Bank Digital Currencies. While most governments were wary of the technology and implemented various regulations, in 2024 we will witness several of them launch cryptocurrency projects of their own!

Several nations are looking into creating Central Bank Digital Currencies (CBDCs) to update their financial infrastructure and boost payment effectiveness for consumers and businesses alike. Some countries have already implemented CBDC pilot initiatives as of 2023. In fact, 11 nations, including the USA, China, India and Japan, have implemented central bank digital currencies (CBDCs) while another 53 are in advanced planning stages for the same.

So, why are governments introducing cryptocurrencies in 2024? Well, the adoption of CBDCs will lead to improved transparency in monetary policies, lower transaction costs and greater financial inclusion for citizens and smaller businesses. Furthermore, since CBDCs are regulated and issued by central banks, they will provide better financial support to the government and commercial banking systems. However, the actual impact of CBDCs on the FinTech industry remains to be seen in 2024.

TechDogs’ Takeaway: After bearing the brunt of the 2022 crash, with the market losing almost 2 trillion dollars, the crypto industry is slowly recovering with the adoption of CBDCs. To leverage this trend, businesses should keep up-to-date on government announcements about CBDCs, especially in the regions/nations they operate. Secondly, businesses must invest in a crypto strategy; when the global crypto infrastructure matures and becomes more accessible to the masses, CBDCs will emerge as the popular choice as most consumers still see crypto as too unstable. Finally, crypto-centric businesses must diversify from traditional banking strategies to gain a competitive edge over their rivals who don’t.

To Sum Up

Fintech in 2024 looks promising! Financial organizations always need to meet new customer demands while being effective, efficient and regulated. This leads to the financial industry expanding quickly and creating innovative financial technologies. Trends such as adopting embedded finance and blockchain, focusing on sustainable investing, exploring government issued CBDCs and aligning with RegTech strategies are sweeping the FinTech landscape this year. To succeed, all you need to know are these trends – no crystal ball is necessary!

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Tags:

Financial Technology Trends Financial Technology FinTech Embedded Finance Peer-to-Peer (P2P) Lending Finance Industry RegTech Sustainable Investing Central Bank Digital Currency (CBDC)

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