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Year after year, fintech is changing the way we do banking, whether it’s with digital payments, virtual assistants or socially conscious alternatives to traditional banking.
The term “fintech” stands for financial technology. Broadly speaking, it captures the breadth of technology used in the banking and financial services industries. It also refers to the companies developing this technology to compete with traditional banks.
Fintech is a big part of life for consumers across the country — according to financial services provider Plaid, by 2021 88 percent of Americans will be using technology to manage their finances in some way. Additionally, Adroit Market Research predicts that the global fintech market will reach over $698 billion by 2030.
While tools like digital payments and multi-factor authentication have been around for years, new technologies are constantly being developed. Here are some of the latest fintech trends bringing convenience and protection to consumers.
5 fintech trends to watch out for in 20231. Fintech companies are finding new ways to make finance greener
As environmental issues grow in importance around the world, so will new solutions – and fintech companies are often at the forefront of making finance greener.
Big banks have failed in the past when it comes to the environment. A 2022 study of multiple nonprofits found that a quarter of all fossil fuel funding over the past six years came from JPMorgan Chase, Citi, Wells Fargo and Bank of America. Smaller challenger banks – a kind of fintech offering digital banking services – offer alternatives to the big banks that put the environment at the forefront of their mission.
For example, Aspiration offers a debit card that earns up to 10 percent cashback on purchases from socially and environmentally responsible companies. The debit card itself is made from plastic that comes from the ocean. Although the fintech isn’t technically a bank, its deposits are held in custody accounts by partner banks, so they’re insured by the FDIC.
The story goes on
Meanwhile, Treecard is another fintech that offers an alternative to big banks and whose main mission is reforestation. Customers can sponsor the planting of a tree in two ways: by walking 10,000 steps (tracked via the fintech’s app) or by spending $50 with the elegant, sustainably sourced, recyclable wooden debit card. Treecard also claims to donate 80 percent of its profits to reforestation efforts.
What’s the promise: You can bank anywhere that is environmentally friendly and prioritizes global impact over profits.
What to look out for: The accounts offered by these fintechs probably don’t offer all the features that a standard bank account offers. They may also not be insured, although many offer FDIC insurance through custody accounts.
2. Workers have more flexibility in their payday and even get paid daily
Features that allow you to get your paycheck a few days early have become popular in recent years. But some fintechs go one step further and allow employees to get their earned wages almost whenever they want.
For example, Even works with employers like Walmart and PayPal to give their hourly workers access to up to 50 percent of their earned wages, among other things. The idea is to get paid after a shift instead of waiting for a check.
Meanwhile, the fintech DailyPay allows workers to access money from hours worked pretty much whenever they want. You must sign up for DailyPay through an employer, and then you can transfer up to $1,000 in earned wages per day to a connected bank account.
What’s the promise: In addition to earlier access to paychecks, some employers may be working with fintechs to allow workers to receive their earned salary whenever they want. This can be useful for covering overdrafts, paying bills, and avoiding early payday loans.
What to watch out for: If you access your wages earlier, your paycheck will be smaller later. Some of the fintech apps also ask for tips. Make sure the tip default is set to the amount you want to give, if you plan on giving anything at all.
3. AI will play a bigger role in protecting your finances
Artificial intelligence (AI), machine learning, automation – whatever you call it, advanced computer-based technology is completely changing the way banks and consumers handle finance.
A 2020 World Economic Forum report found that 90 percent of fintech companies and 80 percent of traditional banks have implemented AI technology in some way. Specifically, 56 percent of all companies are already using AI for risk management, while 39 percent said they are in the process of implementing or planning to implement AI for risk management.
JPMorgan Chase was one of the pioneers in integrating AI into financial protection. The financial services company made fintech headlines with OmniAI, a platform dedicated to developing AI technology to make banking safer and more efficient. One of the ways AI does this is through early fraud detection.
You may not know it, but AI may already be helping protect your finances by detecting and preventing payment fraud and money laundering. As banks and fintech companies continue to develop AI in the financial sector, there will be more protections for consumers’ bank accounts.
The Promise: AI technology is increasingly being used to assess risk, detect fraud and prevent money laundering, making both consumers and businesses financially safer.
What to look out for: The Consumer Financial Protection Bureau (CFPB) warns that AI technology could play a role in detecting risk in credit decisions. Banks and lenders must be able to provide specific reasons for refusing a loan to prevent discrimination.
4. Money management finds its way into virtual reality
Virtual reality has become a frequent topic in recent discourse, with Metaverse and Oculus Quest making simulated experiences more advanced and accessible. And now virtual reality is also finding its way into fintech.
Artlabs, a software company that develops virtual and augmented reality for brands, lists some ways virtual reality can be used in fintech:
Virtual shopping and payment
Data and transaction visualization
Improved virtual customer service
Biometric authentication – a form of identity verification based on a person’s physical and behavioral characteristics
Bell.One is a technology provider bringing virtual reality to the banking industry. It is developing technology that will allow bank customers to find, for example, a nearby ATM by simply holding their cellphone and scanning its location using the phone’s camera and GPS.
What’s the promise: Virtual reality technology is taking banking a step further than virtual assistants and automated transactions. You will have a much richer banking experience without having to leave your home.
What to watch out for: In some cases, virtual reality can make things too accessible. For example, if virtual reality allows payments through eye scans, it might be easier to spend more recklessly.
5. Just Walk-Out technology allows you to check out without waiting in line
In 2022, Amazon extended its Just Walk Out technology to third-party providers. The technology allows customers to purchase items from a store without having to go through a checkout process. Instead, they simply scan a credit or debit card, QR code, or even the palm of their hand as they enter and exit the store. Items they take off the shelf are added to a virtual shopping cart or removed when they put the item back, but nothing is charged until the customer exits the store.
It might sound like science fiction, but Amazon has already used the technology in its Amazon Go stores using computer vision, sensor fusion, and machine learning. Shoppers in Amazon Go stores never have to wait at the checkout. Just Walk Out has also been implemented for locations such as Sainsbury’s, TD Garden, WHSmith and others.
What’s the promise: More and more stores are introducing technology that allows you to shop and pay for items without having to wait at the checkout.
What to look out for: Technology can change some parts of purchasing, such as B. making it difficult to return or get a receipt. It may also make some consumers suspicious of being virtually tracked by technology.
bottom line
New technologies emerge every year that change the norms of banking and finance. Concepts such as an app that you can use to send money to friends or a digital wallet in your cell phone would have been unthinkable decades ago. We often take these developments for granted, but the role they play in our day-to-day actions is crucial.
That being said, new technologies, like their creators, are not perfect. It often takes years to hone their skills. While, as with any change, it makes sense to be a bit cautious about these innovations, it’s worth exploring how they can bring ease and security to your finances in the long run.
