The dominance of fintech solutions for payments, the evolution of fintech solutions for cybersecurity, the advancement of digital banks, the entry of technology giants, and the shift in focus from inclusion to financial health are five current or predicted trends in the United States fintech industry.
Dominance of Fintech Solutions for Payments
- More and more transactions are becoming electronic, and as a result, the way payments are processed is changing across numerous verticals and customer types. Several technologies that improve how payments are made are emerging.
- Professional services firm KPMG noted this trend in its latest biannual report on fintech. In said report, the firm wrote that it expects payments to continue to be a strong area for investment. It highlighted as well that interest in deals involving B2B payments has increased as can be seen from Mastercard’s acquisition of Transfast, a peer-to-peer and business-to-business money transfer company, and JPMorgan’s acquisition of Instamed, a medical payments technology company.
- As a consequence of this trend, payments are expected to remain the most dominant segment of the United States fintech industry. It is projected as well that investors will continue to funnel money into fintech for payments because they know that the segment has potential for long-term growth.
Evolution of Fintech Solutions for Cybersecurity
- Cyber risks and the technologies for detecting these risks are evolving, and the United States government is paying more attention to the potential impact of these risks on the country’s infrastructure.
- This is a fintech trend to watch for in the country, according to KPMG. In its latest biannual report on fintech, the firm wrote that cybersecurity has grown in prominence as a fintech segment, thanks to evolving cyber risks and detection tools. Fintech investors have also expressed interest in a variety of cybersecurity solutions, including mobile identity verification, tokenization, and fraud detection.
- Alex Lazarow, a Forbes contributor who writes about fintech, also recently wrote that security is one of the biggest fintech trends in 2020. He added as well that, between 2017 and 2018, the percentage of firms in the United States that have experienced a cyber attack grew from 41% to 61%, and losses from cyber attacks grew from $229,000 to $369,000.
- KPMG expects that cybersecurity will continue to be a strong area for fintech investment as a result of this trend.
Advancement of Digital Banks
- Digital banks, otherwise known as challenger banks or neobanks, are growing in prominence, with some becoming more valuable than some traditional banks in the United States. Chime, the country’s number one digital bank, now has a valuation of $5.8 billion. Digital banks, together, were able to raise over $3 billion in funding from venture capital firms in the first three quarters of 2019 alone.
- The advancement of digital banks was identified as a fintech trend by both Frank Rotman, founding partner at QED Investors, and Mitch Siegel, principal at KPMG. Rotman expects this trend to continue up to 2022 when it is projected that digital banks will become mainstream.
- According to Siegel, personalization will become key as a result of this trend. Siegel believes personalized offers are what will set a digital bank apart from its competitors.
Entry of Big Tech
- Technology giants, such as Apple, Facebook, and Google, are making a foray into fintech. Apple has partnered with Goldman Sachs to launch a credit card, Alphabet, Google’s parent company, has teamed up with Citigroup to launch a checking product, and Facebook has taken steps to create its own cryptocurrency.
- Both Rotman and Matt Harris, partner at Bain Capital Ventures, indicate that this is a fintech trend. Rotman says this trend should be seen not as “tech getting into finance” but as “‘customer-facing organizations’ offering their customers banking products.”
- Both Rotman and Harris expect that this trend will result in more partnerships between technology companies and banks, and between technology companies and fintech startups. More and more technology companies will take advantage of their relationship with customers, and incorporate banking products and services, such as insurance, lending, and payments, in their business models.
Shift in Focus from Inclusion to Financial Health
- Inclusion used to be the priority among fintech companies in the country. Now, the focus has shifted to an even broader concept: financial health. Prioritizing financial health means providing customers with more holistic offerings that enable long-term financial success.
- Both Lazarow and the Forbes Finance Council have observed this trend. The prioritization of financial health was identified by Lazarow as one of the five biggest fintech trends and by the Forbes Finance Council as one of 14 fintech trends to look out for in 2020.
- As a result of this trend, comprehensive financial health solutions that target certain verticals, such as seniors, kids, gig economy workers, and dental practices, have emerged. Luz Urrutia of Opportunity Fund notes that several fintech startups have made financial health a priority, with fintech startup LendingClub even adding a “chief financial health officer” position.