In this modern age when the whole world is accommodated with advanced technology, fintech industries are evolving swiftly with every passing year and financial infrastructures are spending hefty investments to fulfill customer demands and to secure the unpredictable future of finance. Immense evolution is observed in this sector during the pandemic year where everyone was crawling for financial services that do not involve any physical contact. Undoubtedly, fintech industries have reshaped the dimensions of financial infrastructures considering the rapid adoption of digital assets.
In 2018, almost 70% of senior banking executives claimed that collaborating with Fintech and Bigtech is a great opportunity for banks to create new services. In 2019, Fintech startups scooped up $34.5 billion globally. It is mainly related to small startup companies which tend to develop innovative technological solutions in areas such as big data, mobile payments, alternative financial management, etc.
Let’s have a look at 5 promising reasons that answered the frequently asked question of why businesses should start investing in fintech startups today.
From Paper Money to Digital Assets.
2016 was a revolutionary year for digital assets such as cryptocurrencies, bitcoin, XRP, ethereum, etc as styles of currencies began to transform digital assets. Virtual currencies allow online payments at a low cost without the need for multiple traditional channels. The future of fintech technologies remains relatively unpredictable with every passing year. Cryptocurrencies are not very well understood by an average banking customer who lives in a country with a stable main currency. Although there exist early crypto adopters by nature, these customers don’t have much in the way of incentive to acquire cryptocurrencies over regular currencies, and they even consider cryptocurrency extremely risky.
Cryptocurrencies are particularly relevant to almost one billion people around the globe who don’t have bank accounts but have mobile devices. Cryptocurrencies are revolving around the globe at a swift speed and have an immense rate of adoption in areas of the world with unstable currencies. Hence cryptocurrencies help new fintech startups to have the limelight in a market where fintech can find such customers who gain benefit from their products.
Your Mobile is Your Wallet.
Mobile devices have become very normal today and have evolved at an unexpected pace from the past few decades. Literally, everything is stored on your mobile, and the same revolution is observed in your wallets. Fintech industries are successfully combating traditional financial services on multiple fronts. Digital wallets play a crucial role in the disruption of those traditional financial services. Fintech companies are at the spearhead of diversion towards a cashless and wallet-less economy.
According to ARK research, digital wallets are beginning to penetrate the complete traditional financial services stack in this modern era of technological advancements. Digital wallets can surely serve as a lead generating platform for commercial activities beyond financial products. Today, digital wallets are valued between $250 and $1,900 per user but have the potential to hit the figure of $20,000 per user, representing a $4.6 trillion opportunity in the United States by the year 2025.
Hence fintech startups should start investing hefty amounts to make online transactions more accurate and efficient for customers due diligence and enhanced user experience, which is the main moto of technological innovations.
Blockchain Penetration.
Blockchain technology is penetrating from hype to mainstream, and it is impossible that fintech industries stay unaffected. There would be no wrong in saying that blockchain technology is empowering fintech industries. From 2019 to 2025, The global blockchain market size is expected to grow at a CAGR of 69.4%. Blockchain is the most optimistic trend in the IT domain. It enables a ledger that can be accessed by those parties that are involved in transactions and can act as a universal irrefutable depository of all transactions between involved parties.
A choice can never be made between fintech and blockchain because one compliments the other. The conversation has switched from the past few years to whether the blockchain is reliable to integrate with business legacy systems. Enterprises have a prominent interest in the field application of this evolving technology, but the duo of fintech blockchain has proximity towards startups pioneering innovations in the sector. A blockchain is more than just a database. We can have an integrated trail of blockchain with entries segregated into technologies instead of having multiple records for every transaction receipt. Blockchain architecture and block validation prohibit double-spending.
Security and Trust Are Essential.
Citizens and evolving businesses require innovative yet secure methods to access financial services in order to help the economy bounce back from COVID-19 crisis. Indeed, fintech innovations provide tremendous social and economic advantages by developing a connection between unbanked and underbanked populations to a digital economy. Also, fintech innovations are playing a crucial role in the growth of small businesses and empowering customers in innovative and exciting ways.
It is mandatory for fintech startups to ensure that businesses and customers are leveraging benefits from them. Developing a trust relationship between customers and the fintech industry is essential for acquisition. Our dependence on the digital landscape is expanding with the speed of light, cybersecurity, and identity verification solutions are something that needs to be continuously refined and considered to combat fraudulent activities. Cybercriminals are evolving in parallel to technological advancements. The fintech revolution in financial services develops a connection between organizations and varying degrees of cybersecurity maturity levels. Fintech industries need widely accepted and mutually understood cybersecurity control to support business protection and to gain customer’s trust. Hence, businesses should invest to enhance their cybersecurity controls.
Enhanced Customer Experience.
The major reason for fintech evolution around the globe is huge customer value. Fintech industries need to retain loyal customers for their growth as the banking industry has a huge customer base. Fast and accurate identity screening helps to provide a seamless onboarding experience to customers, boosting customer retention rate. Other than incorporating AI-powered advanced identity verification solutions for the enhancement of cybersecurity infrastructure, big data is also a primary asset and Fintech industries should invest their time, money, and energy in its security. Data protection and customer privacy policies play a crucial role to gain customer’s trust and loyalty.
Chatbots are capable of customizing customer’s experiences. Approximately 90% of the traditional banks are considering automating their customer interaction in the near future. In contrast, 60% of primary customers of fintech claim to use chatbots on a regular basis for online purchases.
Last but certainly not least, the best possible way to enhance customer experience is to connect with them. Understanding customer requirements is significant for fintech businesses to enhance customer trust with industry. One way of doing this is to conduct a survey and get customer’s points of view about the brand. Other than that, conducting online webinars and interactive sessions also enhances customer interaction and helps to develop a better understanding of customer experience towards products and services.
The Final Verdict.
If you are thinking to enhance your financial infrastructure, just don’t think twice and start investing in fintech startups today. Financial technology has paved the way for a swift revolution in banking sectors and financial services. Even though the pandemic year diversely affected numerous fintech industries, small-size startups in comparison to legacy financial institutions still have the flexibility to acquire new evolving market dynamics. Technologically advanced platforms save them from the hassle of migrating from legacy platforms, providing them a technological edge to attract a digital-first audience.
Moreover, consideration of various factors such as stage of growth, exit strategy, financial performance, risk assessment, and competitor analysis other than the investment is also mandatory to keep up the pace of fintech companies and let them revolutionize the world in the best optimistic way. Fintech is definitely the right choice for investment considering continuous innovations and promising future in financial technology.
