Fintech represents one of the largest and fastest-growing markets in the world, and one that was valued at around $112.5 billion at the end of 2021.
Incredibly, experts predict that this market will reach $332.5 billion by the year 2028, highlight a compound annual growth rate (CAGR) of 19.8%.
One of the key elements of fintech is banking products and innovations. But how exactly is fintech shaping the future of banking in developed economies?
What is Fintech?
Fintech is a term that describes ‘financial technology’ and can broadly be applied to any innovation in the transaction of capital and transfer of cash.
However, it’s typically applied to new and innovative technologies that are designed aimed to improve, streamline and potentially automate the delivery and use of specific financial services.
At its core, fintech is inherently disruptive, as it aims to change the way in which people and businesses manage cash and commercial transactions.
One of the most prominent fintech innovations includes cryptocurrency, which is underpinned by decentralised blockchain technology and driving financial inclusion in the developing world.
How is Fintech Disrupting the Global Banking Space?
Fintech has already begun to disrupt the traditional banking space, in both developed and developing economies across the globe.
While this trend is still in its infancy, the majority of financial sector executives (73%) believe that consumer banking is the segment most likely to be disrupted by fintech.
We’re certainly seeing widespread cryptocurrency adoption by leading consumer banks, as first-generation assets such as Bitcoin (BTC) continue to enter the consumer mainstream and benefit from significant demand.
On a more fundamental level, mobile payments are also gaining increased popularity and credibility among younger demographics. This is changing the way in which people bank and how institutions make their services available, with some 65% of people aged between 18 and 34 now using mobile payments to complete purchases online.
Another highly disruptive fintech innovation exists in the form of digital ‘neo’ banks, which are fully digitised and operate no branches at all.
They also boast low overheads and improved pricing for customers, creating a significant challenge for traditional banks.
The Last Word – Is Fintech Helping Business Users?
For the large part, such innovations are good news for households and mobile businesses alike, from the perspective of driving greater levels of financial inclusion and creating a more competitive banking space.
Of course, institutions looking to embrace fintech and adopt technology such as cryptocurrency will need to tread carefully, even though the market is not heavily regulated and has relatively few barriers to entry.
After all, many fintech innovations remain relatively unknown and carry potential vulnerabilities, so it may be worth liaising with a fintech law firm if firms are to ensure that they proceed in the best possible way and realise the full value of the underlying technology.