Almost every day, new solutions and tools appear on the financial technology market. We talk about long-term trends in the industry that directly affect the consumer experience.
Mobile banking boom
The audience of banking applications is no longer limited to young users and residents of large cities. According to Insider Intelligence, 89% of US consumers use mobile banking. Moreover, for 70%, the application on the smartphone has become the main way to access the account.
The trend is noticeable not only in the US market. During the pandemic, the popularity of financial apps increased by 55% in Japan and South Korea. In the US and China, the increase was 20%, in Germany and Italy - 15%. During the first lockdowns, the increase in registrations in mobile banking reached 200% pointwise.
In Russia, banking customers are also massively switching to a mobile format. In July 2020, 51% of Russians used such applications against 26% in 2018, according to the NAFI analytical center.
Experts note that the transition to mobile banking allows credit institutions to reduce the number of branches. At the same time, they no longer risk losing their customer base, as before.
What this means for consumers: the number of bank branches will continue to decline, and the functionality of mobile applications will expand to cover almost the entire range of financial services.
Buy now, pay later
There are more and more platforms and tools on the market that allow consumers to use money for free. Last year, this fintech segment was valued at $4 billion. It is expected to grow at an annual rate of 22.4% over the next few years.
The Buy Now Pay Later (BNPL) concept involves customers making purchases without having to pay for them all at once. Interest-free installments are provided by both special platforms and operators, as well as banks, including in partnership with trading platforms.
Generally, BNPL does not require the same thorough credit checks as regular loans. This expands the range of possible users of the product. In addition, such solutions are readily used by millennials and generation Z, who are looking for convenient tools for managing their budget.
A major representative of this market, Affirm, has already held a successful IPO in 2021. On the day of the placement, the value of its shares doubled from the opening price.
Competing with new players, tech giants are launching their own BNPL products. So, Apple Card allows you to use interest-free credit for Apple devices without commissions and fees.
In turn, banks pick up this trend and issue credit cards with a long interest-free period. In some cases, such products can be even more profitable than installment services.
In the Russian market in the summer of 2021, Sber launched a credit SberCard with a completely free service. The bank offered a reduced rate (9.8%) for all transactions in the Health category and online purchases at SberMegaMarket, which is part of the Sber ecosystem. The interest-free period is 120 days, the credit limit is up to 1 million rubles.
By providing a free product, the credit institution earns on the acquiring commission paid by the outlet. But in general, as Sberbank explains, banks do not have the task of making money on a single product. It is more important to give a wide range of such products: on some, the organization will earn more, on others it will not earn anything.
Mobile banking boom
The audience of banking applications is no longer limited to young users and residents of large cities. According to Insider Intelligence, 89% of US consumers use mobile banking. Moreover, for 70%, the application on the smartphone has become the main way to access the account.
The trend is noticeable not only in the US market. During the pandemic, the popularity of financial apps increased by 55% in Japan and South Korea. In the US and China, the increase was 20%, in Germany and Italy - 15%. During the first lockdowns, the increase in registrations in mobile banking reached 200% pointwise.
In Russia, banking customers are also massively switching to a mobile format. In July 2020, 51% of Russians used such applications against 26% in 2018, according to the NAFI analytical center.
Experts note that the transition to mobile banking allows credit institutions to reduce the number of branches. At the same time, they no longer risk losing their customer base, as before.
What this means for consumers: the number of bank branches will continue to decline, and the functionality of mobile applications will expand to cover almost the entire range of financial services.
Buy now, pay later
There are more and more platforms and tools on the market that allow consumers to use money for free. Last year, this fintech segment was valued at $4 billion. It is expected to grow at an annual rate of 22.4% over the next few years.
The Buy Now Pay Later (BNPL) concept involves customers making purchases without having to pay for them all at once. Interest-free installments are provided by both special platforms and operators, as well as banks, including in partnership with trading platforms.
Generally, BNPL does not require the same thorough credit checks as regular loans. This expands the range of possible users of the product. In addition, such solutions are readily used by millennials and generation Z, who are looking for convenient tools for managing their budget.
A major representative of this market, Affirm, has already held a successful IPO in 2021. On the day of the placement, the value of its shares doubled from the opening price.
Competing with new players, tech giants are launching their own BNPL products. So, Apple Card allows you to use interest-free credit for Apple devices without commissions and fees.
In turn, banks pick up this trend and issue credit cards with a long interest-free period. In some cases, such products can be even more profitable than installment services.
In the Russian market in the summer of 2021, Sber launched a credit SberCard with a completely free service. The bank offered a reduced rate (9.8%) for all transactions in the Health category and online purchases at SberMegaMarket, which is part of the Sber ecosystem. The interest-free period is 120 days, the credit limit is up to 1 million rubles.
By providing a free product, the credit institution earns on the acquiring commission paid by the outlet. But in general, as Sberbank explains, banks do not have the task of making money on a single product. It is more important to give a wide range of such products: on some, the organization will earn more, on others it will not earn anything.
Denis Okhrimovich, Managing Director for Marketing of the Retail Business of Sberbank:
“Until recently, a credit card was considered a product that is worth making out for the sake of some one-time purchase. Now the situation has changed. The frequency of using credit cards is simply incredible. According to this indicator, they are close to conventional debit cards.
The top 3 categories people spend money on with credit cards are groceries, supermarkets, clothing, and household goods. But this does not mean that customers pay for products with a credit card, because it is very difficult for them. On the contrary, they understand how convenient and profitable it can be.
Let's take our credit card with free maintenance and a grace-free period of 120 days. Under such conditions, the consumer can use a credit card constantly, paying for his daily expenses, and not pay interest. In this case, he can take his own money, which is, for example, on a regular debit card, and put it on a deposit or invest somewhere. That is, a person uses the bank's money for free, and receives additional income with his own funds.
What this means for consumers: More opportunities to buy in installments and not pay interest, especially online.
AI against fraud
Artificial intelligence technologies have matured enough to be applied in the financial sector. According to a survey of financial services professionals conducted by OpenText, the majority of banks (80%) are well aware of the potential benefits of AI and machine learning. Two-thirds of organizations are already implementing appropriate strategies and plan to roll out such solutions soon.
There are many options for using AI in the financial sector, from chatbots to personalized recommendations. One of the most interesting and long-awaited scenarios is the detection and prevention of payment fraud, the fight against money laundering and other crimes.
“Complex ML algorithms are already being used to manage fraud and detect anomalous activity in card transactions,” Infosys notes. At the same time, AI elements can be combined with voice solutions. For example, to create "smart" answering machines that receive suspicious calls instead of the subscriber.
Startups developing AI to fight fraud are attracting millions of dollars of investment. One of them, Resistant AI, was recently invested in by GV (formerly Google Ventures), the investment arm of Alphabet.
AI anti-fraud solutions revenue was about $6.5 billion in 2020. Future Market Insights expects this figure to increase to $39.5 billion by 2031. Companies and users are concerned about the growth of digital fraud, and this is fueling demand, note analytics.
What this means for consumers: It is hoped that annoying calls from "security services" and fraudulent transactions will decrease, but this will take time.
Artificial intelligence technologies have matured enough to be applied in the financial sector. According to a survey of financial services professionals conducted by OpenText, the majority of banks (80%) are well aware of the potential benefits of AI and machine learning. Two-thirds of organizations are already implementing appropriate strategies and plan to roll out such solutions soon.
There are many options for using AI in the financial sector, from chatbots to personalized recommendations. One of the most interesting and long-awaited scenarios is the detection and prevention of payment fraud, the fight against money laundering and other crimes.
“Complex ML algorithms are already being used to manage fraud and detect anomalous activity in card transactions,” Infosys notes. At the same time, AI elements can be combined with voice solutions. For example, to create "smart" answering machines that receive suspicious calls instead of the subscriber.
Startups developing AI to fight fraud are attracting millions of dollars of investment. One of them, Resistant AI, was recently invested in by GV (formerly Google Ventures), the investment arm of Alphabet.
AI anti-fraud solutions revenue was about $6.5 billion in 2020. Future Market Insights expects this figure to increase to $39.5 billion by 2031. Companies and users are concerned about the growth of digital fraud, and this is fueling demand, note analytics.
What this means for consumers: It is hoped that annoying calls from "security services" and fraudulent transactions will decrease, but this will take time.
Payments are embedded everywhere
The Internet of Things and the rise in connectivity are starting to impact the payments industry. "Given the amount of information that can be transferred between devices, the need for physical cards and account numbers is questionable," McKinsey analysts wrote.
As an example, they cite companies experimenting with biometric payments. So, Amazon Go launched a pilot contactless identification service. Customers' credit cards are tied to their palm prints, and a unique biometric signature is created for each user. To pay for goods in the store, it is enough to hold your palm over the reader.
Payment solutions are embedded in a wide variety of software today, says Terry Angelos, senior vice president and head of financial technology at Visa. According to him, more and more credentials are inside platforms connected to IoT devices - cars, electronics, household appliances.
But the potential of the market is far from being tapped. In addition, developers have yet to ensure the security of new channels and devices through which payments will pass.
What this means for the consumer: refrigerators will not start ordering and paying for products themselves soon, but payment for goods and services is already getting closer.
Payment through an assistant
Demand for virtual assistants has increased worldwide, according to Emergen Research. This is primarily due to the development of the technology itself. Assistants are getting smarter and more accurate, and their credibility is growing. Therefore, analysts are sure that virtual assistants will firmly gain a foothold in the market.
The popularity of virtual assistants is driving the voice payment market. In 2028, it could more than double to $41.5 billion from $19.9 billion in 2020.
Similar solutions have already been implemented by several major financial market participants. For example, Visa launched voice-on-card payment in several Moscow restaurants last fall. The function works through a virtual assistant without the participation of waiters or a delivery operator. The first time you use it, you need to enter the card number. Payments can then be made by voice using a code word.
Mastercard is working on similar voice payment platforms. You can also make a transfer using a voice command through Sber virtual assistants - they can make money transfers, pay for services, order and pay for food with delivery. The introduction of such technology is not ruled out in other large banks.
What this means for the consumer: The process of paying for anything will continue to be simplified, and it will become more difficult to avoid impulsive spending.
The Internet of Things and the rise in connectivity are starting to impact the payments industry. "Given the amount of information that can be transferred between devices, the need for physical cards and account numbers is questionable," McKinsey analysts wrote.
As an example, they cite companies experimenting with biometric payments. So, Amazon Go launched a pilot contactless identification service. Customers' credit cards are tied to their palm prints, and a unique biometric signature is created for each user. To pay for goods in the store, it is enough to hold your palm over the reader.
Payment solutions are embedded in a wide variety of software today, says Terry Angelos, senior vice president and head of financial technology at Visa. According to him, more and more credentials are inside platforms connected to IoT devices - cars, electronics, household appliances.
But the potential of the market is far from being tapped. In addition, developers have yet to ensure the security of new channels and devices through which payments will pass.
What this means for the consumer: refrigerators will not start ordering and paying for products themselves soon, but payment for goods and services is already getting closer.
Payment through an assistant
Demand for virtual assistants has increased worldwide, according to Emergen Research. This is primarily due to the development of the technology itself. Assistants are getting smarter and more accurate, and their credibility is growing. Therefore, analysts are sure that virtual assistants will firmly gain a foothold in the market.
The popularity of virtual assistants is driving the voice payment market. In 2028, it could more than double to $41.5 billion from $19.9 billion in 2020.
Similar solutions have already been implemented by several major financial market participants. For example, Visa launched voice-on-card payment in several Moscow restaurants last fall. The function works through a virtual assistant without the participation of waiters or a delivery operator. The first time you use it, you need to enter the card number. Payments can then be made by voice using a code word.
Mastercard is working on similar voice payment platforms. You can also make a transfer using a voice command through Sber virtual assistants - they can make money transfers, pay for services, order and pay for food with delivery. The introduction of such technology is not ruled out in other large banks.
What this means for the consumer: The process of paying for anything will continue to be simplified, and it will become more difficult to avoid impulsive spending.