Which technologies will make the most noise in 2022 in fintech? Watch out for white-label software development and DeFi!
The fintech industry is escalating its growth at lightning speed. The banks are evolving to be more digitally sound and service-oriented and the support of fintech has been the game-changer. Banks use algorithms and models to calculate statistical probabilities of financial services such as tracking and updating activities, securities, pricing, etc.; and for them, data and its accuracy are crucial for growth-driven customer support. Continuing the rapid speed, the year 2022 expects a dynamic shift in the global fintech market with some interesting technological advancements.
The first of the many significant advancements of fintech is quantum computing. Some of the global financial institutions are already seeing significant benefits in quantum computing and they will be able to have good control over the market in the future. In this data-dependent world, more powerful computers are essential to calculate probabilities accurately, and there lies the importance of quantum computing. This is the technology used by tech giants like Google and IBM to offer cloud businesses to big banks like J.P. Morgan, which are already investing in future financial applications of quantum computers to thrive the benefits over standard methods.
Its usage is very prominent in capital markets, corporate finance, portfolio management, and encryption-related activities. Quantum computing is potentially revolutionizing, but there is still time for the rollout of this technology at scale, as financial institutions have just started to get their prominence in developing quantum algorithms to fulfill the need of the hour.
The inclination towards cloud adaptation is another fact that will be very dominant in 2022. Security is the lead concern for fintech service providers as both individuals and businesses need the facility to open and manage their finances from a distance. Secure data handling will help in scenarios such as onboarding and identity verification processes, account management, balance checking, analyzing spending habits, etc.
Encrypted data and zero-trust verification processes have also increased the demand for cloud security support in recent years. Cloud technology helps companies to deliver the utmost security at a relatively rapid pace and also helps to gather and store large data securely making it accessible any time. So, by every means it is given that cloud adaptation will achieve more importance in 2022.
AI and ML platforms are continuously upgrading to make the Fintech services top-notch. Fintech is one of the leading industries to be benefitted massively from the power of AI/ML. Machine learning applications enable the processing of large amounts of data and reaching valuable conclusions by using powerful algorithms. As a result, now it can be more effective and provide efficacies, including timesaving supports and services.
AI and ML are enabled at analyzing complex patterns in real-time to ensure fraud detection, lending approvals, and AML screening for risk monitoring and investment predictions. FinTech has its vast usage in recurring payments, fund transfers, or sending money via digital platforms like PayPal, etc. The strong possibility of including its voice assisting ability is expected to grow and make its presence quite dominant in the year 2022.
Blockchain is undoubtedly the most significant financial innovation for digital transactions as it supports distributed management, and it cannot be controlled by a specific individual, company, government, or bank. Blockchain’s growing acceptance in a secure digital transaction creates impact, though it is still under scrutiny for the minimal security issues it can create. Blockchain payment methods have scaled in the retail and eCommerce industry during Covid-19 as several end-users have opted for cryptocurrency over conventional payment options, and it is progressively elevating the customer experience.
The next prevalent fintech trend is white labeling. Developing fintech applications and software is a complex and overwhelming task, especially for any company that is new to this sector. White-label software development comes as a rescue for them. White-label products are manufactured by a provider to be rebranded before selling. White label fintech solutions allow businesses of all sizes to easily create a global payment gateway.
Through white leveling, new businesses can afford these sophisticated solutions without breaking the bank or any financial institutions’ implementation process. It helps in creating a large customer base for the distributors and minimizes initial launch costs for the reseller, which supports fintech companies to outsource financial applications to reach the market in less time, keep the resources intact and maintain their relevance in a highly competitive market.
White label solutions (also known as private label solutions) are a highly beneficial strategy as the e-commerce and banking sectors are growing at an exponential speed, and these industries become more open to partnerships with third parties.
Fintech companies are dependent on powerful tools and applications to stay relevant in their financial services and white labeling is one of the most prominent solutions for that. According to the FinTech State of the Nation report, the number of fintech companies in the UK is expected to double up by 2030, indicating white label partnerships are more likely to increase in coming years.
Decentralized finance (DeFi)
Decentralized finance (DeFi) is a new game-changer. Its advent is more salient as the crypto sector has seen a rapid boom in investments and transition through the digital space very recently. Cryptocurrency is creating the possibility for peer-to-peer exchanges without the bank’s involvement. DeFi offers effective user control without the complex transaction process in comparison to the traditional centralized systems that have space and time challenges to support cryptocurrency transactions.
DeFi consumers are free from the dependency of a central authority like bank and can significantly reduce third-party tariffs for effortless end-to-end transactions. DeFi is undoubtedly fintech’s most fascinating concept that started as an alternative financing tool to support cryptocurrency with self-executing smart contracts. 2022 will see a lot more decentralized finance and, the banks and other financial corporations will welcome it for all its possibilities.
These are some of the most prominent trends to watch getting limelight and bring positive and speedy up-gradation in the sphere of FinTech in 2022.
— Uday Chaudhari – Senior Director, Technology, Synechron.