New and uncharted territory into which the financial technology industry is venturing is revolutionary and disruptive across the globe and the banking model is not immune to this.
According to CB Insights, latest data indicate that fintech funding globally was at $44 billion in the third quarter for 2024, this is 15% above the second quarter, proving that this is a sector that can withstand hard economic times.
At spearheading of the fintech revolution one can identify digital payment platforms and blockchain based financial services. Micro and small online sellers, which PayPal has been serving for many years, was intended to be benefitted with the company’s brand new partnership with Visa that aimed at the prioritizing of the cross-border payments, according to the statement.
Through this partnership, the expenses and time taken to make cross-border payments will drastically be reduced thus a possibility to disrupt traditional banking services within this sub-sector.
,But on the other hand, blockchain technology extends its presence into the everyday world of financial services. The second largest digital currency by market capitalization has successfully implemented the Ethereum upgrade, or “The Merge” to a proof-of-stake consensus model.
This specific upgrade should also bring down Ethereum’s energy consumption by more than 99% thus negating one of the primary concerns that come with using cryptocurrencies. This upgrade has thus fueled interest in blockchain financial application where some large-scale financial institutions such as JPMorgan Chase and Goldman Sachs reveal increased blockchain investment.
Traditional financial institutions are being disrupted by decentralized finance (DeFi) platforms which have emerged in recent years. To recap, these decentralized lending, borrowing, and trading platforms have reached $100BN in total value locked (TVL) for the first time since late 2023, the start of the crypto market crash.
Governments and their agencies are still working to come up with strategies and frameworks to regulate this emerging industry; the US SEC for instance is planning to release a comprehensive DeFi regulatory framework before the close of the year.
Fintech has presented a challenge to the traditional banks which are therefore now increasing their efforts at embracing digitization. Citigroup introduced its new concept in digital banking called Citi Digital; which is Citigroup’s single, global multi-year initiative to deliver full and efficient, personal mobile banking to consumers globally.
It offers sophisticated and autonomous financial consulting and individual investment tips, thus marking its intentions to fight for fintech start-ups in terms of technological enhancement.
There is also a change in the insurance industry due to the technology advancement across the globe. New companies operating in the InsurTech sector were able to attract 8 billion dollars with this method. $5 billion in funding in the first three quarters of 2024, it is the development of applications for Artificial Intelligence to analyze risks and create tailored insurance offers that received a lot of attention. Global insurance leader Lemonade has revealed that its customer base has risen by forty percent in the past year alone proving that consumers are increasingly willing to engage insurance firms with large doses of advanced technology.
Multiple regulators are defining the fintech environment, mainly due to emerging innovations in the current decade. DORA has become the benchmark for cybersecurity and digital resilience by European Union’s financial institutions as its implementation is now complete. This regulatory approach presents significant impact on the EU-based fintechs and might be adopted by other jurisdictions as well.
As debates nearer and dearer the boundaries between conventional and fintech questions of specifics of data processing and protection stay primary. The latest data leak incident at a leading global fintech firm has servants the call for higher levels of data security protocols in the emerging financial technology industry. Market players are now pressuring the fintech companies, incumbent financial players, and regulators to work together and solve these problems to enable the stable development of the sector.
Fintech as a concept and development is not only changing the face of financial services but also has enormous ripple effect on the economies. Financial liberalisation is believed to enhance financial access as well as utilise these services hence enhancing financial services in developing nations. According to the World Bank, the advance of fintech could introduce up to 1 new comer per year, on average. Of the 6 billion people in the unbanked category, financial inclusion by 2030 has the potential of giving boosted economic prosperity worldwide especially in developing nations.
It’s now mid of 2024 and based on trends it can be viewed that the fintech market is only growing at a faster pace. These subsequent advancements in technology, changes in the legal structure and the increased shifting of consumer perception of financial services demonstrate and predict that financial services are to be naturally disrupted and hence open for further innovation in the coming years.
