Fintech Perspectives for 2024

2024 is underway and many of us are excited about everything that the fintech industry has in store for us this year. This is very special for those of us who are part of this ecosystem. The pandemic launched the era of mass digital financial services and the need to connect financial institutions with their users through technological platforms accelerated the development of various technologies by several years.

In 2021 and 2022, we witnessed a “money party” for startups that could lead digital financial products and services to new dimensions, with valuations that even challenged common sense, and in some cases compromised the trust in those people and companies in charge of performing these valuations.

Finally, 2023 meant the end of the party; the music had stopped, and access to financing for fintech companies became much scarcer and harder to achieve. Plus, the capital funds that were throwing money in droves during 2021 and 2022, now incorporated a new indicator when carrying out startup valuations: profitability. That fundamental component for the sustainable growth of any business was left aside during the capital funds boom, which gave rise to several “unicorns” that today are finding it difficult to justify the enormous financing they received when contrasted with the profits from their operations.

Beyond the corrections that are being made in the world of capital funds, it is indisputable that in the last decade, the fintech industry has experienced spectacular growth and has radically transformed the way in which people interact with money, carry out financial transactions and access banking services.

Today, we can't avoid asking ourselves: What's next?

Before we dive into future trends, it's important to understand how the fintech industry has gotten to where it is today. Fintech, a combination of “finance” and “technology,” has become an essential component of the global financial system in recent years. Here is some historical data that highlights its evolution:

1. Exponential Growth of Investments:
Investment in fintech startups has been phenomenal. According to data from CB Insights, more than US$100 billion was invested in fintech globally in 2021. Large investors, financial institutions and technology companies have seen the potential of fintech and are willing to support it.

2. Greater Adoption of Digital Financial Services:
The adoption of digital financial services has increased significantly. In 2021, the COVID-19 pandemic accelerated the transition to online services, from opening bank accounts to investment management and contactless payments. This has led to an increase in demand for fintech solutions.

3. Diversification of the Fintech Industry:
Fintech is not limited to a single financial service. Over the years, it has diversified its offerings, including online payments, P2P (peer-to-peer) lending, crowdfunding, automated investments, insurtech (insurance technology), and more. Each subsector has experienced its own growth and evolution.

To have a realistic and objective perspective on what we can expect in the fintech and digital banking industry, we must first understand what are the main digital financial products that leverage the exponential growth of this industry:

1. Mobile Banking and User Experience:
Mobile banking has redefined the way consumers interact with their financial institutions. Banking apps offer a more convenient and personalized user experience, which has led to greater adoption of online financial services.

2. Cryptocurrencies and Blockchain:
Cryptocurrencies like bitcoin and ethereum have gained traction in recent years. Additionally, blockchain technology has found applications in the financial industry to improve the security and efficiency of transactions.

3. Digital Payments:
Digital payments have become the norm in many parts of the world. Solutions like Apple Pay, Google Wallet, and online payment services like PayPal and Venmo have simplified everyday transactions.

4. Artificial Intelligence (AI) and Automation:
AI and automation are transforming risk management, financial decision-making and customer service. Chatbots and virtual assistants are increasingly being used to provide instant answers to financial queries.

Although it seems that the table is set, one of the characteristics that make the fintech industry unique is that it always has something new to surprise us. These are some trends that I believe will mark the path of evolution of digital financial services for the coming years:

1. More Integration of Financial Services:
Greater integration of financial services on a single platform is expected. Consumers are looking for comprehensive solutions that allow them to manage their savings, investments, loans and insurance in one place. This will boost collaboration between fintechs and traditional banks.

2. More Neobanks:
Neobanks, 100% digital banks without a physical presence, will continue to gain ground. These banks offer checking and savings accounts with innovative features and competitive rates. The simplicity and lack of hidden fees are attractive to consumers.

3. Payments With Cryptocurrencies:
Cryptocurrencies will continue to be relevant, and more businesses and merchants are likely to accept cryptocurrency payments. Traditional financial institutions will also explore ways to integrate cryptocurrencies into their offerings.

4. Greater Focus on Security:
As digital transactions increase, security will continue to be a primary concern. Biometrics, two-factor authentication, and advanced cybersecurity will be focus areas to protect users' financial information.

5. Growth of Sustainable Banking:
Ethical and sustainable investing is on the rise. Consumers are looking for investment options that reflect their values, and fintechs are responding with solutions that promote responsible investing and sustainability.

6. Regulation and Compliance:
Regulation will continue to evolve to address emerging challenges in the fintech industry. This may include cryptocurrency oversight, data protection, and anti-money laundering.

7. Global Expansion:
Many fintechs will look to expand globally in 2024 and beyond. This includes seeking opportunities in emerging markets and adapting to the specific needs of different regions.

8. Greater Competition:
As the industry continues to grow, competition will intensify. This will lead to greater innovation and constant improvement of digital financial services to attract and retain customers.

The fintech industry, digital banking and online payments are undergoing a revolution that will continue in 2024 and the years to come. The combination of advanced technology, changes in consumer preference and evolving regulation are shaping an ever-changing financial landscape.

Consumers can expect greater convenience and personalized options in their financial services, while fintech companies and traditional institutions will strive to offer innovative and secure solutions. Ultimately, the fintech industry will continue to challenge established norms and improve the way we manage our finances in an increasingly digital world.