Seven Fintech Predictions for 2024
- Wider Range of AI Applications: Fintech companies are utilizing AI for new products and services, and this trend is expected to grow.
- More Sustainable Payments: Fintech and banks are focusing on reducing environmental impact and promoting eco-friendly digital payment solutions.
- Increased Adoption of Stablecoins: Stablecoins, cryptocurrencies linked to stable assets, are becoming more accepted, especially in cross-border transfers.
- Shift of Revenue Models to SaaS: Fintech companies are expected to shift towards Software as a Service (SaaS) models to counter interchange erosion and improve revenue predictability and scalability.
- Mergers and Acquisitions: More consolidation and M&A activities are expected in the fintech industry, as companies aim to expand their market reach and improve service offerings.
- Increased Regulation as Brexit Grace Period Ends: Fintechs operating in the UK will face increased regulatory compliance as the grace period for FCA EU licenses comes to an end.
- Increased Regulation around DeFi: Decentralized finance (DeFi) is gaining attention, but regulators are closely scrutinizing its adoption due to security concerns.
In this article, the author highlights seven key predictions for the fintech landscape in 2024. The first prediction is the wider range of AI applications in the industry. Over half of fintech companies are already utilizing AI and this trend is expected to continue, with AI being applied to creditworthiness assessment, robo-advisory services, algorithmic trading, and risk evaluation.
The second prediction focuses on sustainability in payments. Fintech companies and banks are responding to the need for sustainability and are promoting digital payment solutions that reduce environmental impact. These digital payment methods are considered more eco-friendly compared to traditional methods.
The third prediction highlights the increased adoption of stablecoins. Stablecoins, which are cryptocurrencies linked to stable assets, are anticipated to see continued growth and acceptance. They offer faster and simpler ways to convert into fiat currencies, making them attractive for cross-border transfers in the business sector.
The fourth prediction suggests a shift in revenue models towards Software as a Service (SaaS). As interchange erosion reduces fee earnings, fintech companies are expected to turn to SaaS models. This shift offers predictability of revenue, scalability, and improved accessibility for customers.
The fifth prediction focuses on mergers and acquisitions in the industry. The author expects more consolidation and M&A activities in 2024 as established fintech firms and traditional financial institutions seek to expand their market reach and enhance their service offerings.
The sixth prediction emphasizes increased regulation as the grace period for FCA EU licenses comes to an end in the UK. Fintechs operating in the UK will need to obtain full authorization from the FCA to continue their operations, leading to a greater focus on regulatory compliance.
The seventh prediction is increased regulation around decentralized finance (DeFi). While DeFi is gaining attention, regulators are scrutinizing its adoption due to potential security threats. The UK government supports DeFi’s development, but regulators are focusing on anti-money laundering and counter-terrorism legislation for crypto firms.
Overall, these predictions provide insights into the potential trends and developments that may shape the fintech industry in 2024. Awareness of these trends can help companies stay ahead and adapt to the changing landscape.
