Fintechs and banks are competing for innovation. With the emergence of new technologies, banks are expected to adapt to current trends

FREMONT CA: Fintechs and banks compete to establish and shape the financial services industry's future. On the other hand, traditional banks will have to adapt quickly as new technologies arise to give what their consumers want. As a result, new business models in the financial services sector will develop due to this. Traditional financial providers must completely rethink their business models to keep up with consumer demand for new ways to access and use financial services. Because of new technologies and broader cultural changes, consumers are pushing change unprecedentedly.

Moving into 2022 and beyond, five key trends will identify new solutions to deliver competitive advantage.

• The Upswing of Digital/neo banks. Banking has historically been a monopoly with substantial entry barriers. However, the loosening of rules in nations throughout the world has allowed neobanks to take the lead and attract clients by promising lower costs, convenient mobile banking, and an improved customer experience that eliminates the need for in-store banking. As the world's population becomes more connected, digital banking will overtake in-store services.

• Cross-border payments in real-time. According to Levvel Research, over 40 percent of large businesses in the United States have already adopted real-time payments, and this percentage is expected to rise. Around 50 real-time payment solutions are currently running in various nations and areas. The immediate payment settlement is in high demand, as it provides firms with a competitive advantage, lowers the chance of payment failure, and boosts cash flow efficiency.

• Open Banking. The reliance on digital payments and self-service banking during the epidemic underscored the necessity for banks to become more digital. Open banking is a technology-driven, API-enabled method that enables banks and suppliers to supply financial services utilizing aggregated and authenticated client data. Open banking principles are being incorporated into the goods and services of fintechs all across the world. Banks that do not adopt open banking will limit their ability to serve their clients better while also limiting their chances for expansion.

• Machine Learning (ML) and Artificial Intelligence (AI): Machine learning applications enable the analysis of vast volumes of data sets, resulting in valuable conclusions that, with the use of algorithms, can improve efficiency and save time. It also analyzes trends in real-time, allowing for fast decision-making. Today, AI/ML is used in various financial services applications for anything from fraud detection, lending approvals, and AML screening to risk management and investment forecasting. Fintech will continue to be one of the key businesses to gain from the potential of AI/ML, as it is continuously evolving.

• The rise of Banking-as-a-Service. Banking-as-a-Service (BaaS) platforms and services have evolved as a cost-effective and efficient way of offering financial services based on open banking ideals. Banks must use a service-oriented and composable/modular architecture approach to create new and creative digital services. BaaS is an important digital transformation roadmap for traditional banks and financial institutions.

These main trends will provide an environment for additional innovation and new business models in financial services as technologies and markets mature over the next 12 months. They create opportunities for banks and fintechs to collaborate globally and expand their capabilities in payments, loans, digital banking, fast credit, and many more.