Fintech
Temperature Check on 4 Fintech Trends in 2024
We’re over halfway through 2024, so there’s no better time to take a temperature check of trends to determine what we should be paying attention to in the second half of the year. Learning about the latest trends is critical to understanding how your business can better compete and ultimately succeed in the crowded fintech and banking arena.
Financing
Late last year, we were still in the metaphorical trenches of funding. As of mid-2024, fintech funding trends are mixed. For the most part, venture capital investment is still quite slow due to high interest rates and economic uncertainty. We may see a more positive shift after the U.S. election, as many investors cited political uncertainty as a factor delaying major strategic and investment initiatives.
There is, however, another side to the current funding landscape. Startups in targeted subsectors that are leveraging generative AI in unique ways are still attracting attention and funding from investors, although not quite at the high levels we saw in 2021 and early 2022. These shifts have led companies to focus on sustainable growth and profitability, rather than the aggressive growth-at-all-costs mentality that was common from 2010 to 2019.
Regulation
As expected, the regulatory landscape has tightened significantly this year. Regulators have stepped up their scrutiny not just of financial institutions, but also of specific issues. In the UK, the Basel III framework has introduced new regulations focused on capital adequacy, liquidity, and operational risk. In the US, there has been increased scrutiny of banking-as-a-service partnerships. This has led to a wave of new consent orders on a regular basis. On top of all this, we have seen the CFPB take steps to increase consumer protections, such as last week’s proposed interpretive ruling that some earned wage access instruments should be considered loans.
Embedded Finance and Open Banking
As expected, the conversation around embedded finance and open banking has intensified in 2024, as consumers continue to seek digital experiences that offer seamless financial integration. Banks’ open banking initiatives have expanded, which is critical given that the CFPB is expected to issue its final ruling on Section 1033 of the Dodd-Frank Wall Street Reform Act, which will set the rules for regulations governing personal financial data rights.
Generative AI
It’s no surprise that both the use and mentions of generative AI technology in fintech and banking have increased. Use of the technology has seen a significant expansion since the general release of ChatGPT in late 2022. Now that both banks and fintechs have seen and experienced the potential of generative AI firsthand, there has been a sharp spike in demand to integrate the technology into existing operations to help improve efficiency, personalize customer interactions, and improve risk management.
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