In the continuously changing world of finance and technology, the United States has emerged as a focal point for revolution, and fintech remains at the center of financial evolution. In this digital age, the financial technology sector continues reshaping the way we deal with banking services, investments, and most importantly, money. The US fintech market is no less than an epicenter of innovation – from cryptocurrency to digital payments, and from robo-advisors to neobanks, the US fintech market solutions are not just changing the financial dynamics but also reconfiguring the future of global finance.
Moreover, the market for fintech apps is booming, and as per the fintech market experts, today, 9 in 10 Americans (approximately 90%) are using some or other fintech app to manage their finances well. As a matter of fact, Americans use fintech apps more than video streaming subscriptions and social media.
Before we begin discussing the market research in the fintech field and the latest trends in the US fintech market, know the three categories of fintech trends – General, Customers, and Technology.
Three categories of fintech trends:
Fintech has eventually proliferated due to advanced technology and was further accelerated by the Pandemic and the needs and expectations of the users, let’s take a look at the three categories of Fintech trends.
- General- Microservices, Fintech-as-a-Service (FaaS), Embedded finance, Cryptocurrencies
- Customers – Digital payments and fintech as a new bank
- Technology – Artificial intelligence and Machine learning
Market research in the fintech field
Thorough market research is undeniably critical for comprehending the financial technology landscape. Market research is a vigorous process in the fintech field, considering the fast-paced technological advancements and changes in the demand of the users. It enables investors and businesses to make well-informed decisions and identify potential opportunities to stay agile and responsive in this ever-evolving fintech sector to remain successful and competitive.
Let’s take a look at a few of the latest trends in the fintech market and a few key factors involved in doing market research in the fintech field.
- Understand the competitive landscape: Identifying the existing and potential competitors in your niche is the utmost important element besides analyzing their market share and strategies, strengths, and gaps. Understanding the competitive landscape is a significant step towards succeeding in the market through differentiation and strategy development.
- Identifying competitors and market sizing: Are you looking to understand the market size, understand customer preferences, evaluate regulatory trends, and identify your competitors? Having a clearly defined purpose will set the direction for your research efforts. Calculating the potential market size and growth potential will prove to be beneficial for your business, do not forget to determine the Total Addressable Market (TAM) for your fintech service or product.
- Latest trends and target audience: Deriving sufficient and satisfactory information regarding your ideal target audience and closely observing their preferences, and pain points will make your path to success much easier. This will eventually upgrade your product development and marketing strategies.
- Data collection and trend analysis: Navigating the recent trends and emerging technologies in fintech like digital payments, blockchain, robo-advisors, and others can give a much-required boost to your business. Also, collect relevant data through primary and secondary research.
- SWOT analysis and market entry strategy: To identify areas for growth and improvement, conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to assess your business’s position in the market. Formulate a tactful market entry – this includes planning your fintech solution and go-to-market plans.
- Risk assessment and monitoring: Market research needs continuous monitoring of the industry, competition, and customer behaviour. Additionally, identify all kinds of potential risks (financial risks, operational risks, market risks) that could affect your fintech venture.
Latest trends in the US fintech market
Amidst the financial technology disruption, it becomes important to understand the latest trends in the fintech market for business owners, investors, or even those who are intrigued by the world of finance. In this blog, we’ll dive deep into a few latest developments and trends in the US fintech market, giving you a bird’s eye view of where this fintech market is heading.
The world has witnessed a revolution in the mode of payment, and the benefits of digital payments are unquestionable. Fintech giants like PayPal, Square, and Stripe are making financial transactions more convenient and eventually reducing the dependency on traditional cash payment. Let us read along about the latest trends in the US fintech market.
1. Artificial Intelligence (AI) and Machine Learning
Artificial Intelligence is one of the major trends in the fintech market besides machine learning. AI indicates stimulating machines with human intelligence and making them perform functions that need human reasoning. Whereas Machine learning (ML) refers to a subset of AI that allows one to learn from data with the help of algorithms.
AI has transformed the financial technology (FinTech) industry landscape by enhancing customer experiences and improving the efficiency of the way financial services are delivered. The combination of AI and FinTech has given birth to several advancements and developments in customer service and chatbots, fraud detection and prevention, risk assessment, blockchain and cryptocurrencies, algorithmic trading, personalized financial services, robo-advisors, predictive analytics, operational efficiency, robotic process automation. All these factors collectively offer tremendous potential for enhancing services, boosting accessibility, and reducing costs.
The fintech industry has significantly made AI and ML integral to automated tasks like managing data, preventing fraud, recommending management strategies, and performing quality checks in Business Process Outsourcing (BPO). According to the fintech industry analysts, as of 2023, the AI in the fintech market is nearly USD 42.83 billion and is estimated to reach USD 49.43 billion by the year 2028, with a CAGR of 2.91% during the forecast period (2023-2028).
2. Banking as a Service (BaaS) or Open Banking
Open banking is one of the major fintech trends in the industry as it makes secure data sharing and collaboration between financial institutions, technology companies, and customers possible. Now, users are comfortable sharing their financial data with authorized third-party service providers and also leverage personalized solutions like investing platforms and budgeting apps.
Facebook and Instagram with their services like marketing and shopping are leading this fintech trend and many others are in the queue. Over the past few years, BaaS, or open banking has been widely recognized and well-integrated into the financial ecosystem.
Open banking users are estimated to boost at an annual rate of 50% from the year 2020 to 2024. In the year 2020, there were around 24.7 million open banking users in the world and this number is poised to touch 132.2 million by the year 2024.
3. Internet of Things (IoT)
As the name suggests, it refers to the network of physical objects enabled with internet connectivity, sensors, and software. For instance, banks make use of IoT to provide tailored financial advice or send notifications to their customers based on spending patterns. IoT helps financial institutions collect real-time data from connected devices like wearables and smartphones in order to supply customized services, alerts, and recommendations to customers.
Within the domain of the blockchain-powered fintech market, IoT has triggered the execution of smart contracts automatically under the fulfilled predefined conditions. For example, insurance payouts are triggered when IoT sensors detect any particular event. The impact of fintech industry growth is estimated to increase manifold in the coming years.
4. Buy now pay later or BNPL
After BNPL came into existence, customers had the freedom to split the total amount into smaller, interest-free, installments over a defined period. This evolving latest fintech trend allows users to make purchases and carry over the payment over time. The simple procedure and quick approval process bolstered this trend in no time. According to market experts, BNPL was used in deals worth $120 billion across the world and is estimated to touch $576 billion by the year 2026.
5. Embedded Finance
This includes smoothly incorporating financial products and services into non-financial platforms, such as e-commerce websites and mobile apps. Technological developments like Application Programming Interfaces (APIs) and cloud computing have successfully contributed to the booming of embedded finance. Industries like e-commerce, social media platforms, healthcare, and ride-sharing have adopted embedded finance to provide a more comprehensive customer experience.
A biometric trend gained traction around 2015 and it is seen as one of the prime trends of the fintech market. This impressive technology uses unique physical characteristics like facial recognition, fingerprints, voice recognition, or iris scans to authenticate users in any financial transactions. The above-mentioned features of this technology have significantly improved security, reduced fraud, and enhanced the user experience. The biometric market size is projected to grow at a CAGR of 12.85% between 2022 and 2027.
To sum up
The fintech market has gained new momentum in the past few years, the US fintech market is dynamic in nature, and it will continue to evolve in the future. Being well-informed about recent technology developments and industry growth will yield positive results in making financial decisions from investors to fintech enthusiasts.
By keeping an eye on the above-discussed latest trends, one can navigate the ever-changing world of the fintech market and make the most of the opportunities it offers. Fintech is fundamentally changing how we manage, invest, and interact with money, and keeping up with these changes is crucial for achieving financial success.