In 2024, fintech is poised to usher in and consolidate several pivotal trends reshaping the industry as technologies evolve to fulfill the ever-changing needs of global consumers.
Fueled by increased online payment adoption, the rise of embedded finance, and surging demand for financial services in emerging markets, fintech in 2024 is primed for a rapid ascent.
A Statista study projects global market growth from $127.65 billion in 2022 to a staggering $332.3 billion by 2027, fuelled mainly by over 4 billion adults - accounting for approximately half the global population - who are either unbanked or underbanked.
Subject-matter experts with decades of experience created this analysis, not freelance copywriters, content managers, or AI-based tools. We are global regulatory compliance experts.
What Are the Top Fintech Trends to Watch in 2024?
As fintechs position themselves to profit from new opportunities, we expect the following industry trends to shape the global fintech in 2024:
- Rise of Embedded Finance
- AI-Driven Personalized Financial Services
- Central Bank Digital Currencies (CBDCs) Momentum
- Open Banking Expansion
- Decentralized Finance (DeFi) goes Mainstream
- Mobile Payments Adoption
Let’s examine these Top Fintech 2024 Trends in greater detail below.
1. Rise of Embedded Finance
As we enter 2024, embedded finance - incorporating financial services into non-financial companies’ existing platforms - is expected to register explosive growth.
According to an analysis by Dealroom, the market for embedded finance solutions in fintech is projected to be valued at $7.2T by 2030, driven by the rise of open banking, the increasing adoption of mobile wallets, and the growing demand for personalized financial services.
In particular, sectors like retail and ecommerce, healthcare, and education are expected to drive much of the short to medium-term growth, driven by the need for convenient and accessible financial services.
While embedded finance promises to alleviate small to medium-sized businesses' financial management issues, compliance, security, and regulatory landscape complexities persist.
2. AI-Driven Personalized Financial Services
In recent years, artificial intelligence (AI) has become sophisticated enough to have a significant impact on real-world products and services. It is also becoming more integrated with the end-user experience. By using AI to deliver new products and services as key differentiators, fintechs build AI capabilities into digital products to generate incremental revenue.
We expect to see a wider range of AI applications launched by fintechs worldwide in 2024, including the following:
- Personalized financial advice
- Data-driven insights
- Compliance and customer interaction
- Fraud prevention
In a sector that is growing in complexity due to the numerous business models operating under little to no standardization or regulation, fintechs are harnessing AI technologies to help meet compliance objectives and help detect and prevent financial fraud.
Increasingly, fintech firms will employ algorithms to analyze individual spending patterns, risk profiles, and investment preferences to provide tailored products that align with each individual's unique preferences.
3. Central Bank Digital Currencies (CBDCs) Momentum
The continued exploration and potential launch of CBDCs by nations such as China, Sweden, South Korea, the US, and the European Union are poised to transform digital currencies. These government-backed digital currencies aim to lower transaction costs, boost financial inclusion, and shape cross-border payments.
This development presents a compelling opportunity for fintech companies to establish themselves as indispensable partners for treasurers navigating this evolving field with innovative solutions.
Fintechs are well-positioned to help shape the future of CBDCs through innovation in the following areas:
- Infrastructure and security
- Custody and data management
- Market data and analytics
- Transaction monitoring
4. Open Banking Expansion
In 2024, we believe an important transformative force driven by digital transformation and collaboration within fintech software development firms will be the integration of open banking application programming interfaces (APIs), where financial data and services are shared with third parties that help the bank’s customers.
Through open banking, fintech institutions will discover how to offer unique experiences through standardized APIs. This will allow entrepreneurs to develop personalized financial services that elevate the customer experience.
It’s also important to recognize that open banking brings potential risks involving unauthorized connections between financial accounts and fraudulent third-party applications.
As part of this evolution, fintechs should also continue promoting sustainable fraud prevention measures such as real-time transaction monitoring and identity verification protocols to mitigate these risks.
5. Decentralized Finance (DeFi) Goes Mainstream
Another prominent fintech trend is the expansion of DeFi platforms, which empower individuals to access financial services directly, eliminating traditional intermediaries. DeFi's evolution is set to advance, offering more sophisticated and secure decentralized applications focusing on scalability and regulatory compliance.
In 2024, DeFi will enter a transformative phase marked by increased maturity. In particular, we expect lending and borrowing protocols to be enhanced further as decentralized exchanges introduce innovative features and decentralized insurance platforms expand coverage and introduce customizable insurance products.
Fintechs have the potential to play a prominent role in the development and adoption of DeFi. By sharing their expertise and resources, fintechs can help make DeFi more accessible, secure, and user-friendly for a wider audience. In the long run, the collaboration between fintechs and DeFi projects can reshape the future of finance, creating a more open, inclusive, and efficient financial system.
6. Mobile Payments Adoption
In 2024, the growth of digital payments that make transactions frictionless will likely continue. Mobile payments are set to explode in 2024, driven by the increasing value of digital wallet transactions.
According to Insider Intelligence’s forecast, driven by the pandemic bump, the mobile commerce share of global retail will reach 8.7% by 2026. The rise of buy now, pay later (BNPL) options, microloans, and personalized investment opportunities contribute to diverse and engaged user bases globally. Juniper Research predicts that by 2024, unique contactless mobile payment users will hit 1 billion worldwide, and digital wallet spending will surpass $10 trillion in 2025, an increase of $4.5 trillion in five years.
With the rise of mobile commerce, digital wallets account for over a third of payments worldwide, effectively becoming the most popular online payment method by 2024, according to FIS Global Payments Report. The convenience and security are the drivers of mobile payments growth, making transactions faster and more secure.
What Are the Key Regulatory Headwinds for Fintechs in 2024?
We expect significantly more stringent regulatory monitoring in several industries, forcing fintechs to adapt to shifting laws regarding cybersecurity, data protection, and financial services.
Based on current developments, we expect the following regulatory priorities to impact fintech in 2024:
1. AI Regulation
During the year, we anticipate the first steps in regulating the use of artificial intelligence in financial services, with a strong emphasis on safeguarding consumers from any negative effects. This is in addition to the continued focus on anticipated changes to promote harmonization in KYC/AML regulations in key jurisdictions like the US, EU, Singapore, and Hong Kong.
2. Cryptocurrency Regulation
Furthermore, we anticipate stricter regulation of the cryptocurrency sector to handle issues like financing terrorism and sanctions evasion, particularly in the wake of significant crypto exchange failures. It is logical to anticipate that regulators will work harder to bring this industry into compliance with current sanctions and AML regulations, and 2024 might be a turning point in this regard.
3. Scrutiny Around Bank-Fintech Partnerships
Another critical area of regulatory scrutiny will continue to be bank-fintech partnerships, as banks have regulatory obligations to maintain proper management and control over third parties.
The scrutiny is evidenced by highly publicized consent orders against Blue Ridge Bank in 2022 and Cross River Bank in 2023, which are a warning that all banks and fintechs must be prepared for heightened fair lending and third-party risk management scrutiny, an area on which regulators are laser-focused for all banks. This scrutiny presents unique compliance challenges.
In 2024, regulators and industry stakeholders will place a great deal of emphasis on consumer protection as fintechs strive to expand the market for their goods and services.
An Outlook for Fintech in 2024
Despite a challenging 2023 for fintech, with funding slowdowns, valuation haircuts, and an economic downturn, 2024 looks like a year of major breakthroughs and increased convergence with traditional financial institutions.
Such innovation also brings scrutiny and the challenge of navigating new regulations. In 2024, we predict more regulatory scrutiny for fintech, especially in relation to new legislation concerning cybersecurity, data protection, and partnerships with banks.
As we enter 2024, the fintech industry finds itself in a unique position, shaped by a combination of growing regulatory oversight, technical advancements, and market forces.
Need help with support and information on the fintech sector’s key challenges in 2024? InnReg is your trusted compliance partner based on our knowledge and experience. Reach out today for a free consultation: firstname.lastname@example.org
InnReg is a global regulatory compliance and operations consulting team serving financial services companies since 2013. We also help launch and scale fintechs with innovative compliance strategies and cost-effective managed services, assisted by scalable RegTech solutions.