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9 Banking and Fintech Software Development Trends in 2021: What to Focus On

Mar 05, 2021

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Despite the dismal projections at the beginning of the pandemic, the financial sector didn’t hit the new version of the 2007-2008 crisis. Thanks to governmental measures and fintech innovations, the worst seems to be behind.

But what does 2021 hold for us?

Well, in many aspects, the leading fintech trends of the previous year will remain in place. Fintech software development companies will continue to invest in mobile banking, contactless payments, artificial intelligence, and other tech trends. The key change of 2021 is that the adoption of fintech services and the popularity of innovations will rise. The fintech industry reaches the point when customers expect maximum automation and personalization.

For more details on what trends in fintech to follow in 2021, read about:

What is Fintech? Key Areas And Applications

The word ‘fintech’ is used to describe the adoption of technology in the financial, insurance, investment, and banking sectors. Fintech solutions like apps, self-service portals, or online banking platforms substitute traditional banking and face-to-face communication. Instead of going to a bank branch, people can open an application and complete all the actions online.

Besides banking accessibility, fintech innovations make financial services more secure. They provide advanced data encryption opportunities and verification (e.g., fingerprint login). They also enable organizations to collect big data for measuring market trends, evaluating risks, researching the target audience, and more.

So, basically, each time someone bridges technology and finances, it’s fintech.

Overview of the Current Fintech Market

The role of fintech innovations keeps increasing. By 2022, the fintech market is expected to reach $309.98 billion. It’s a 24.8% growth compared to 2018. Although the highest number of fintech startups is recorded in North America, European and Asian markets also rapidly expand.

Number of fintech startups globally

Number of fintech startups globally

(Source: Statista)

Bond, Monzo, N26, GoCardless, are just a few startups that disclosed considerable funding in the last years. To check out other leading fintech innovators, visit this fintech companies overview. It’s the collection of top fintech startups in 2021.

Whereas the number of fintech banks and companies is growing, the demand for e-banking also increases. In 2021, 64.6% of the US population will be using digital banking compared to 61.3% in 2018. The steady increase in usage allows us to predict that the number of users will also gradually rise in the next few years.

Share of US population using digital banking

Share of US population using digital banking

(Source: Statista)

66.7% of bank executives believe that fintech will have a considerable impact on mobile payments globally. The fintech investment banking statistics prove these estimates. The most popular categories of US startups based on the number of investors are payments & settlements, capital markets, data analytics, accounting & tax, and wealth management.

Top fintech startup categories in the US by the number of bank investors

Top fintech startup categories

(Source: FinancesOnline)

Digital payments are also the largest segment of the fintech market by value. In 2021, the total transaction value of digital payments is projected to reach $6,685,102 million.

Fintech market

(Source: Statista)

These are the dominating trends in finance and banking markets that dictate what types of fintech solutions will be popular tomorrow. They set the direction of work for software vendors and hint what technology can meet the needs of consumers best. Keep reading to find a more detailed overview of banking technology trends and solutions.

9 Latest Trends in Banking Technology and Fintech in 2021

Most of these financial technology trends are not limited to fintech. Intuitive mobile applications, artificial intelligence, advanced security measures, robo advisors are shaping the landscape of other industries. But in the fintech sector, they have a unique impact. Let’s discuss the role of emerging trends in the banking sector below.

#1. Accelerating the transition to mobile banking

64% of mobile banking users research the mobile capabilities of a bank before deciding whether to open an account. 61% are ready to switch banks if they won’t be satisfied with the offered mobile banking experience.

The quality and usability of fintech apps will continue to matter in 2021. Not only will neobanks need to focus on the mobile experience. Physical banks also have to launch fintech apps to serve their customers remotely.

It’s important to make sure fintech apps include the functionality expected by users. Based on the recent survey conducted by Business Insider, users believe that the most valuable features are the ability to put a temporary hold on a card and inform a financial institution about their travel plans. The ability to file a card transaction dispute and log in with a fingerprint is also crucial.

Mobile Banking Features

(Source: Business Insider)

Therefore, launching an app this year, don’t forget to study your target audience and meet their emerging needs. Otherwise, people will choose a more convenient application and go to another bank.

#2. More digital capabilities at branches

Even though the number of mobile fintech users grows, the satisfaction with retail online banking platforms declines. Customers crave the quality in-branch experience and personalized help that fintech apps cannot ensure. That’s why to retain and engage customers in 2021, banking institutions plan to add more digital capabilities at branches. 48% of them are going to implement live interactions with bank employees at ATMs, 33% will add AR/VR experiences.

digital capabilities at branches

(Source: Deloitte)

Such trends show that physical branches will have an important place in banking technology. Yet, they will be highly digitalized and require complex software solutions. This increases the need for embedded fintech software development and makes it one of the banking technology trends of this year.

#3. Robo advisors in investment banking

Investment banking is all about offering the right investment options to the right people. Artificial intelligence, predictive analytics, and robotic process automation will do that in the next years.

What started as a fintech innovation led by small fintech firms has turned into a major trend. Justwealth Financial Inc, Saxo Bank, Deutsche Bank, and many other institutions adopt robotic investment banking technology. In 2021, the assets under management in the robo-advisor sector will grow by 19.5%, reaching $937,109 million.

Robo advisory enables banks to provide a broader range of services with minimum investment. Robotic software is a cheap alternative to traditional advisors. Therefore, such solutions will only gain popularity.

#4. Biometrics in fintech apps

Fingerprint verification and facial recognition are the two primary ways to utilize biometric data in banking. With the launch of iPhone 5 and iPhone X supporting TouchID fingerprint and FACE ID, biometric verification became widely accessible. In 2021, around 1 billion smartphones will have some form of face unlock.

This allows fintech banks and software vendors to use biometrics data for advanced verification and security. Such information is difficult to forge and provides customers with ultimate control over their finances and personal information.

Even though there are multiple ways to leverage biometric identification in banking, fingerprint data will be preferred in the following years. It has high accuracy and the cheapest cost compared to other approaches.

banking biometrics

(Source: Thales)

#5. Cryptocurrency surge

Anyone who monitors Bitcoin rates, most likely, wishes they’d bought some several months ago. As the leading cryptocurrency hits $52,000 and gains fans, most fintech companies think about the ways to adopt it. In February 2021, Mastercard announced that they have started working with Wirex and Bitpay to launch crypto cards. Customers can transact using their cryptocurrency balance as easily as with regular money.

That the market behemoths like Mastercard acknowledge cryptocurrency means that fintech companies will also need to adopt it. Therefore, a software vendor that develops a fintech solution in 2021 should incorporate crypto transactions. Although it’s not mandatory now, in the nearest future, cryptocurrency support can become a must-have.

#6. AI in banking

Using artificial intelligence in fintech isn’t limited to customer communications. AI also benefits the processes happening in the back and middle offices, such as risk assessment, anti-fraud, and credit underwriting. By 2023, banks that have adopted AI applications can potentially save $447 billion. Out of them, $199 billion will be saved in the front office, $217 million in the middle office, and $31 billion in the back.

Сost-effectiveness inspires fintech banks and financial organizations to seek AI-powered solutions. Such software optimizes internal processes, improves customer service, and reduces the load on employees. Companies can either reduce the staff or use their human resources more efficiently.

That’s why fintech vendors will keep focusing on artificial intelligence in most of their products. It’s a steady trend unlikely to change soon.

#7. Banking-as-a-Service (BaaS)

BaaS implies that fintech startups can connect to a bank’s system through APIs. An established bank allows fintechs to launch new services on top of its existing infrastructure.

Everything happens in three steps:

  1. A fintech startup pays a fee to access a BaaS platform.
  2. A financial institution that provides BaaS services opens its API to the startup.
  3. The startup uses the API to build new fintech apps.

It’s a win-win case. Whereas old-school banks upgrade their legacy services, fintechs can introduce their products without purchasing an infrastructure. This speeds up time-to-market and simplifies regulatory compliance.

Hence, if you are a software vendor looking for innovative fintech solutions, consider the BaaS model. Established banks (e.g., Starling Bank, BBVA) and BaaS-focused fintechs (e.g., Solaris Bank, Paypal) readily offer such an opportunity.

#8. Blockchain fintech

Blockchain technology is based on a distributed database accessible to multiple users. Each can add a new record but cannot change older data blocks. This gives fintech companies ultimate data transparency and security. Blockchain also improves trade accuracy and helps to manage risks.

Today, the blockchain market grows exponentially. From $3 billion in 2020, it is expected to reach $39.7 billion by 2025. Since banks and financial organizations switch to this technology for better security, fintech providers also leverage blockchain. In 2021, at least 25% of Forbes Global 2000 companies will use blockchain in their services. These are the trendsetters everyone else will look up to.

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#9. Regulatory changes

Regulators’ agendas always shape fintech industry trends. Each time a new regulatory requirement appears, software developers need to make sure their product complies with it.

In 2020, fintech startups enjoyed a pause in drastic regulatory changes. The pandemic brought so much uncertainty that governments took any changes very ‘slow. This year, when the situation has largely stabilized, we can expect regulatory updates and challenges. Fintechs that work in the EU are likely to see more activity regarding prudential reform. The current prudential framework is outdated and requires changes. Therefore, in June 2021, The Investment Firms Regulation (IFR) and the Investment Firms Directive (IFD) will impact fintech investment. The regulations related to crypto-assets will also be in the highlight. Crypto asset providers will need to meet a similar regulatory standard as investment firms. Open finance is another field likely to witness regulatory changes in 2021.

Therefore, fintech vendors and financial services should keep a finger on the pulse of regulatory changes. It is a timeless software development trend.

Final Thoughts

Now, when you know what a fintech company is and what fintech software development trends matter, you can understand whether this field is for you.

In 2021, fintech insurance, banking, investment, and financing will face many innovations. These are the market segments disrupted by robotic automation, artificial intelligence, biometric identity verification, blockchain, and other advancements.

To be ready to implement these technologies in e-banking software development, you will need a strong tech background.

Therefore, we offer you to use Leobit’s software development services. By hiring our remote software engineering team, you get instant access to qualified developers ready to jump-start your project. They are well-versed in fintech software development and have completed a range of projects for customers worldwide. A B2B payment solution and online investment portal are just a few products from our portfolio.

Darina Bogretsova
Darina Bogretsova
Outsourcing Expert at Leobit