Top 5 Fintech Trends to watch out for in 2024

They say the new year is all about new beginnings. But this new year I decided to invigorate an old passion, one that has helped me and a lot of others along the way. That of writing about Fintech.

And what better way, than to try looking into what 2024, the year of the wooden Dragon, has in store for us Fintech aficionados. And if you manage to stay on till the end, I promise to give some exciting new career updates as well, that hopefully, will be beneficial for you too.

And because while I was researching, there was just way too many things, some of which I didn’t wanna cut out for the sake of brevity, I decided to split the trends into 2. Top 5 global Fintech Trends, and top 5 Fintech trends emerging from India. That’s not to say that global trends wont possibly play out in India. But then you all know that India has kinda been like the trail blazer in the recent past, when it comes to Fintech Innovations, right?

Anyway, lets jump right in!

Top 5 Global Fintech Trends

Embedded Finance and the rise of Financial Service as a Service

Embedded finance is expected to grow rapidly in 2024, as more platforms leverage the fintech infrastructure and APIs to embed financial services into their offerings.

The integration of financial services into non-financial platforms such as e-commerce, social networking, or health care is known as embedded finance. By offering seamless, tailored and personalized financial solutions to users, this approach aims to create new revenue streams and enhance customer loyalty for these platforms. For instance, an online marketplace could offer payment plans or financing options, while a health care platform might provide insurance or funding opportunities.

This coupled with the rise of developer conference in Finance, tells me that, pretty soon, traditional financial institutions will probably open up their tech stacks for developer communities to contribute to in an effort to stay competent with new age fintechs.

Digital Assets:

Digital assets are expected to see more adoption and innovation in 2024, as more platforms, products, and services emerge to support the digital asset ecosystem.

Any digital representation of value or ownership is a digital asset, including cryptocurrencies (like Bitcoin), non-fungible tokens (NFTs), and digital artwork. As more individuals recognize the value of these digital assets, their popularity and legitimacy are increasingly recognized by investors, regulators, and established institutions.

Advantages of digital assets include improved transparency, enhanced security features, increased liquidity, and cutting-edge innovation capabilities. For example, cryptocurrenies solve for real time, instantaneous payment systems that operate globally and round the clock. Tokens provide opportunities for fractional possession and easier entry into previously inaccessible industries; this means there's always something out there waiting for those who want it! Finally, in contrast with traditional media forms (like paintings), where creativity stops at painting alone—with digital art being endless possibilities when combined with code - anything goes because no one releases its unique potential yet except us here today!"

And I predict that we will see a rise of investments and advisory firms that specialise in this in 2024.

AI-powered Advisory and Asset Management:

AI-powered advisory and asset management is expected to see more demand and development in 2024, as more consumers and institutions seek smarter and simpler financial solutions.

Honestly I thought this would have happened by 2023, but we didn’t really see much of mass adoption here. I do think, with compute power increasing, traditional financial firms are going to start building their own ML and LLMs. We have already seen giants like Goldman ?and JP Morgan start to develop their own LLMs. ?

In fact, if you’re in the US, then you may wanna pick up some AI developer skills, because Wall street is literally having a blood bath picking up AI talent.

Generative AI in Fintech:

Generative AI is expected to see more exploration and experimentation in 2024, as more fintech players leverage its potential to generate value and innovation.

Harnessing the might of artificial intelligence, AI-driven financial counsel and portfolio administration is transforming how individuals and institutions manage their wealth. By exploiting vast amounts of data and sophisticated algorithms, this innovative approach allows for more astute, streamlined, and tailored monetary solutions that improve decision making and performance.

In fact a recent SBI Fintech conclave discussed how much potential is there in AI , especially to help big banks become a lot more relevant in he digital era to their consumers, and serve better financial products for them. So this isn’t just something western countries are eye by the way!

Blockchain Integration:

Blockchain integration is expected to see more adoption and advancement in 2024, as more fintech players harness the power of blockchain to improve or disrupt the financial industry.

Blockchain integration improves financial processes, systems, and products, by building up trust, transparency, security, and efficiency.

For instance, implementing blockchain integration could result in smart contracts becoming prevalent; these automate complex transactions while ensuring compliance with preset rules. Decentralized finance (DeFi) may also be enabled through blockchain integration creating open systems without intermediaries allowing for faster execution times at reduced costs. This innovative process could even tokenize assets such as real estate properties turning them into tradable digital tokens that can easily be transacted on via distributed ledgers, resulting in increased liquidity & flexibility across marketplaces globally!

Some other trends that we should also watch out for:

Bull run for Bitcoin in the horizon?

·??????? A bull run for bitcoin is a period of sustained price increase, often driven by high investor confidence and increased buying activity. There are various factors that could influence the likelihood and timing of a bull run for bitcoin, such as supply and demand dynamics, technological innovations, regulatory developments, and global economic conditions.?Based on Bitcoin’s past market cycles, some analysts predict that the next bull run could start after the Bitcoin halving in 2024 and reach its peak in late 2025. However, the cryptocurrency markets are very unpredictable, so making any guarantees about future price movements is very difficult.

Central Bank Digital Currency to find a product market fit?

• ? A CBDC, under the guidance of a central bank, has its origins not in commercial institutions but at the very core of monetary policy-making. Like conventional currency, it bears the stamp of sovereignty and can be used to settle obligations without needing an intermediary platform like cryptocurrency. Unlike decentralized digital currencies that lack state support or regulation, CBDCs are a carefully crafted means for governments to maintain control over their money supply while adapting to changing economic conditions. Despite lacking intermediaries and settlement processes like those of digital payment systems, CBDCs are poised to revolutionize the way we think about money. Central Banks' Digital Currencies (CBDCs) have ambitious goals - they aim to enhance or even replace traditional forms of currency with a secure, streamlined, and inclusive method for exchanging value. Global central banks show a keen interest in CBDCs, with some nations poised to make substantial strides in the design and deployment of these digital currencies in 2024.For example, India has announced the launch of the first pilot for retail digital Rupee (e?-R) on December 01, 2022, and plans to expand it gradually to more banks, users, and locations7.

Some of the use cases for CBDCs are:

• Cross-border remittances: Faster, Cheaper, more Convenient. That’s the CBDC promise that central banks around the world are making. With CBDCs, international payments could become more swift and cost-effective due to faster processing times and reduced transaction fees. By eliminating intermediaries like banks, CBDCs allow countries to work together on a level playing field without language barriers or exchange rate complications. With the ability to trace each transfer, regulators can monitor activity for illicit activities while ensuring legitimate transactions are processed efficiently, increasing trust in cross-border dealings.
• Wholesale market settlements: CBDCs could enable more efficient and secure settlement of interbank and financial market transactions, reducing counterparty and settlement risks. CBDCs could also enable innovation and competition in the wholesale market, by allowing new entrants and platforms to participate in the settlement process. CBDCs could also enable integration with other digital assets, such as securities or commodities, creating new opportunities for asset tokenisation and exchange.

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Top 5 Indian Fintech Trends

Cross-Border Financial Solutions:

Cross-border financial solutions are the products and services that enable cross-border payments, remittances, trade, or investments. Cross-border financial solutions are in high demand in India, as the country has a large diaspora, a growing e-commerce sector, and a rising middle class. Cross-border financial solutions aim to provide faster, cheaper, and easier ways to send or receive money, buy or sell goods, or access new markets. For example, cross-border payment platforms could enable instant and low-cost transfers, cross-border e-commerce platforms could enable seamless and secure transactions, and cross-border investment platforms could enable access to global opportunities. Cross-border financial solutions are expected to see more growth and innovation in 2024, as more fintech players enter or expand in this space.

Full-Stack Evolution:

Full-stack evolution is the trend of fintech players evolving from offering single or niche products to offering full-stack or end-to-end solutions. Full-stack evolution aims to provide more value and convenience to customers, while creating more differentiation and loyalty for the fintech players. For example, a fintech player that started as a payment platform could evolve to offer lending, insurance, wealth management, or banking services. A fintech player that started as a lending platform could evolve to offer credit cards, savings accounts, or investment products. A fintech player that started as an insurance platform could evolve to offer health care, wellness, or lifestyle services. Full-stack evolution is expected to see more momentum and competition in 2024, as more fintech players strive to become one-stop shops for their customers.

RegTech and Compliance:

RegTech and compliance are the products and services that help fintech players comply with the relevant regulations and norms, such as the Personal Data Protection Bill, the RBI guidelines, and the GST framework. RegTech and compliance aim to provide solutions that are more efficient, effective, and scalable than traditional methods. For example, RegTech and compliance solutions could provide automated KYC, AML, or CFT processes, real-time monitoring and reporting, or cloud-based compliance platforms. RegTech and compliance are expected to see more importance and investment in 2024, as more fintech players prepare for the enactment of new regulations and norms, and seek to protect the privacy and security of their customers and data.

Financial Inclusion and Literacy:

Financial inclusion and literacy are expected to see more focus and impact in 2024, as more fintech players partner with the government, NGOs, or social enterprises, to reach and serve these segments.

Now I will be honest. This is my personal favourite trend, and I was so tempted to put it at number 1. BTW this is one trend that I am willing to literally put my career behind to make it work. Hence the move to startup by building a Financial wellness platform for Women. ?While I have been doing this since 2020 in like a small way (sharing my financial tracker with cohorts of 3-7 women at a time), now its time to amp up and go in full scale in developing more personalised and relevant financial products and services for us Women.

After all, Ladkiyan ghar ki Lakshmi hai! (Daughters are the Goddesses of Wealth)

FinTech and HealthTech Convergence:

FinTech and HealthTech convergence is the integration of financial and health care products and services, resulting in more robust and tailored solutions for customers. FinTech and HealthTech convergence aims to ensure accessible and personalized health care services, while creating new opportunities and value for the fintech and health care players. For example, FinTech and HealthTech convergence could enable health insurance or financing options for customers, health care platforms or devices for providers, or health data or analytics for insurers or lenders. FinTech and HealthTech convergence is expected to see more collaboration and innovation in 2024, as more fintech and health care players leverage the synergies and complementarities of their domains.

A few other trends I would watch out ?(or rather hope) for in ’24:

• Fintech funding in 2024: I think fintech funding in 2024 will be more selective and strategic, as investors look for quality over quantity, and value over valuation.?I think we will see more funding going into fintech segments that have proven their resilience and potential, such as embedded finance, digital assets, AI-powered advisory and asset management, generative AI, and blockchain integration.?I also think we will see more funding going into fintech markets that have high demand and opportunity, such as cross-border financial solutions, full-stack evolution, RegTech and compliance, financial inclusion and literacy, and FinTech and HealthTech convergence. I think we will see fewer unicorns being formed, as the market becomes more mature and realistic, and more early-stage startups getting a boost, as they find their product-market fit and niche. I think the overall fintech funding in 2024 will be slightly higher than in 2023, as the market recovers from the pandemic and the regulatory uncertainties, and as the fintech innovation and adoption accelerates.
• Fintech consolidation in 2024: I think fintech consolidation in 2024 will be more frequent and diverse, as fintech players look for synergies and efficiencies, and as the market becomes more competitive and saturated. I think we will see more fintech mergers and acquisitions, both within and across fintech segments, as fintech players seek to expand their offerings, capabilities, and customer bases.?For example, we could see more fintechs merging or acquiring NBFCs, as they look to leverage their licenses, capital, and networks. We could also see more fintechs merging or acquiring other fintechs, as they look to enhance their value propositions, differentiation, and innovation.?For example, we could see more fintechs merging or acquiring digital asset platforms, as they look to tap into the growing crypto and token economy. I think we will also see more fintech collaborations and partnerships, both with fintech and non-fintech players, as fintech players seek to create more value and convenience for their customers, and as the market becomes more open and interoperable.?For example, we could see more fintechs collaborating or partnering with e-commerce, social media, or health care platforms, as they look to embed financial services into their offerings.?We could also see more fintechs collaborating or partnering with data providers, borrower agents, lenders, and derived data partners, as they look to leverage the Oken network.
• On the players who are building digital public infrastructure in India: I think they are playing a crucial role in creating a more inclusive, efficient, and innovative financial ecosystem for the country. They are leveraging the existing public digital infrastructure, such as Aadhaar, UPI, and India Stack, to provide new solutions and services that can benefit millions of consumers and businesses. Some of the players who are building digital public infrastructure in India are: Account Aggregators (AAs): These are entities that enable secure and consent-based sharing of financial data across different institutions, such as banks, NBFCs, mutual funds, insurance companies, and pension funds.?AAs can help consumers access and manage their financial information, and also facilitate faster and cheaper credit, wealth management, and financial inclusion. Open Credit Enablement Network (OCEN): This is a protocol that standardises the flow of credit between lenders and marketplaces, such as e-commerce, social media, or health care platforms. OCEN allows these marketplaces to act as Loan Service Providers (LSPs) that can offer customised and contextual credit products to their customers, using the data shared by AAs.?OCEN can help create new opportunities and innovations in the digital lending space. Open Network for Digital Commerce (ONDC): This is a framework that aims to democratise e-commerce by creating an open and interoperable network of platforms, sellers, and buyers. ONDC can help reduce the entry barriers and costs for small and medium enterprises to participate in e-commerce, and also enhance the choice and convenience for consumers.?ONDC can also enable integration with other digital public infrastructure, such as UPI, AAs, and OCEN.
• On the profitability of AAs and UPI payments fintech: I think these players have huge potential for profitable growth, as they can create value for both the consumers and the providers of financial services. They can charge fees for facilitating the data sharing or payment transactions, or they can monetise the data or insights they generate from their platforms. They can also leverage their network effects and customer loyalty to offer additional products and services, such as credit, insurance, or investments.?However, they also face challenges, such as regulatory uncertainty, data security, customer awareness, and competition from other players.
• On the emergence of OCEN in 2024: I think OCEN has the potential to transform the digital lending landscape in India, by enabling new types of credit products and services that can cater to the diverse and dynamic needs of the consumers and businesses. OCEN can also help improve the efficiency and transparency of the credit delivery process, by reducing the intermediation costs and risks. However, OCEN also requires the collaboration and coordination of multiple stakeholders, such as lenders, marketplaces, AAs, regulators, and consumers.?Therefore, OCEN may take some time to scale up and reach its full potential.
• On the comparison of OCEN and ONDC Financials: I think OCEN and ONDC Financials are complementary, rather than competing, initiatives. OCEN is a protocol that standardises the flow of credit between lenders and marketplaces, while ONDC Financials is a framework that aims to democratise e-commerce by creating an open and interoperable network of platforms, sellers, and buyers. Both OCEN and ONDC Financials can benefit from each other, by leveraging the data and network effects of their respective platforms.?For example, OCEN can enable ONDC Financials to offer cashflow-based lending to the sellers and buyers on its network, while ONDC Financials can enable OCEN to access a larger and more diverse customer base for its credit products.
• On the expansion of AAs beyond the four financial regulators: I think AAs have the scope to expand beyond the financial sector, and include other types of data, such as electricity, telecom, OTT, or health care data. This can help consumers access and share their data across different domains, and also enable new use cases and services, such as bill payments, subscriptions, or health insurance.?However, this also requires the consent and cooperation of the data providers and users, as well as the alignment of the regulatory and technical standards.
• On the impact of AAs and DPDP Bill on credit bureaus: I think AAs and DPDP Bill can have a significant impact on the credit bureaus, as they can challenge their existing business models and practices. AAs can provide consumers with more control and choice over their financial data, and also enable them to share richer and more granular data with the lenders and other service providers. This can reduce the dependence and influence of the credit bureaus, which rely on limited and aggregated data, such as credit scores or loan history. DPDP Bill can also impose stricter rules and penalties on the credit bureaus, such as requiring consent for data collection and processing, and ensuring data protection and privacy.?This can affect the profitability and sustainability of the credit bureaus, and also create opportunities for new entrants and innovations.

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I hope you find these trends insightful and useful. Let me know if you have any questions or feedback. And if you liked this, make sure you do Like and share it with your friends, and Subscribe. Because this year, I plan to release at least 50 editions of Fintech Chronicler’s deep dives. Promise!