7th December 2023

Better business. Better community

Business Industry and Financial

The Role of Fintech Innovation in Boosting Financial Service Synergy

It’s no secret that the demand for fintech solutions is growing steadily. According to a recent report, the global value of the financial technology industry is expected to reach
$324 billion by 2028 at a 25.18% CAGR over the period of 2023-2028.

As I see it, the rise of the fintech industry as a whole will also have a major positive impact on the popularity of financial services that are leveraging this innovative technology. Let’s take a closer look at a few key market sectors where financial technology
firms have already been making a difference.

Open Banking: Improving User Experience

Open banking refers to the practice where regulated financial institutions offer third-party fintechs open access to financial data through application programming interfaces (APIs). It is also a trend that transformed the heated rivalry between banks and
fintech startups into fruitful partnerships benefiting both parties, as well as consumers. As a result, analysts expect the open banking market to surge to as high as $123.7 billion by
2031.

From financial institutions’ perspective, open banking provides a seamless way to reach their partners’ customer bases with financial services like compliance, lending, and payments at a significantly lower acquisition rate. At the same time, it also incentivizes
competition, enhances user experience, and facilitates financial inclusion through optimized data sharing between involved parties. With a client-centric focus and tapping into fintech’s skillsets and specialized resources, banks can also achieve high customer
retention rates while maintaining their positions in the market.

With the increased popularity of open banking, the sector has already accelerated payment innovations among banks and fintechs. With the latter parties gaining access to crucial banking data, financial technology startups have developed more efficient and
convenient solutions. Examples of such include account aggregation via a single dashboard, seamless KYC checks, transaction and financial goal tracking, and service comparisons between different providers.

Embedded Finance as a Way for Businesses to Boost Customer Satisfaction and Retention

Valued at $67 billion in 2022 and projected to reach $623 billion by 2032, embedded finance is a market that seeks to integrate financial services into non-financial platforms,
applications, and other products.

With examples ranging from Apple’s credit card (Apple Card) to a coffee shop app that provides one-click payments to its customers, the goal of embedded finance is to incorporate software solutions into businesses’
existing offerings. This way, customer-related parameters like sales, retention, or satisfaction can be enhanced to the great benefit of these businesses. But how do fintech companies come into the picture?

In embedded finance, fintechs form new partnerships with non-financial companies and utilize data insights and unique financial solutions, which they integrate into the products and services that are already popular among consumers. 

For instance, a well-known retailer could build insurance options into the checkout flow, allowing customers to insure the items in their carts for an additional fee. Buy now, pay later (BNPL)
is another example, and embedded fintech providers are focusing their efforts on integrating their services into banks’ applications, websites, and other business processes.

Digital Payments Revolution at the Intersection of Fintech and E-Commerce 

With the annual market revenue growing from 2017’s $1.47 trillion to $3.65 in 2023, the e-commerce industry presents a significant opportunity for fintech innovators. With the
fintech “ABCD” (AI, blockchain, cloud computing, and big data), startups are making the operations of online stores more effective and cost-efficient.

For example, the influence of fintech companies has transformed the payment processing market in the last few years. E-commerce firms now have access to much more straightforward, quicker, and convenient solutions to accept transactions from their customers.
At the same time, BNPL integrations increase checkout values and conversions by as much as 60% and 20% on average. Moreover, the cutting-edge technology of fintech providers can also help
prevent fraud more efficiently.

With digital wallets representing 70% of all e-commerce transactions in the APAC region, fintech integrations can provide customers seamless access to
a wide variety of financial services that can range from anything like loans and insurance to investments. All of the above is offered without the need for users to leave the platform. Consequently, e-commerce companies can expand their revenue streams, engage
with their customers more efficiently, accelerate scaling, and reach a larger audience on a global scale.

Financial Synergy to Bring About a New Financial Age

My belief is that the advent of innovative fintech solutions has revolutionized the global financial landscape, creating a shift towards financial synergy and seamless integration and collaboration of various financial processes. By consolidating a diverse
range of financial products and services within a single platform, user experience is significantly improved, and businesses can effectively engage with their customers.

The convenience of accessing multiple offerings in one place streamlines transactions, simplifies decision-making for consumers, and ultimately leads to greater efficiency in financial interactions. Financial synergy catalyzed by fintech solutions has ushered
in an era of transformative possibilities for individuals and organizations alike.

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