As the COVID-19 pandemic turned 2020 into a historic year of global upheaval, the financial services industry and the tech companies that support it found themselves caught off guard. As in most other commercial fields, the crisis forced banking sector participants and their ilk into reactive mode.

As a result, many fintech strategies, conceived for a future in which “post-pandemic” would be the stuff of science fiction, were abandoned, shelved, or amended on the fly as the crisis unfolded.

Nevertheless, whether despite the pandemic or because of it, several trends of financial software development survived the social and economic turbulence. Over the last year, they have either continued strengthening steadily or accelerated under the pressure of enforced changes in how financial enterprises and their customers interact.

This article highlights four of those fintech trends and explains why they may be worth your attention during 2021.

1. Tech to Support Financial Literacy

It’s not easy to find any silver lining to the coronavirus cloud. However, if there is a glimmer of light, it might be found in the savings people made by working from home. Those lucky enough to avoid being furloughed and instead shifting to remote working suddenly discovered that commuting expenses were no longer taking a bite out of their salaries.

Even a little extra disposable income is enough to prompt speculation about how to put it to work. On the back of that increased interest in personal investing, service providers started to think about the benefits of raising financial literacy among the customer base.

Consequently, 2020 saw a rise in the launch of apps promoting financial awareness and literacy. Such solutions use gamification tactics and rewards-based courses to help customers understand the benefits of investing in capital markets.

Putting Literacy to Work

Of course, many of these apps include facilities to put users’ new-found knowledge into practice. According to a recent Marketing Dive article, the use of investment apps, many with onboard educational elements and financial management recommendations, grew by 88% in the first half of 2020. That’s a more remarkable uptick than that seen in the casual games category of mobile apps.

Governments worldwide have continued to combat COVID-19 with lockdowns and movement restrictions in the first quarter of 2021. As a result, consumer interest in effective budgeting and  investing (where disposable income is available) is unlikely to wane just yet.  

Traditional and challenger banks and financial services companies are sure to continue rolling out new digital initiatives to increase their customers' financial savvy. The likelihood is that they will do so either in the form of new app products or as add-ons to primary apps.

2. Zero-Contact Biometric Verification

Security is always a hot topic in fintech, so in the realms of identification and verification, fingerprint recognition in particular was a welcome technological development in the industry. While fingerprint verification has been mainstream for some time, though, 2020 was the year in which people began to think more about the risks of any form of physical contact. For example, handling cash is now probably less desirable than it has ever been—a situation that’s driving strong uptake in contactless payment solutions.

Over the course of last year, it wasn’t just physical contact with cash that people sought alternative solutions for, but essentially, any physical contact with items or surfaces. As a result, interest grew in alternatives to fingerprint recognition for verification purposes.

Fingerprint verification for contactless payment cards remains popular today, but expectations are that 2021 will see more decisive moves towards other physiological, and even behavioral, biometric solutions for personal identification.

Contactless Biometric Technology to Watch This Year

Hand-vein capturing and voice recognition are two of the more promising variants of biometric identity verification. Both can work without any requirement for physical contact during the identification process. Another advantage is that face coverings do not diminish their effectiveness. That's a welcome benefit at a time when masks are essential in many countries as a COVID-19 precaution.

Efforts to develop voice and hand-vein recognition will likely step up in 2021 due to the promise they show as non-contact verification techniques. Indeed, in the case of vein recognition, the banking, financial services, and insurance sector is expected to lead technology growth by the end of this decade.

3. Banking in the Cloud

Up until and during 2020, the financial services sector and banking, in particular, were courting cloud technology with a significant degree of caution. Although there was a clear trend in the transition away from legacy systems, many banks and similar service providers were hesitant to trust the cloud.

While their reticence was chiefly due to the perception of cloud computing as a potential source of security weakness, the percentage of banks using cloud solutions is slightly rising.

Fear is a Strong Motivator for the Cloud Agenda

With no sign of a fast letup of the Covid-19 pandemic, the rise of fintech-in-the-cloud may well continue apace. Confidence in cloud solutions has grown as protective measures have gained robustness and sophistication. The belief among knowledgeable observers is that 2021 will be the year in which fears of falling behind in a hyper-competitive, volatile market outweigh those derived from security concerns.  

Only through migration to the cloud can financial institutions achieve the agility necessary to bring products to market at speed and deliver maximum responsiveness.

The coronavirus pandemic has served to apply even greater motivation to make the cloud transition. It’s forcing an agenda of rapid change and continuous adaptation — dynamics that on-premises solutions are limited in their capability to support.

4. AI in the Fintech Environment

AI is another technology trend that was hot in 2020 and looks promising for this year too. As the financial services industry observes how artificial intelligence solves a plethora of business challenges in other verticals, a wider adoption of machine learning and other AI formats is almost inevitable. These technologies are beginning to prove invaluable in many industries, by helping companies to:

• Reduce costs
• Unearth customer insights
• Improve customer experience
• Automate their internal workflows and processes
• Combat fraudulent sales transactions

It would be surprising indeed, then, if enterprises reliant on financial technology don’t turn to AI and machine learning in more significant numbers during 2021. Activities most likely to benefit from artificial intelligence include:

• Process optimization
• Credit scoring
• Security
• Customer support
• Automated self-service investment and trading

2021: Another Exciting Year for Fintech

The four trends highlighted in this article might be some of the most important to watch this year. However, with the pandemic prevailing globally and commerce continuing to weather forces not experienced on such a scale in modern times, it's fair to say that anything can happen.

The one certainty is the potential for digital technology to help financial companies remain agile and competitive and support their customers' needs in these turbulent times. Therefore, it's anybody's guess as to what surprises the fintech landscape might throw up over the next few months.

In any event, this year is undoubtedly one in which anyone with a stake in the industry would be foolhardy to take their eye off developments for long.