Five Fintech Predictions For 2022
2021 saw several ongoing trends in financial technology, or “fintech,” accelerate, as well as completely novel developments burst onto the stage. What will 2022 hold? Here are five predictions from my vantage point:
Cybersecurity will be paramount.
Modern-day hackers are going to continue to be aggressive in exploiting every avenue and opening in disrupting commerce and operations. The financial industry is on the front lines of cyberattacks with an extraordinary amount of exposure. The volume and intensity of attacks are only likely to increase as more and more transactions are conducted electronically.
Policy groups have long warned that cybersecurity risks in financial services could pose a threat to global stability. Several prudent measures have been taken recently to help guide the industry to strong cybersecurity postures, such as the recent mandate by the major U.S. financial services regulators requiring financial institutions to promptly report cybersecurity incidents. But ultimately, the responsibility falls on each institution and vendor to ensure that strong training and solutions have been implemented, in case a major incident cascades into a marketwide disruption.
ESG and fintech collide.
The Environmental, Social and Governance (ESG) movement became one of the defining trends among financial institutions in 2021 and will certainly continue to be a dominant theme going forward. However, in 2022, ESG considerations will expand from investment selections to the technologies underpinning them. This will occur in two ways: First, new platforms will be developed in order to identify and confirm ESG merits. For example, the Association for Financial Crime Specialists believes that predictive algorithms capable of detecting whether companies are violating environmental regulations “will see a huge spurt in the next year.”
Second, the ESG merits of fintech providers themselves will be more heavily scrutinized. What is the composition of their executive leadership? What are their environmental stances? Fintech leaders will need to have good answers to these questions.
DeFi has a breakout year.
Cryptocurrencies are officially mainstream: In 2021, more money was invested in cryptocurrencies than all previous years combined. In fact, the ecosystem has grown to the point where there are now newer and more creative forms of digital assets, such as non-fungible tokens (NFTs), for investors to consider.
One related element of the digital asset ecosystem is decentralized finance, also known as DeFi. DeFi automates processes commonly associated with traditional, high-touch finance. While no one expects Main Street America to invest through DeFi anytime soon, given cryptocurrencies’ rapid maturation overall, at this juncture, DeFi is certainly an area that warrants attention.
Wall Street becomes cloud-native.
2021 saw transformative moves regarding the financial industry’s embrace of the cloud: CME Group partnered with Google Cloud, Goldman Sachs integrated with AWS, Wells Fargo signed major cloud deals with Microsoft and Google and the list goes on. The financial industry’s interest in the cloud is nothing new, yet previous efforts were largely focused on putting a cloud component on top of legacy systems.
The Covid-19 pandemic prompted financial services to double down on a cloud-native strategy in which even the most critical processes live in the cloud, thereby reducing costs while also fully unlocking its many advantages. These benefits include everything from streamlined internal communications and collaboration to personalized customer experiences. Relatedly, the growth of artificial intelligence and machine learning — a major priority for Wall Street over the last several years — is in many ways connected to the continued advances in cloud-native computing, as cloud infrastructure is instrumental in scaling AI and ML models.
The “new normal” necessitates automation.
Finally, the pandemic continues to have a significant impact on the day-to-day workplace. Finance had previously been very reliant on in-person, physically co-located offices due to its apprenticeship-style career paths and highly regulated structure. In-person connections will remain important, but it is clear that remote work will play a greater role for the industry moving forward. Concurrently, the industry remains under tremendous pressure to cut costs.
Hence, automation solutions like robotic process automation (RPA) are ideal in increasing workplace efficiencies, while also eliminating cost-creating redundancies. RPA in finance is evolving from simple task automation, such as completing repetitive reports automatically, to holistic solutions that could even improve the accuracy of financial forecasts.
Given the unpredictability of the past few years, the only certainty is that there will be more surprises ahead in 2022. By understanding these trends and preparing for them, however, financial leaders will put their organizations in the best position possible to succeed.
This article originally appeared on forbes.com, to read the full article, click here.
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