Fintech companies aren’t off to a great start in 2022. Markets tumbled to start the year with the tech-laden Nasdaq getting hit the hardest.
Many of the hottest fintech stocks from 2021 had their valuations cut in half (or worse) as the Federal Reserve relented on easy money policies to curb inflation. While rising rates usually aren’t a good sign for growth-oriented tech companies, this could be an opportunity to separate some true innovators from those that simply benefitted from cheap capital. Here are four Fintech trends to keep an eye on in 2022.
Increased Influence of Artificial Intelligence and Machine Learning
Artificial intelligence is already having an impact in the financial services sector. The rise of Robo advisors is a prime example. For many retirement savers, it’s not an advisor or wealth manager that develops a financial plan, but an app that uses personal data and risk tolerances to produce investment recommendations. Betterment and WealthFront are two of the biggest Robo advisors with over $25 billion in assets under management.
Robo advisors may only be the tip of the iceberg for fintech when it comes to the implementation of AI and machine learning. By utilizing AI, fintech firms can make quicker and more informed decisions on lending to borrowers or putting clients into the proper portfolios. AI can also help from the customer service end as clients can get questions answered immediately through chatbots or automated message systems. Perhaps most importantly, AI and machine learning systems can be leveraged for better security by adapting to the latest trends in computer-related crime.
One of the trends pushed forward by the COVID-19 pandemic was the rise of contactless and digital options for consumers. Delivery apps like DoorDash and Uber Eats added contactless ordering choices where clients could place a food order from their phone, pay for it, tip the delivery driver, and receive the delivery from their desired location without ever being in action contact with the restaurant or delivery driver. Restaurants added contactless menus where consumers could use QR codes to pull up dynamic food and beverage selections on their smartphones.
Moving forward, look for contactless and digital consumerism to continue to make changes in the way purchases are made. Many venues that host sporting events and concerts are beginning to offer only digital tickets which attendees can present through mobile wallets or smartphone apps. Online banking will continue to grow as well, as consumers require physical dollars for fewer and fewer transactions (plus, online banks can provide better rates on savings and investment vehicles since overhead costs are drastically lower).
Successful tech innovations usually have one common theme: They reduce friction and simplify the lives of the people using them. E-commerce was a lifesaver for many during the pandemic as hard-to-find items like toilet paper, antibacterial wipes, and paper towels were frequently unavailable in traditional brick-and-mortar stores.
But while e-commerce is usually thought to be the norm nowadays, this is far from the truth. According to research from the St. Louis Fed, e-commerce sales as a percentage of all retail transactions reached an all-time high in Q2 of 2020 at 16.4%. That number declined to 14.3% in Q1 2022 as consumers pulled back due to inflationary spikes, but e-commerce has certainly shown increased viability going forward. Combined with advances in digital payments (and maybe even some blockchain integration), e-commerce may become a vehicle for mom-and-pop stores to sell to a global client base.
Work with an Experienced Financial Advisor
We hope you found this guide to 2022 Fintech trends helpful! If you have any other questions, our knowledgeable financial advisors at Good Life Financial Advisors of Mt. Pleasant are here to help you plan your investments. Contact us today to speak to our consultants and learn more about the tools and guidance we offer.
The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.