Recently, the financial technology industry changed the face of the American financial space and provided Americans with unique opportunities to handle their money.
This has been triggered by the current technological shifting, the rising need to embrace convenience during the delivery of financial services, as well as the entry of fintech companies at the industry’s vanguard.
Therefore, it becomes pertinent to understand the trends, threats and opportunities that will characterize the future of American fintechs in the context of financial industry of the United States of America.
The emergence of fintech
Fintech evolution started with newer and improved ways of bank operation and payment solutions. This industry has grown over the years to encompass many services ranging from the peer-to-peer lending, mobile wallets, robo-advisor, as well as the blockchain.
PayPal and Square, were lay foundation on which subsequent generations of companies are testing the limits of possibilities in the field of finance.
Driving factors of fintech ecosystems
The following are the causes of the fast growth of fintech in the U. S. They include; Technological innovation, new customer trends, the role of regulatory bodies and availability of capital. In my view, all these elements have been key in creating appropriate conditions for the development of the fintech sector.
Technological advancements
AI, machine learning, and the application of big data have made this possible and now, fintech organizations are in a position to provide tailor-made financial services.
For instance, the self-serve chatbots assist customers with their issues at all times by using Artificial Intelligence to handle their cases, as well as algorithms that employ machine learning in the identification of fraudsters and determination of risks.
Changing consumer behaviors
The contemporary customer expects quick and easy solutions and operations when it comes to their financial affairs. This is the area that fintech firms have conveniently used to their advantage by providing simple to use apps, instant and smooth digital experiences that established banks can’t offer.
Regulatory support
The U. S. government has embarked on a process to put appropriate mechanisms that encourage fintech innovation. Activities like regulatory sandboxes enable technology firms to pilot new items within the stipulations of the law with an aim of enhancing creativity.
Venture capital investment
The availability of Venture capital has ended the funding constraint issue for fintech startups and allowed them to grow their business. The appealing feature is the high revenue growth rate and the focus on disruption in core financial services, therefore funding has increased dramatically in the last ten years.
Business threats currently affecting fintech organizations
Nevertheless, the given trends have several threats that can negatively influence the development of fintech in the U. S. These are challenges such as; regulatory issues, cyber risks and issues to do with model sustainability.
Regulatory hurdles
It should be noted that the sphere remains somewhat regulated, and that presents a considerable difficulty to fintech businesses. Employing the means of compliance with federal and state regulations may turn unaffordable and lengthy in the case of startups.
Cybersecurity threats
Since financing organizations deal with large amounts of money and highly sensitive personal and business information, they are most vulnerable to cyber threats. Pleasing the customer through adequate protection of their information is important as it would allow firms to have very strong security measures in place.
Opportunities for future Growth
However, there are several challenges that can be faced regarding the fintech in the United States which are listed as follows: In spite of these challenges, there exist a number of opportunities which can be seen in the future of fintech in the U. S.
As seen in recent hype, fintech firms can leverage more of the trends and technology breakthroughs to diversify their service Portfolio and clienteles.
Emerging trends in fintech
The following are some of the trends that are likely to define the future of fintech in the US; Open banking, Blockchain integration, and Financial inclusion.
- Open Banking: Adoptions such as Open Banking which permits third-party app developers access to client’s bank information will spur Open Banking initiatives, thereby increasing competition in the financial industry. This shall help the fintech firms to expound their services to consumers with more targeted and symbiotic approaches.
- Blockchain Technology: According to research, blockchain is seen as a way of altering the existing financial functions such as cross-border payments, smart contracts. Thus, compared to traditional Financial and IT providers not utilizing blockchain, medium to high risk fintech companies can provide faster, secure, and cheaper solutions.
- Financial Inclusion: Thus, fintech companies have a notable opportunity to be involved into the fiscal inclusion providers market. The use of advanced technology in banking and micro-financing can reach out for the client base that is unserved and underserved.
Collaborations and partnerships
Another area remains cooperation between fintech company and the representatives of conventional financial sector.
This is because through a symbiotic relationship with banks, one gets a chance to share on the existing infrastructures and clients, while another argument is that through the cooperation with the fintech firms banks get a chance to harness the innovation that the startups possess.
International expansion
The globalization allows for products and services offered by fintech companies to extend to every country, which could be a signal for U. S companies with interests in that area to branch out to the global markets. Therefore, accessing emerging markets leads fintech firms to expand their markets past their home market and can therefore achieve growth.
Conclusion
Extensive research has it that the future of American Fintech in the United States financial market is bright due to the innovation of technology, high usage of mobile devices by customers and favorable legislation.
There are quite several risks that companies face in the global reach that include; regulation, cybersecurity, and the challenge of coming up with sustainable business models yet the potential for growth and innovation is enormous.
Thus, connecting new trends, partnering, and expanding their sphere of influence, fintech brands can further influence the dynamics of the financial market and develop the sector. Fintechs are in fact destined to use the next decade as the main frame of the future of financial industry in the United States.