Trends for the financial industry: 6 highlights in the Tech Trends Report

Published on Apr 07 2023.

14 minutes reading

The Tech Trends Report is an annual report that analyzes and predicts technology trends that are likely to have a significant impact on business, society, and the world of finance. And as we know, trends in the financial market allow us to anticipate future scenarios in a world that is constantly changing.

In practice, looking at emerging financial movements helps guide banks e fintech as they develop solutions aligned with new innovative initiatives in the banking and means of payment e banking.

Here in Dock we are constantly drinking from different sources to keep up with these trends, and one of them is precisely the Tech Trends Report. Presented by futurist and researcher Amy Webb, Director of The Future Today Institute, which is part of the New York University School of Business, this study is fundamental to understanding how companies operate from now on.

Recently, the content of the 17th edition was released at the SXSW event, highlighting strategic technology trends, with a section of specific insights for financial services. In this article, we selected some of them that have a very significant impact on Latin America. Find out below:

Trends for the financial industry: What are the main ones for 2024?

1. Frictionless Payments

It has been some time since frictionless payments, or Frictionless Payments, are emerging as a key trend in the financial sector, simplifying transactions and improving the user experience.

Frictionless payments eliminate traditional steps in a purchasing transaction, such as entering card information, making the experience faster. Examples include digital wallets, contactless payments and methods integrated into apps and websites.

The novelty highlighted by the report is the use, by banks and fintechs, of data from these frictionless payments to develop products and financial services Cards, such as loan, credit and investment options.

In this scenario, the Embedded Finance <span style="color:#fff">now</span>, which integrates payments directly into a value chain, represents an additional opportunity for companies to operate in the financial world, promoting the adoption of frictionless payments and diversifying revenues more broadly.

2. Asset Tokenization

A tokenization refers to the conversion of physical assets, or financial products into digital format. Through technology blockchain, assets such as real estate, for example, or even intellectual properties, can be transformed into smaller parts, that is, in digital tokens.

This greater divisibility improves asset liquidity, expanding access to investment opportunities and allowing a broader audience of investors to participate in markets previously accessible only to large capital holders.

The interesting thing is that asset tokenization is now also seen as a strategy to reduce costs and bureaucracy, especially in the financial market. By digitizing assets, traditional intermediaries such as brokers can become less necessary, reducing transaction fees.

In fact, it is worth remembering that tokenization was also highlighted in the Febraban Tech 2023, especially in panels related to Real Digital. On the occasion, Fabio Araujo, project coordinator at BC, highlighted that tokenization for the sake of tokenization is not enough, this process must be carried out to meet the needs of the financial system, expanding and facilitating access to services.

3.Alternative Credit Scoring

The use of alternative data in credit scoring has been recurring year after year as a trend for the financial market. One of the reasons why this approach remains in evidence is the fact that the alternative score opens up new revenue possibilities, especially with the offer of financial products to a portion of the population previously considered at high risk of default.

The Tech Trends Report 2024 points out that innovating in this aspect will be fundamental for the future of access to credit, and the path to this lies especially in credit technologies. IA and machine learning applied on a large scale.

A FICO, partner of Dock within the scope of prevention of fraude, has already been working in this direction and seeks to work financial inclusion from the point of view of ESG, in the social sense of accessing alternative data to provide credit in a more democratic way.

“For instance, if a person works with a delivery app, we can understand that they generate revenue and come up with a score to proactively offer a loan at an affordable interest rate,” explains Fabricio Ikeda, Head of Fraud Protection and Compliance for Global Partners & Alliances at FICO.

4. Open Banking

O Open Banking It makes financial data more accessible, which helps fuel the creation of new systems without the burden of working with old programming languages. In 2023, the Tech Trends Report showed how this effectively gives new players the opportunity to design, for example, systems based on real-time processing infrastructures.

For 2024, the study highlights another aspect: the data sharing of the customer raises important data security and privacy issues.

Therefore, institutions need more than ever to invest in strong cybersecurity measures and comply with data protection regulations to protect customer information. In addition to security measures, the open banking requires adherence to complex regulations, requiring significant updates to systems and processes.

The path indicated by the report is that financial institution apostin APIs that comply with data sharing and security standards. And to face this challenge in integrating new technologies, Having a financial API provider that provides quick and agile updates is essential.

5. Programmable Money

Programmable money, or Programmable Money, refers to digital currencies or assets that can be controlled and manipulated through code or programmable logic.

Unlike traditional forms of money, programmable money allows developers to embed rules and conditions into transactions, enabling automation and personalization of financial processes.

The Tech Trends Report 2024 highlights the use of technology in smart contracts, a type of digital contract that uses technology to guarantee the self-execution of clauses, whenever the expected contractual conditions are met.

For example, in the context of implementation of Drex – Real Digital (central bank digital currency project, created and operated by the BC) this functionality will make it possible to program money to perform specific functions when meeting certain conditions.

To illustrate, imagine the following: when purchasing a car, the buyer can program the money to be transferred only after updating the vehicle's documentation into his name, adding to the contract a additional layer of security.

6. Better Digital Wallets

If on the one hand digital wallets are no longer new, on the other they continue to evolve, making transactions faster and easier, encouraging impulse purchases and attracting a wider customer base that is increasingly comfortable with digital payments.

As the report points out, the Digital wallet users spend an average of 31% more than non-users in all types of purchases, which reinforces that these platforms facilitate transactions and encourage greater spending.

On the other hand, companies also obtain benefits from digital wallets, including:

Compared to traditional payment methods like credit cards, digital wallets generally have lower processing fees, reducing commercial costs.
Digital wallets also provide companies with valuable data about customer purchasing habits, enabling targeted marketing and personalized offers.
It is also possible integrate loyalty programs with digital wallets, making it easier for customers to collect and redeem rewards, increasing consumer engagement.

If you want to read the Tech Trends Report 2024 in full, visit the The Future Today Institute website.

Recapping the Tech Trends Report 2023: what's still worth keeping an eye on?

Many of the trends identified in the 2023 report have resurfaced in Tech Trends 2024, which highlights the continued importance of topics such as Open Banking e Alternatives Credit Scoring.

However, in addition to these recurring trends, other elements that were highlighted in 2023 also continue to require our attention and monitoring to fully understand the constantly evolving technological landscape. Check out some of them:

1. Invisible Banking

O invisible Banking is, briefly explained, the automation of financial transactions carried out by the user, so that the experience is more fluidand friendlier.

It is about using financial services through resources and tools that are already incorporated into our daily lives, in such a way that their use goes unnoticed.

The tendency is for this simplified experience to lead consumers to brands that make the purchasing process as easy as possible. Therefore, brands and suppliers that do not update their payment technologies may end up making their customers look to do business elsewhere.

The Invisible Banking is directly connected with the phenomenon of Embedded Finance, in addition to being based on innovations in Banking as a Service (BaaS). This is because this model creates environments where real-time payments and other financial transactions are invisible to the consumer.

The Tech Trends Report 2023 highlighted what we here at Dock We have always advocated: outsourcing the provision of payment technology and banking allows companies to focus only on differentiating their financial products and offer the best possible customer experiences.

2. DeFi

DeFi is an acronym in English for “decentralized finance”, which in Portuguese means “decentralized finance”. The definition may be simple, but the notion of decentralized finance is broad.

Decentralized finance is based on the intention of removing banks and other payment institutions who act as intermediaries in practically all monetary exchanges: traditional financial transactions, loans, credit negotiation, financing, investments, creation and management of savings, contracting and paying off debts, among others.

In this vast universe, we have a list of themes, identified as trends for the financial market, to follow:

Stablecoins: its about cryptocurrencies associated with a consolidated currency. Since the crypto industry has been impacted by a dramatic decrease in value, stablecoins have been seen as a bridge to build trust in the industry.
CBDCs: are digital currencies, issued and regulated by the Central Bank of the issuing country. As of 2023, only 11 countries have actually launched a CBDC, and most of them are in the Caribbean. Outside this region, Nigeria stood out as the only issuer of a CBDC. There are several pilots in play too, such as Brazil, which is expected to launch Real Digital at the end of 2024.
Social and digital payments: chat-based payments are increasingly common, enabling financial transactions on social media.
Staking: a way to earn passive income from investments in cryptocurrencies and which involves controversial regulatory issues.
Crypto goes green: the energy intensity of the blockchain It has long been the target of criticism, which should bring new solutions.

3. Digital Identity

A digital identity It is not necessarily a single digital identity document, but rather any form of documentation that allows a person or company to be recognized via technological devices and resources.

This integration between identification and technology brings digital identity closer to the world of solutions in banking. As the Tech Trends Report pointed out in 2023, and reinforced the trend in the 2024 edition, this is the starting point for absolutely all innovation related to the world of fintechs.

But that’s not all: it also causes impact beyond financial services, bringing benefits for industries such as healthcare and education.

Also, it is hard to imagine how the metaverse promise would be fulfilled without a strong digital ID per se, in order to enable verified virtual engagements.

Finally, as the number of financial transactions migrating to the digital world grows exponentially, the need for identity verification has become a growing demand and certainly a trend to keep up with.

4. Instant Payments

The promise of technology instant payment It's simple: create systems that allow money to flow more quickly and efficiently between buyer and seller. Furthermore, the solution plays an important role in financial inclusion and the digitalization of the economy.

In Brazil, the Pix, instant payment system implemented by the Central Bank, closed three years as a great success: according to the BC, transfers of resources and payments made through the Pix totaled R$17,18 trillion in 2023 alone and broke a new record.

The positive numbers from other years had already caused the BC to announce plans to open the system's protocols free of charge to all countries that want to use them. Colombia, Uruguay and Peru are some of the markets that are interested in accelerating the innovation process of their financial system based on Pix.

Countries that have already deployed an instant payment model include Mexico, where instant payments are enabled by CoDi — which stands for Cobro Digital—and Argentina, enabled by Transferências 3.0.

Keeping up with trends for the financial industry means contributing to making finance more organic

At Dock, we believe that keeping track of trends and staying one step ahead of the game is key to building an increasingly organic, seamless world of finance.

We continuously keep up with them and upgrade our platform for solutions in Banking, Cards & Credit, Acquiring e Fraud Prevention so that our customers can also evolve their businesses along these trends, providing their customers with excellent payment experiences.

Do you want to find out more about how we do this? Watch our video manifesto

Trends for the financial market: what you saw in this article

The Tech Trends Report highlights the main trends for the technology universe every year, including insights for banking and payments.
Among the main trends for the financial market are the evolution of Open Banking, the maturity of the alternative credit score and the success of digital wallets.
The trends for the financial industry are related to our society’s digitization and interest in financial solutions that are increasingly integrated with our everyday lives and organic in everything we do.
In Latin America, trends for the financial industry such as instant payments and the use of alternative data in credit scores contribute to financial inclusion and evolving businesses.