April 3, 2024 | 5 min read
Innovation pace picks up: How the fintech world will solve new pain points in 2024
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![Fintech world](https://images.ctfassets.net/wqi8u1luxsv0/3xYEkCi9b0E2heLaZSziwp/e5aabdd345fc9a98a201ccc01071a6a2/Fintech_world.png)
![Fintech world](https://images.ctfassets.net/wqi8u1luxsv0/3xYEkCi9b0E2heLaZSziwp/e5aabdd345fc9a98a201ccc01071a6a2/Fintech_world.png)
If you wanted to find out what the near future is likely to mean for financial services innovation, an excellent starting point would be FT Partners’ report, The FinTech Journey Continues: what to look for in 2024.
Expansive and in-depth, the document sets the scene by crunching the numbers on investment trends over the previous five years, reminding us of the shift in investor activity that has brought us to where we are now. It then looks at 18 hot innovation trends to watch in the coming months - and what an exciting year it promises to be.
Embedded finance - a hot trend to watch in the year ahead
One of the most compelling trends is the acceleration of embedded finance which, as the report recalls, began life “primarily related to banking-as-a-service (BaaS) and embedded payments.” But things are moving fast and it’s anticipated that we’ll see the emergence of myriad new embedded Fintech use cases as the year progresses.
This builds on products like store-branded credit cards and buy-now-pay-later and innovations with big online brands that have allowed consumers to order and pay for goods and services within a single app. Indeed, card-on-file, a technology advanced by Marqeta, is delivering convenience by allowing users to securely store card information and “conduct transactions in one place.”
An explosion of use cases - if it’s financial it can be embedded
We’re also seeing embedded financial technology extend to B2B contexts, with payroll services for SMEs offering payments, banking and salaries all managed via a single sign-in. APIs are literally key here and they’re being used by insurtech providers to enable digital insurance programmes to some of the world’s major insurers. On top of this, the embedded trend is finding its way into other important segments of the financial services sector, including accounting and tax and wealth management.
As FT Partners’ report comments: “Embedding financial services can help SaaS companies improve user engagement and reduce churn, while offering high-margin incremental revenue opportunities; given the range of solutions that are now available on the market, we expect the space to gain significant traction in 2024.”
Fusing innovation - where two categories combine to transform UX
Also among the trends covered in The FinTech Journey Continues: what to look for in 2024, is the “fusion of FinTech and E-Commerce.” In a way, this is part of the embedded finance story and according to FT Partners marks a “significant inflection point in the evolution of online retail.”
“Technological innovation, shifting consumer behaviors, and widespread adoption across industries has resulted in enhanced payment processes, revamped business models and more personalized customer experiences. Global digitization, increased smartphone penetration, and payments innovation have catalyzed this critical shift,” the report said.
It adds that payment gateways have advanced fraud protection and data encryption in an age of proliferating digital wallets that have made online shopping faster and more user friendly.
The report also cites some of Marqeta partner Klarna’s incredible achievements as “a centerpiece of the intersection of FinTech and ECommerce.” The report states that the business has given some 150 million consumers across half a million merchants in 45 countries “smarter and more flexible shopping and purchasing experiences.”
This point was recently reinforced by Marqeta’s Senior Director of Solutions Engineering Nick Holt. In a recent Finextra article, Nick discussed how “consumers are becoming increasingly comfortable with accepting financial services from brands rather than traditional providers.”
He added that the latest research into consumer use of embedded finance showed that almost a quarter of UK consumers own a credit card affiliated with a brand, and 54% of them consider themselves a customer of the brand instead of the bank.
The end of the beginning - fintech enters exciting to new era
Later in the FT Partners’ report, a superb interview with Jon Lear, President and Co-Founder of Fintech Meetup, draws upon a cricket analogy to describe how the sector has only “approaching the end of its first innings.” Jon informs readers of how fintech initially focused on “a handful of industry pain points” but thanks to an “explosion of innovation” had expanded to more than 130 categories of services and solutions.
Yet despite its penetration of virtually every corner of financial services, Jon is firmly of the belief that fintech has “so many critical problems left to solve.” And he goes on to call out three particular areas of interest. The first is “the promise of” real-time cross-border settlement, which is “tantalizingly close,” thanks to energetic partnerships between fintechs and big banks and market infrastructures. The next is institutional adoption of embedded finance which, Jon says, is being boosted by banks “allocating significant resources” to building embedded finance offerings.
The third area is the convergence of financial services and artificial intelligence, which is going to enable “deep personalization” and will be vital in ensuring businesses meet rapidly rising customer expectations and demands.
If you’re interested in further reading on trends in embedded finance, take a look at this API Chronicles livestream here, our Pulse report blog here, and this interview with Marqeta CEO Simon Khalaf. Alternatively, to find out how to start your embedded finance innovation journey, contact a member of our team at europe@marqeta.com