FinTech Blockchain Market Booms: US$ 325.6 Billion Revenue

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FinTech Blockchain Market Booms: US$ 325.6 Billion Revenue

November 4th, 2024 Market.us Leave a comment

According to the findings of Market.us, The Global FinTech Blockchain Market is set for remarkable growth, projected to surge from USD 7.2 billion in 2023 to an impressive USD 325.6 billion by 2033, achieving a robust CAGR of 46.4% over the forecast period (2024-2033). This rapid expansion highlights the increasing adoption of blockchain in financial services, driven by its potential to streamline transactions, enhance security, and reduce operational costs. In 2023, North America emerged as the leading region, holding over 38.5% of the market share and generating USD 2.7 billion in revenue.

This dominance is attributed to the region’s advanced financial infrastructure, high investment in blockchain technology, and regulatory support that encourages innovation. North America’s leadership in this space underscores the region’s role in pioneering blockchain solutions that continue to shape the future of fintech globally.

FinTech Blockchain refers to the application of blockchain technology in the financial services sector. Blockchain’s decentralized and immutable ledger system enhances financial operations by allowing for secure, transparent, and efficient transactions without the need for intermediaries like banks or clearinghouses. This technology supports various functions such as digital payments, automated billing, and enhanced security measures. FinTech companies leverage blockchain to streamline processes, reduce costs, and maintain comprehensive and tamper-proof records, which help in building trust and compliance with regulatory standards

The FinTech Blockchain market has witnessed significant growth, particularly with the rise of cryptocurrencies, Non-Fungible Tokens (NFTs), and an increased focus on digital financial services. The market’s expansion is driven by the need for secure and swift transaction methodologies that blockchain technology offers. As financial institutions increasingly adopt blockchain for a range of applications from cross-border payments to fraud prevention, the market continues to evolve with new innovations and integrations.

The primary driving factors of the FinTech Blockchain market include the demand for reduced transaction costs and improved transaction speeds. Blockchain technology eliminates the need for intermediaries, which lowers transaction fees and reduces transaction times, thus facilitating faster financial exchanges across the globe. Moreover, blockchain enhances data security and integrity, which are crucial in the financial sector, given the sensitivity of financial data.

Key takeaways revealed that, In 2023, Payments, Clearing, and Settlement led the application segment, holding 34.6% of the market share. This leadership is largely due to blockchain’s ability to streamline transactions, reduce processing times, and minimize costs, making it a highly attractive option for financial institutions seeking operational improvements. Blockchain’s inherent transparency further enhances trust, a critical component in the payments and settlement process.

The provider segment saw Infrastructure and Protocols Providers at the forefront, capturing 42.5% of the market in 2023. These providers are essential to blockchain’s growth, establishing the core architecture on which various blockchain applications operate. By building and maintaining the foundational elements of blockchain networks, these companies enable robust, scalable, and secure systems that support a wide range of financial applications.

Market demand for FinTech Blockchain is fueled by the growing need for transparency and security in financial transactions. Businesses and consumers alike seek systems that minimize the risk of fraud and ensure the integrity of transactions. Blockchain’s inherent features, such as decentralization and cryptographic security, address these needs effectively. Additionally, as digital transactions continue to increase globally, the demand for blockchain solutions that can support high volumes of transactions securely and efficiently is also rising.

There are significant opportunities in the FinTech Blockchain market related to the expansion of blockchain applications beyond traditional financial services. Innovations such as smart contracts, tokenization of assets, and decentralized finance (DeFi) platforms offer new ways to invest, manage, and secure financial assets. Additionally, the integration of blockchain with other emerging technologies like AI and IoT presents further opportunities to enhance financial services and develop new products.

Technological advancements in blockchain are continually enhancing its application in FinTech. Upgrades in blockchain protocols, improvements in smart contract functionality, and the integration of blockchain with artificial intelligence and machine learning are paving the way for more sophisticated financial services. These advancements are making blockchain more accessible, efficient, and secure, thereby expanding its use in the financial sector.

Key Market Segments

Application Analysis

In the FinTech blockchain market, Payments, Clearing, and Settlement applications are notably prominent, holding a 34.6% segment share. This is largely because blockchain technology drastically improves the efficiency and security of financial transactions.

By automating and securely processing transactions without the need for traditional banking intermediaries, these applications not only speed up financial dealings but also enhance transparency and reduce the potential for fraud. This segment’s dominance reflects its critical role in revolutionizing financial interactions in a digital economy.

Provider Analysis

The Infrastructure and Protocols Providers segment is another significant part of the blockchain ecosystem, commanding a 42.5% market share. Providers in this segment develop the underlying technology that supports all blockchain applications – from basic transaction ledgers to sophisticated smart contracts.

Their work forms the backbone of blockchain networks, ensuring stability, security, and scalability. The dominance of this segment underscores the importance of robust and reliable infrastructure, which is essential for the broader adoption and functionality of blockchain technology.

Enterprise Size Analysis

Large Enterprises have a leading presence in the blockchain arena, with a 65.5% stake in the market. These organizations have the necessary financial resources, technological infrastructure, and managerial capacity to integrate blockchain into their operations at a significant scale.

Their dominance is indicative of the substantial investments required to implement blockchain technology effectively and the high value these enterprises place on its potential to enhance operational efficiency, reduce costs, and secure data.

Industry Vertical Analysis

In the industry verticals, Banking leads with a 46% share, showcasing the profound impact blockchain has had on this sector. Banks have been at the forefront of adopting blockchain to improve the security and efficiency of their transaction processes.

Blockchain provides banks with advanced solutions for handling the ever-increasing volume of digital transactions, combating fraud, and ensuring compliance with stringent regulatory standards. The significant share held by the banking sector reflects its commitment to leveraging cutting-edge technology to stay competitive in a rapidly evolving financial landscape.

Emerging Trends in FinTech Blockchain

1. Blockchain Identity Management: This trend focuses on creating secure, transparent, and user-centric digital identity solutions using blockchain. By distributing identity data across a decentralized network rather than centralized databases, it enhances security and privacy for digital interactions.

2. Financial Supply Chain Optimization: Blockchain technology is transforming financial supply chains by making them more efficient and transparent, which simplifies auditing processes and improves data management and security.

3. Decentralized Finance (DeFi): DeFi continues to reshape the financial landscape by enabling services like lending, borrowing, and trading to operate without traditional financial intermediaries, promoting a more accessible and transparent financial ecosystem.

4. Smart Contracts: These are self-executing contracts with the terms of the agreement directly written into lines of code. They automate and enforce contracts without the need for intermediaries, enhancing security and efficiency.

5. Cross-Border Payments: Blockchain technology facilitates near-instant cross-border transactions, reducing the need for intermediaries and lowering transaction costs. This innovation is crucial for making global payments faster and more cost-effective.

Top Use Cases for Blockchain in FinTech

1. Open Banking APIs: Open banking APIs are enabling new financial services by allowing secure and controlled access to financial data across different institutions, which supports the development of innovative financial apps and services.

2. AI-Powered Financial Advisors: The integration of AI and machine learning in personal finance is revolutionizing financial management, offering tailored budgeting, investing, and debt repayment plans through advanced analytics and personalized financial advice.

3. Regulatory Technology (Regtech): Regtech uses technology to enhance regulatory compliance, helping financial institutions meet legal requirements more efficiently and effectively, which is crucial for maintaining operational integrity and customer trust.

4. Fraud Detection and Management: AI and machine learning are being used to detect and prevent fraud by analyzing data to identify patterns that may indicate fraudulent activities, significantly enhancing the security of financial transactions.

5. Robotic Process Automation (RPA): RPA is being used to automate routine, rule-based financial tasks, which helps reduce the workload on human employees and increases efficiency and accuracy in financial operations.

Major Challenges

1. Regulatory Uncertainty: The evolving nature of blockchain has led to inconsistent regulations across different regions, creating compliance complexities for FinTech companies.

2. Scalability Issues: Current blockchain networks often struggle to handle a high volume of transactions efficiently, leading to slower processing times and higher costs.

3. Integration with Legacy Systems: Incorporating blockchain into existing financial infrastructures can be complex and costly, requiring significant changes to traditional systems.

4. Energy Consumption: Some blockchain networks, particularly those using proof-of-work consensus mechanisms, consume substantial energy, raising environmental and sustainability concerns.

5. Security Vulnerabilities: While blockchain is inherently secure, vulnerabilities can arise from smart contract bugs or inadequate security practices, potentially leading to financial losses.

Attractive Opportunities

1. Enhanced Transparency: Blockchain’s immutable ledger provides clear and traceable transaction histories, reducing fraud and increasing trust among stakeholders.

2. Cost Reduction: By eliminating intermediaries, blockchain can lower transaction fees and operational costs, benefiting both service providers and consumers.

3. Financial Inclusion: Blockchain enables access to financial services for unbanked populations, offering secure and affordable solutions in underserved regions.

4. Smart Contracts: Automated contracts that execute when predefined conditions are met can streamline processes and reduce the need for manual intervention.

5. Tokenization of Assets: Blockchain allows for the digital representation of physical and financial assets, facilitating easier trading and liquidity.

Recent Developments

April 2024 – Strategic Collaboration between GDF and FINTECH.TV

In April 2024, Global Digital Finance (GDF), a key player in promoting innovation in digital assets within the financial sector, announced a significant partnership with FINTECH.TV. This collaboration aims to leverage FINTECH.TV’s extensive media coverage to enhance awareness and education around finance, blockchain, technology, and sustainability. The partnership is expected to create a substantial impact on the global digital finance landscape by combining GDF’s regulatory and policy expertise with the broadcasting reach of FINTECH.TV.

October 2023 – Ankr and XDC Network Partnership

In October 2023, Ankr, known for its robust remote procedure calls (RPC) services, entered into a crucial partnership with XDC Network, a specialized layer 1 blockchain platform. This partnership focuses on enhancing XDC’s capabilities in trade finance and asset tokenization. Ankr’s advanced RPC service is designed to boost XDC Network’s performance, security, and scalability by facilitating efficient cross-network communication, which is vital for applications operating across different blockchain environments.

Conclusion

In conclusion, while blockchain technology presents challenges such as regulatory uncertainty and scalability issues, its potential to enhance transparency, reduce costs, and promote financial inclusion makes it a compelling innovation in the FinTech industry. Addressing these challenges through technological advancements and regulatory clarity will be crucial for realizing blockchain’s full potential in transforming financial services.

Source of Information: https://market.us/report/fintech-blockchain-market/

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AI In Fintech Market Propel’s USD 76.2 Billion Valuation by 2033

October 31st, 2024 Market.us Leave a comment

Introduction

The ongoing advancements in AI In Fintech Market is set to drive remarkable growth, fundamentally transforming the financial ecosystem and enhancing the way consumers interact with their finances. As of 2023, the market was valued at approximately USD 11.8 billion which highlights the significant strides that AI has made in the financial services sector, reflecting its importance in enhancing efficiency, customer engagement, and security.

By 2033, the global AI in fintech market is projected to reach a valuation of approximately USD 76.2 Billion, reflecting a robust growth trajectory. This anticipated expansion corresponds to a compound annual growth rate (CAGR) of 20.5% from 2024 to 2033, indicating a strong upward momentum in the adoption of artificial intelligence technologies within the financial services sector.

In 2023, North America emerged as a leading player in the AI in fintech sector, commanding over 41.5% of the global market share. The region’s demand for AI in fintech was valued at approximately USD 4.9 billion, reflecting its significant role in driving innovation and adoption of advanced technologies within the financial services industry.

AI in fintech refers to the integration of artificial intelligence technologies within the financial services industry to enhance processes, improve decision-making, and deliver more personalized customer experiences. This includes applications such as machine learning algorithms for credit scoring, natural language processing for customer service chatbots, and predictive analytics for fraud detection.

Major Factors are driving the rapid growth of AI in the fintech market like the increasing demand for automation and efficiency in financial operations is pushing institutions to adopt AI solutions that can handle repetitive tasks with precision and speed. Additionally, the surge in data generation due to digital transactions and online banking provides fertile ground for AI algorithms to analyze patterns, thus making them indispensable in the evolving financial landscape.

Key takeaways indicate that the Solution segment emerged as the dominant force, capturing a remarkable market share of over 78.3%. This dominance reflects the growing reliance on comprehensive AI solutions that enhance operational efficiency and drive innovation within financial services.

Additionally, the Cloud-Based segment established a strong market presence, holding over 62.9% of the market share. The increasing adoption of cloud technology is enabling financial institutions to access scalable and flexible AI solutions, which facilitate real-time data processing and improved customer interactions.

Furthermore, the Analytics & Reporting segment also made a notable impact, capturing more than 30.7% of the market share. The emphasis on data-driven decision-making in fintech underscores the importance of analytics tools that provide insights into customer behavior and market trends.

Regionally, North America emerged as a leading force in the AI in fintech sector, capturing over 41.5% of the global market share. This strong position reflects the region’s robust demand for AI technologies in financial services, which generated revenues of approximately USD 4.9 billion.

Statistics

According to a recent report by Citi GPS, Artificial Intelligence (AI) is poised to significantly transform the future of finance and money, potentially increasing global banking industry profits by $2 trillion by 2028, a 9% rise over the next five years.
A recent report from the Bank for International Settlements (BIS) indicates that over 80% of central banks are now utilizing some form of FinTech, including AI, within their payment and settlement systems. This suggests a potential for further integration of AI technologies into global trade finance in the future.

Market Demand

There is a significant demand for AI in the FinTech sector as organizations seek to gain a competitive edge and cater to the evolving expectations of tech-savvy consumers. The push towards digital transformation, driven by consumer preferences, personal finance, asset management, fraud detection and quick financial solutions, fuels this demand. Additionally, as the volume of financial data grows, so does the necessity for advanced AI tools that can analyze and leverage this data effectively.

Opportunities and Expansion

The AI in FinTech market is ripe with opportunities, particularly in developing innovative solutions that can ensure security and compliance while enhancing user experience. The deployment of AI for regulatory compliance and risk management presents a substantial opportunity, as these are critical concerns for financial institutions.

Market expansion in the market is likely to accelerate as technology continues to advance and penetrate different regions and sectors. Emerging markets, with their rapid digitalization and less entrenched banking services, offer a fertile ground for expansion. As traditional financial institutions collaborate more with tech startups, AI applications in finance are expanding beyond conventional banking into insurance, wealth management, and beyond.

Impact Of AI on Finance

1. Automated Decision-Making: AI enables financial institutions to automate complex decision-making processes. This includes credit scoring and loan approvals, where AI can analyze vast amounts of data to make accurate decisions quickly, improving efficiency and reducing the need for manual intervention.

2. Fraud Detection Enhancements: AI has significantly improved fraud detection systems by identifying patterns that may indicate fraudulent activities. It analyzes past transactions and customer behaviors to flag unusual actions, reducing financial losses and increasing trust among clients.

3. Personalized Banking Experience: AI powers chatbots and virtual assistants that provide customers with personalized banking advice. These AI systems learn from individual customer interactions, offering tailored financial guidance and support to customers.

4. Operational Efficiency: AI streamlines various financial operations such as data management, compliance reporting, and transaction processing. This not only speeds up processes but also reduces errors associated with human handling.

5. Innovative Investment Strategies: AI algorithms analyze market data to uncover investment opportunities that might be overlooked by human analysts. This can lead to more innovative trading strategies and potentially higher returns.

Emerging Trends

AI is driving transformative trends in fintech, redefining the customer experience, operations, and security measures across the industry. Hyper-personalization has become a significant trend, where AI analyzes individual financial habits and needs to provide tailored financial advice, investment options, and budgeting tools.

Robo-advisors like those from companies such as Wealthfront are examples, utilizing data to offer affordable, customized financial planning to a broad user base. This personalization helps consumers make informed financial decisions and increases user engagement.

Many fintechs are also using AI to streamline risk assessment, with automated systems that assess creditworthiness using broader datasets than traditional methods. Another trend is the use of hybrid cloud infrastructures that integrate AI to improve scalability, data security and operational efficiency, allowing fintechs to offer faster, more reliable services.

Top Use Cases

AI has reshaped Fintech by powering smarter, more efficient, and customer-centered solutions. One of the most significant use cases is fraud detection and prevention. With AI, financial institutions can detect unusual patterns in real-time, flagging potential fraud before it affects customers.

Another vital area is customer service and chatbots. AI-driven chatbots offer 24/7 support, answering questions, assisting with transactions, and providing personalized recommendations. Also, automated trading and investment platforms leverage AI to make fast, data-driven trading decisions which help analyze market trends, economic indicators, and even social media sentiment.

In the area of credit scoring and risk assessment, AI analyzes vast amounts of data beyond traditional metrics. By considering factors like social data and purchasing behaviors, AI can deliver a more inclusive credit assessment, benefiting users who may lack credit history but have reliable financial habits.

Major Challenges

Despite its potential, the AI in FinTech market faces several challenges. Key among them is the issue of data privacy and security. With financial services companies handling sensitive information, ensuring the security of AI systems is paramount. Additionally, the lack of clear regulatory frameworks for AI in financial services can impede development and adoption. There’s also the challenge of integrating AI with legacy systems in established financial institutions, which can be costly and complex.

Business Benefits

AI-driven Fintech applications bring substantial business advantages, primarily by increasing efficiency and lowering operational costs. Improved customer experiences through AI chatbots and virtual assistants provide instant, accurate responses to queries, freeing up human agents for more complex tasks which improves service quality.

For businesses involved in automated trading, AI systems provide speed and precision, empowering users with advanced trading capabilities and democratizing the investment process. The insights gained from AI’s rapid analysis of vast data sources also enable more informed decision-making, optimizing returns. In all, AI enables Fintech firms to operate leaner, more agile, and customer-focused models, setting new standards for financial services.

Conclusion

In conclusion, the AI in FinTech market is positioned for vigorous growth, driven by continuous advancements in AI technology and growing digital consumer demands. The integration of AI is set to deepen further, with potential breakthroughs in areas like voice-activated banking, AI-driven investment platforms, and more robust risk management systems.

The success of AI in FinTech will depend on how effectively companies can harness AI technologies to deliver enhanced value to customers while mitigating risks and aligning with global standards and expectations. This convergence of technology and finance promises not only to expand market boundaries but also to redefine the very essence of how financial services are conceived and delivered in the digital age.

Global Trade Daily

Generative AI in Fintech Market Revenue Surges to USD 16.4 Billion in 2032

October 10th, 2024 Market.us Leave a comment

Introduction

According to the findings from Market.us, The Generative AI in Fintech Market is projected to experience substantial growth globally, with expectations to reach an estimated value of USD 16.4 billion by 2032. This marks a significant increase from its valuation of USD 1.1 billion in 2023. The market is anticipated to grow at a Compound Annual Growth Rate (CAGR) of 31% from 2024 to 2033.

In the regional analysis for 2023, North America has emerged as a major player in this sector, accounting for over 36.5% of the market share. This equates to revenue of approximately USD 0.4 billion, indicating strong adoption and integration of generative AI technologies within the North American fintech industry.

Generative AI refers to the branch of artificial intelligence that focuses on creating new content, data, or solutions based on training data it has learned from. In the financial technology (fintech) sector, generative AI is playing an increasingly pivotal role. It helps in various functions such as personalizing financial advice, automating customer interactions, and managing real-time data analysis.

The market for generative AI in fintech is growing rapidly as financial institutions continue to adopt these advanced technologies to gain a competitive edge and improve customer experiences. This market segment is seeing significant investment as companies seek to leverage AI for innovation in payment systems, risk assessment, and compliance management.

The growth of this market is driven by the increasing need for efficiency and automation in financial services, the vast amounts of data being generated in the financial sector, and improvements in AI model capabilities. As a result, both startups and established financial firms are integrating AI solutions to enhance their offerings and operational effectiveness.

The demand for generative AI in fintech is fueled by the need for more sophisticated, automated financial services that can handle complex transactions and personalized customer interactions. Financial institutions are increasingly relying on AI to process large volumes of data to derive insights and make predictive decisions, which enhances customer service and operational efficiency.

Generative AI has gained popularity in the fintech sector due to its ability to innovate and revolutionize traditional banking and financial services. Its capacity to generate new content and solutions, such as automated financial advice or customized investment portfolios, makes it a key differentiator in a competitive market.

There are significant opportunities for generative AI in areas like risk assessment, fraud detection, regulatory compliance, and customer relationship management. The technology’s ability to adapt and learn from data makes it ideal for fintech applications where regulations and economic conditions are constantly evolving.

The global expansion of fintech services, coupled with increasing digitalization of banking and financial services in emerging markets, provides a substantial growth platform for generative AI. As more businesses and consumers adopt digital financial solutions, the potential applications and reach of AI technologies expand, driving further market growth.

Generative AI in Fintech Statistics

The Global Generative AI in Fintech Market is forecast to escalate substantially, with projections indicating a growth to approximately USD 16.4 billion by 2032, up from USD 1.1 billion in 2023. This trajectory represents a robust Compound Annual Growth Rate (CAGR) of 31% during the forecast period from 2024 to 2033.

In 2023, the Software segment dominated the market, securing over a 61% share of the Generative AI in Fintech market. Similarly, the Cloud segment held a significant market position, capturing more than a 72% share.

The application of Generative AI in Fraud Detection proved to be particularly prevalent, leading the market applications in 2023 with a share exceeding 25%. Geographically, North America maintained a dominant stance in the market, holding more than a 36.5% share, with revenues reaching approximately USD 0.4 billion.

A notable 82% of financial institutions are currently either exploring or implementing Generative AI solutions to bolster their operations and customer services. Utilization of Generative AI for customer service and personalization is anticipated to potentially enhance customer satisfaction scores by 20% by 2024.

Furthermore, the application of Generative AI in anti-money laundering (AML) and fraud detection processes is expected to reduce false positives by 50% by 2024. Additionally, these technologies could augment the accuracy of credit risk assessment models by up to 25%, fostering improved lending decisions.

The demand for Generative AI solutions in regulatory compliance and reporting is projected to see a significant uptick, with an expected increase of 40% in 2023. In the realm of financial trading and portfolio management, Generative AI is poised to enhance investment returns by 10% by 2024, underscoring its transformative potential in the fintech sector.

The Global FinTech Blockchain Market is poised for extraordinary growth, with projections indicating an increase from USD 7.2 billion in 2023 to USD 325.6 billion by 2033. This surge represents an impressive Compound Annual Growth Rate (CAGR) of 46.4% during the forecast period from 2024 to 2033.

Similarly, the Global AI in Fintech Market is set to expand significantly. Starting from USD 11.8 billion in 2023, it is expected to reach USD 76.2 billion by 2033, growing at a CAGR of 20.5% over the same period.

Report Segmentation

Component Analysis

In 2023, the Generative AI in Fintech market experienced significant dominance in its Software segment, which held more than a 61% share. This predominance underscores the pivotal role software solutions play within the financial technology sector, particularly in integrating artificial intelligence to streamline and enhance financial services.

The software components of Generative AI are crucial for enabling sophisticated tasks such as automated decision-making, risk assessment, and customer service optimization. These applications not only improve operational efficiencies but also contribute to a more personalized user experience, driving the demand for advanced AI-powered software solutions. Furthermore, the continuous development of machine learning models and algorithms has bolstered the capacity of Fintech companies to offer more accurate and efficient services, reinforcing the growth of the software segment. This segment’s expansion is also facilitated by the increasing accessibility of AI tools and platforms that allow for rapid deployment and scaling, making it an essential asset for fintech enterprises looking to maintain a competitive edge in a rapidly evolving industry.

Deployment Analysis

The cloud deployment model marked a significant footprint in the Generative AI in Fintech market in 2023, capturing more than a 72% share. This substantial market share can be attributed to the multiple advantages that cloud-based solutions offer over traditional on-premises installations. Primarily, cloud platforms facilitate greater scalability and flexibility, essential for handling the vast data volumes that fintech applications generate and utilize.

Additionally, cloud environments significantly reduce the infrastructure costs associated with deploying AI systems, making advanced technologies more accessible to fintech companies of all sizes. The cloud’s capacity to support seamless updates and integration plays a crucial role in its dominance, as it allows financial institutions to stay at the forefront of technological advancements without substantial upfront investments.

The security enhancements and compliance with regulatory standards offered by major cloud service providers further augment the attractiveness of cloud deployment in the fintech sector, ensuring that sensitive financial data is handled securely and in accordance with global data protection regulations.

Application Analysis

In 2023, the Fraud Detection application within the Generative AI in Fintech market held a dominant position, accounting for more than a 25% share. This prominence highlights the increasing reliance on AI-driven solutions to combat financial fraud, a growing concern within the digital transaction space. Generative AI enhances fraud detection systems with its ability to analyze large datasets rapidly and identify patterns that may indicate fraudulent activity, which often eludes traditional detection methodologies.

The adaptability of AI algorithms allows for continuous learning from new transactions, thereby improving their accuracy and efficiency over time. This capability is crucial in adapting to the constantly evolving tactics employed by fraudsters. As fintech platforms proliferate and digital transactions increase globally, the demand for robust, AI-enhanced fraud detection mechanisms continues to grow, driving significant investment in this segment. Enhanced accuracy and reduced false positives in fraud detection not only protect financial assets but also build consumer trust in fintech services, further stimulating market growth

Top Use Cases of Generative AI in Fintech

Generative AI is significantly transforming the Fintech landscape by enhancing various aspects of financial services. Some of the prominent use cases include:

1. Automated Financial Advice and Risk Assessment: By analyzing extensive customer data, generative AI offers personalized financial advice and evaluates investment risks, enabling better informed decision-making tailored to individual financial goals and risk tolerances.

2. Fraud Detection and Regulatory Compliance: Generative AI excels in real-time monitoring of transactions, identifying patterns indicative of fraudulent activities. This not only helps in mitigating financial losses but also ensures adherence to evolving regulatory standards, safeguarding both the financial institutions and their customers.

3. Enhanced Customer Interactions and Support: AI-powered virtual assistants and chatbots provide 24/7 customer support, handling queries efficiently and enhancing customer satisfaction. These systems are capable of offering customized interactions based on the customer’s history and preferences, which improves service delivery and customer loyalty.

4. Streamlined Loan and Credit Processing: Through the intelligent analysis of data points like credit history and transaction patterns, generative AI can automate and optimize the loan approval process, offering a more accurate assessment of creditworthiness and reducing the time from application to decision.

Emerging Trends in Generative AI for Fintech

As generative AI continues to evolve, several trends are shaping its application in the Fintech sector:

1. Expansion of AI-Driven Personalization: The trend towards hyper-personalization is growing, where services are tailored to individual needs and preferences, driven by deeper data analysis capabilities of generative AI. This is evident in customized investment strategies and personalized banking experiences.

2. Integration with Regulatory and Compliance Frameworks: There is an increasing use of AI to navigate the complex regulatory landscape in finance, automating compliance processes and ensuring up-to-date adherence to regulations without extensive manual oversight.

3. Advancements in AI for Predictive Analytics: Predictive capabilities of AI are becoming more sophisticated, allowing financial institutions to anticipate market changes, customer needs, and potential fraud scenarios ahead of time, thus better positioning them to respond proactively.

4. Innovations in Financial Product Development: AI is also spurring innovation in product development, enabling the creation of new financial tools and services that meet changing consumer demands, such as dynamic pricing models and risk-adjusted insurance policies.

Business Benefits of Generative AI in Fintech

The incorporation of generative AI into Fintech offers numerous business benefits:

1. Operational Efficiency: AI automates and optimizes many routine tasks, from customer onboarding to transaction processing, significantly reducing the time and labor costs associated with these operations and allowing human resources to focus on more strategic activities.

2. Improved Decision Making: With the ability to analyze large datasets rapidly, AI enhances decision-making processes, providing insights that are not easily discernible through traditional methods. This supports more accurate and timely business decisions.

3. Enhanced Risk Management: AI’s predictive analytics help in better assessing and managing risks associated with lending, investments, and other financial services, thereby reducing potential losses and enhancing financial stability.

4. Customer Retention and Satisfaction: By providing tailored experiences and proactive customer service, AI technologies increase customer engagement and satisfaction, which in turn helps in retaining customers and enhancing brand loyalty.

Conclusion

The integration of generative AI into the fintech sector is significantly transforming financial services, driving demand, popularity, and market expansion. As these technologies continue to evolve, they offer substantial opportunities to enhance efficiency, compliance, and customer engagement. The future of fintech seems increasingly intertwined with generative AI, promising not only to streamline operations but also to innovate and personalize the financial experience for users globally. This alignment is expected to propel continuous growth and adoption in the fintech industry, making generative AI a cornerstone of future financial technologies.

Source of information : https://market.us/report/generative-ai-in-fintech-market/

About The Author

Mr. Yogesh Shinde is ICT Manager at Market.us. He oversees a comprehensive portfolio of ICT products and solutions, including network infrastructure, cybersecurity tools, cloud services, data center solutions, telecommunications equipment, software-defined networking (SDN), and Internet of Things (IoT) devices. With a focus on driving digital transformation and enhancing connectivity, Yogesh ensures that the company’s offerings meet the evolving needs of both industrial and commercial sectors. His expertise in information and communication technology is instrumental in delivering innovative and reliable solutions to clients worldwide.

Banking, Global Trade Daily, International Trade

Why Strategic Churn Is Good for Your Bottom Line

August 27th, 2024 Guy Marion Leave a comment

If you have a subscription-based business, a concept that may seem counterintuitive at first glance is strategic churn. Losing hard-won customers is something that we try to avoid at all costs. Yet, for many savvy subscription leaders, strategic churn, or the intentional loss of poor-fit subscribers who drag down overall customer satisfaction, gross margins, and product development velocity, has become a crucial strategy for increasing the bottom line and ensuring long-term viability in a market that’s undergone a whiplash-level pivot from growth at all costs to growing efficiently.

According to recent data from Chargebee’s 2024 State of Subscriptions and Revenue Growth report, a staggering 73% of subscription businesses are raising prices in 2024—a significant uptick from the previous year’s 62%. What’s more intriguing is the willingness of these businesses to accept substantial churn rates of 20% or more of their customer base in pursuit of greater profitability and sustainability. But done right, this strategy of increasing prices, ideally in conjunction with releasing product and service enhancements that appeal to the core loyalists who are willing to pay more for a more valuable service, helps separate the wheat from the chaff.

Higher paying customers drive higher annual recurring revenue (ARR) per customer, higher customer lifetime value (CLV), and are stickier with more predictable retention rates. Alternatively, price-sensitive customers who are less willing to pay are often those who submit a disproportionately high number of support cases, request expensive returns or process chargebacks, are more prone to posting negative reviews online, and have a higher propensity to voluntarily cancel (“strategic churn”).

In my recent discussions with B2B and B2C subscription growth leaders, we’ve discussed the rationale behind embracing strategic churn at length. Across industries, from SaaS platforms to content streaming services, the consensus is clear: sacrificing short-term numbers for long-term gains is a strategic opportunity.

Let’s look at why strategic churn is emerging as a powerful tactic for subscription companies to optimize customer lifetime value (CLTV), drive net revenue retention (NRR), and achieve positive cash flow, all while fostering deeper relationships with their most valuable customers.

Prioritizing value over volume

One of the fundamental principles driving strategic churn is the recognition that not all customers are created equal. While acquiring new customers is essential for growth, retaining those who value your product or service is equally—if not more—important. By focusing on quality over quantity, subscription companies can tailor their offerings to cater to the needs of their most loyal and high-value customers.

Some butter is better than no butter

Butternut Box, a leading UK-based fresh dog food subscription box, recently experienced strategic churn when it decided to make a calculated bet on raising prices in three step-up phases between 2022 and 2023. The decision to raise prices was motivated by a variety of factors ranging from a 30-40% increase in the cost of lamb and beef to supply chain challenges due to new factory construction and the need to become profitable as a company. It used the pricing changes to shift into a value-based pricing model from its previous cost-plus model and worked with third-party pricing consultants to run surveys to develop psychological price barriers. The company then rolled out its pricing increases in phases, beginning with new customers and continuing with existing customers.

Butternut Box carefully monitored its churn during this time. It implemented targeted campaigns aimed at customers who were dissatisfied with the new prices, offering personalized win-back messages and adjusting plans to retain them. This included tools to review and adjust their subscriptions, such as removing additional products or switching to surcharge recipes. Additionally, Butternut Box improved the pause/cancel experience by allowing customers to modify their plans online instead of calling. The philosophy that “some butter is better than no butter” guided them to offer flexible options to retain customers who were considering downgrading rather than canceling entirely. Incredibly, neither acquisition rates nor CPAs suffered through the change.

The results? Butternut Box significantly increased Customer Lifetime Value (CLTV) while maintaining stable gross retention and exponentially improved its CAC: LTV ratio. Butternut Box proves that even in customer-obsessed businesses like itself, strategic churn results in a more sustainable business, which is better for customers.

Switching to usage-based pricing was a win for Livestorm

Another interesting example is Livestorm, a B2B SaaS vendor. Livestorm was among the first in the video conferencing industry to switch pricing from license-based to usage-based. Livestorm managed to transition most of its customers from 70% paying fixed monthly fees to 80% paying for usage in less than a year. What’s extraordinary is that it doubled its average revenue per account and tripled its lifetime value. Along the way, a meaningful proportion of the legacy customers opted against shifting to usage pricing (strategic churn) – freeing up Livestorm to accelerate development and better serve its more valuable customers – while overall revenue increased.

Embracing the strategic churn journey

Embracing strategic churn requires a shift in mindset—from focusing solely on short-term sales acquisition rates to prioritizing long-term sustainability and customer lifetime value. It’s about understanding that not every customer is meant to stay forever and letting go of those who no longer align with your strategic objectives. 80% of consumers are more likely to purchase a new subscription that allows them to cancel online (2021 State of Retention Industry). Remember, by making it easy for customers to cancel and offering a positive experience, you increase the likelihood of them returning. This could happen if they realize the value of your product or service, if you introduce new features they desire, or if their circumstances change.

By proactively managing churn and nurturing relationships with high-value customers, you can unlock new opportunities for growth, innovation, and market leadership. In an era of relentless disruption and fierce competition, embracing strategic churn and subscriptions can be a powerful revenue growth tactic.

Conclusion

Strategic churn represents an opportunity for growth you may not have considered until now. By raising prices and/or adjusting your model, you can improve your product appeal more quickly to your most committed customers. By prioritizing value over volume, embracing customer-centricity, and learning from real-life success stories, you can harness the power of strategic churn to drive sustainable growth, increase profitability, and chart a course toward long-term success.

About the author:

Guy Marion, Chargebee’s Chief Marketing Officer, leverages over 15 years of strategic marketing and leadership to drive SaaS growth. Before joining Chargebee, Marion was CEO and Founder of Brightback, now Chargebee Retention. At Chargebee, he spearheads the go-to-market strategy, increases brand awareness, and drives customer acquisition. In his free time, he enjoys spending time with his family, boating on the San Francisco Bay, and contributing to the startup ecosystem.

Chargebee is the leading Revenue Growth Management (RGM) platform for subscription businesses.

Archives, Banking, Banking on Global Trade, Global Trade Daily

Fintech Market to Reach $324 billion in 2026

February 11th, 2022 U+ Leave a comment

U+ today released “The State of Fintech 2022,” a report that analyzes disruptive fintech trends and industry projections including banking, payments and insurance. The report outlines how and why investors have poured $91.5 billion into fintech firms in 2021, nearly doubling the previous year’s figure. As a result, analysts predict the fintech market to reach $324 billion by 2026.

“The growth and investment in fintech points to closer collaboration between startups and incumbents, as well as regulators, investors and even consumers, as the industry searches for cost reductions, client-friendly experiences and technology upgrades,” said U+ Founder and Chief Executive Officer Jan Beránek. “Since technology use has redefined the financial services industry, incumbents and challengers are competing to acquire and analyze customer data. In an attempt to secure brand loyalty, developing client-friendly experiences is a key focus.”

With convenience and enhanced customer experiences at the top of the priority list in fintech, the U+ report also reveals a demand for software engineers to help businesses keep up with the fast-paced tech initiatives.

Innovative banking solutions have arrived in a major way, with about 30% of all global banking customers using at least one non-traditional financial service. With more than 26,000 fintech companies worldwide, now is the time for all financial service providers to secure their place within this sector, even if it means collaborating with innovative partners to lead the industry using big data and artificial intelligence, for example.

U+ also selected the Top Fintech Innovators after extensive market research, leveraging databases including CB Insights and Crunchbase. Market share, along with the amount and date of funds raised, were also considered as selection criteria.

Archives, Banking, Global Trade Daily

Central Banks to Adopt Their Own Digital Currencies to Eliminate Potential Risks

November 1st, 2021 Francois Moreau Leave a comment

Digital currencies backed by central banks, or central bank digital currencies (CBDCs), are becoming a reality for residents in a few countries around the world. The evolution from checks, to debit cards, and now to digital payments give cause to wonder if we really need cash anymore. While economists agree that we still need cash for now, some governments are discussing the effects of implementing a CBDC nationally.

However, not everyone is as interested in the prospect of implementing a nationwide digital currency. Commercial lending and banking would be affected, as the widespread use of CBDCs could take a bite out of commercial deposits and put the industry’s funding in jeopardy. But with China currently developing a digital Yuan, that leaves government and supply chain leaders wondering about the potential trade risks of not competing in the global economy with CBDCs.

Luckily, lawmakers have come up with a slew of solutions that include strict regulations and controls, hard limits on transfers and holdings, and a long-term transition period before the new digital assets could be launched in full effect. In the meantime, central bankers in the US are contemplating adopting their own digital tokens for instant, low friction international transactions.

What is Central Bank Digital Currency?

A CBDC is the virtual form of a certain fiat currency. You can think of it as an electronic record or a digital token of how currency is spent, held, and moved. CBDCs are issued and regulated by central banks and backed by the credit of their issuer. They aren’t really a new kind of money, it just changes the way we track transactions.

While seemingly very similar at first glance, CBDCs are not cryptocurrencies. Cryptocurrencies are digital currencies that are secured by cryptography and exist on decentralized blockchain networks. Bitcoin and other cryptocurrencies are not backed by any government or banking entity and are purely digital currencies. CBDCs, in contrast, are backed by legal tender and are only a digital representation of fiat money.

Part of the draw to create CBDCs is inspired by their crypto-cousins’ distributed ledger technology. DLT, or blockchain technology, refers to the digital infrastructure and protocols that allow access, validation, and continuity across a vast network. This means that, in contrast to fiat currency that exists today, digital currencies can be tracked and verified in real-time, limiting the risk of theft and fraud.

Blockchain technology is usually associated with cryptocurrency, but it has the potential for numerous applications that could help governments organizations and banking entities run more smoothly with accountability and transparency. Another reason why countries are drawn to CBDCs is they have the ability to help increase banking access for otherwise underbanked populations.

Currently, there are 81 countries exploring CBDCs. China is racing ahead of the pack with their development of the digital Yuan, putting pressure on countries that will want to remain competitive. It raises the question of whether China will at some point accept only digital currency, meaning other countries would need their own CBDCs to remain competitive on a global scale.

China’s digital Yuan

China has long been known to resist cryptocurrencies and crypto trading, so when the news broke that their central bank has been developing a CBDC there was some confusion. However, it has now become clear that the Chinese government is creating an environment where citizens who want to use digital currencies like crypto will have to use the digital Yuan, removing any competition from DeFi banking initiatives.

Before their crackdown on Bitcoin and crypto, local investors made up 80% of the crypto trading market. This shows promise when it comes to the adoption of the digital Yuan, with so many Chinese citizens open to adopting and spending digital currency.

They have already started real-world trials in a number of cities and are expecting the digital Yuan to increase competition in China’s mobile payments market. It is still not entirely clear how users will hold and spend the new digital Yuan whenever it is available nationwide. Right now the most popular form of mobile payment in the country relies on QR codes scanned by merchants.

Alipay and WeChat Pay could eventually integrate CBDC functionality, and smartphones could also potentially be used as a digital wallet for CBDCs. There is still a lot to be discussed, tested, and fixed before the digital Yuan can be distributed nationwide, but China is currently the country closest to rolling out its own CBDC.

Where does the United States stand?

Crypto thefts, hacks, and frauds amounted to about $1.9 billion in 2020, so many leaders have reservations when it comes to enforcing and regulating CBDCs in the US. But there is evidence that CBDCs would have no issues being adopted by the American people. Crypto aside, the digital payments sector is booming with about 75% of Americans already using digital payments apps and services.

But there is not yet a single widely accepted infrastructure available that could handle CBDCs, and lawmakers are lagging behind when it comes to regulations for fintechs as it is. The US could take a page from China’s book and explore adding CBDC functionality to existing banking fintechs like Chime, Paypal, and ApplePay. According to online trader Gary Stevens from Hosting Canada, it would also be wise to look at banks that offer trading services as well.

“In the US, banks offering online trading services (such as Merrill Edge through Bank of America) tend to provide a seamless client experience,” says Stevens. “They strive to provide a consistent login interface between the bank and its brokerage arm, making switching between these platforms easier. This also makes other tasks like moving money between these accounts more flexible. Therefore, US residents have come to expect a more integrated, holistic experience with similar core functionality.”

The Future of CBDCs

The onset of the pandemic has created the perfect storm for CBDCs to come to fruition. Telework, online education, and streaming services have experienced growth while brick-and-mortar establishments have suffered. The same is true for the financial services industry. Banks have struggled to compete with fintech solutions, and more people are utilizing digital payments than ever before.

Since CBDCs are such a new technology, there is still much to learn when it comes to implementing CBDCs nationwide and around the globe. Offline accessibility and resilience are only a couple of concerns regarding digital currency adoption worldwide. Other issues include user privacy, using private and public blockchain networks, and how digital currencies will be exchanged on a global scale. Only time will tell how central banks choose to seriously pursue this route to make it more mainstream.

Conclusion

There are a lot of details still up in the air regarding CBDCs, as well as a considerable amount of research, testing, and development left to unfold. But one thing is clear: central bank digital currencies are already under development. Whether you are getting into online trading or just like the convenience of e-payments, they might be coming to a digital wallet near you sooner than you think.

Archives, Banking, Global Trade Daily, International Trade

Is Saudi Arabia Leading the Race for FinTech Financial Inclusion?

July 8th, 2021 Francois Moreau Leave a comment

It can be hard to keep up with Fintech. Just as the sector appears to be settling into some form of pattern in the UK and USA, where the next notable round of innovation is widely expected to be the automation that is changing the industry, new markets and new centers are emerging.

One of these – and one that was thought to be rather unlikely until fairly recently – is Saudi Arabia. Though the Middle East has long had a promising fintech sector, this has largely been confined to Saudi’s smaller neighbor, UAE.

Now, a range of Saudi startups have raised large sums in seed capital, and seem poised to make a major impact on the industry. In this article, we’ll look at these recent success stories, and explore when they mean for Saudi’s nascent fintech sector.

Saudi Arabia: A New Frontier?

First, let’s take a look at those recent headlines. Back in April, a promising but relatively small Saudi fintech startup, Tamara, announced that it had raised $110 million for its Series A funding. This came as a real shock to industry, and with good reasons – not only was this the largest level of Series A funding ever raised by a Saudi startup, but it was the largest Series A ever raised by a middle eastern startup.

Perhaps the news shouldn’t have come as much of a surprise, though. Observant investors noted that the Saudi fintech sector has been growing steadily over the past few years – from just 10 startups registered under the Fintech Saudi initiative in 2018, to a total of 155 in 2020. And with extra companies comes extra funding – from January to May this year, fintech startups based in Saudi Arabia raised almost $130 million, a whopping jump compared to the $23 million raised by the sector from 2015-2020.

This growth is also likely to continue in the medium term. This level of investment is proving to be an incentive for Western fintech startups, as well, who are now looking to the Middle East as a potential new market for their services. Whether they will be able to take advantage of the size of the market in the region will, however, depend on a number of factors.

As we will see, the biggest problem standing in the way of creating a dynamic Fintech sector in Saudi is not the demand for innovative banking services – that is certainly strong enough. Rather, it is a somewhat traditional banking sector that may be reluctant to open up to technology companies.

Growth Across the Region

Saudi certainly has some well-established models to follow when it comes to catalyzing fintech growth. Bahrain, for instance, is widely regarded as having some of the most fintech-friendly banking regulations in the world, and the sector in that company is growing rapidly. Similarly, Egypt is seen as a real growth market for the sector, given the country’s huge population and a government that seems to be supportive of novel approaches to small business finance.

In both of these countries, government support has been key to encouraging the fintech sector, and Saudi Arabia appears to have recognized this. The Fintech Saudi initiative is the flag bearer for this support, and was launched back in 2018 by the Saudi Central Bank. The bank partnered with the Capital Markets Authority (CMA) in the kingdom, which has played a pivotal role in providing investment funding for fintech startups.

The goals of these investments are certainly ambitious. The mission statement of the CMA states that it is tasked with “transforming Saudi Arabia into an innovative fintech hub with a thriving and responsible fintech ecosystem”. As part of this wide mandate, Fintech Saudi facilitates the licensing process for startups, connects entrepreneurs with investors, service providers, and banks, and has an accelerator program run by Flat6Labs.

This government support is, in turn, part of a broader change across the region, in which governments who were previously averse to change are embracing new ways of doing business. Just as the oil industry is changing, and becoming more transparent, so is the financial sector. And that will have impacts far beyond investors and bank staff because fintech might just be able to make banking truly inclusive.

Open Banking and Inclusion

If, as seems likely, Saudi Arabia becomes a leader in the fintech space, it will act not just as a catalyst for the development of fintech solutions across the region. It will also be the biggest test run yet of one of the central promises of fintech – that this technology can open up banking in a way never seen before.

On the one hand, Saudi Arabia seems like an unlikely place to be at the forefront of inclusive banking. The country is still very conservative and has some of the most secretive banking practices in the world. However, there are signs that the kingdom is open to change – both socially and in regard to the way it does business.

This has been overtly stated by Fintech Saudi, which is developing an open baking framework for the kingdom. Their aim, they say, is to force Saudi banks to be more open, and to share data about their activities more widely. This, in turn, will likely make it easier for under-represented groups in the country – women, most of all – to access banking services.

At the moment, many guest workers and women in the country are under-served by financial institutions, and by allowing them to open accounts it is hoped that the country can become more open generally. In addition, fintech can help these workers to make international payments more easily, sending money back home and sharing the benefits of the strident Saudi economy.

The Challenges

Of course, changing the way in which a conservative country runs its banking system is not going to be easy. The Fintech sector in the country, while attracting a lot of funding, will have to overcome some real challenges if it is going to succeed.

One of these is a skills gap. A recent report from Fintech Saudi, for instance, shows that hiring qualified talent was the primary challenge for 40% of startups in the fintech space. Without qualified workers to power the work of startups, it’s likely that these will either stall or be forced to move their activities (and their profits) elsewhere.

Secondly, there is the issue of cybersecurity. Saudi has been a major target of cyberattacks in recent years, many of which appear to have originated in Iran. While the average fintech startup might not be a target of global cyber-weapons, the sheer number of common cybersecurity risks that the average Saudi company experiences every year could be enough to deter some startups and investors from working in the country.

The Bottom Line

That’s not to say that these challenges don’t have solutions, of course. Open banking has progressed in two ways around the globe in recent years, either via regulators forcing traditional banks to embrace it and work with fintech startups (as is the case in the European Union) or (as we see in the US) incumbent banks opting to partner with open banking providers to keep pace with innovation.

If Saudi Arabia can do the same, while also recognizing that both talent acquisition and customer service are key to success in Fintech, there is no reason why it cannot emulate the success of its neighbors, and become the next global fintech hub.

Archives, Banking, Global Trade Daily, Special Reports

Why Credit Cards Could Be the Next Big Opportunity in B2B Payments

June 22nd, 2021 Rick Fletcher Leave a comment

With the advent of widespread remote work, businesses have made impressive leaps in eliminating checks and adopting electronic supplier payments. These changes primarily translated to increasing the number of ACH or Direct Deposit payments made. According to Nacha—the governing body for the ACH network—business-to-business payments for supply chains, supplier payments, bills, and other transfers increased by almost 11% in 2020. But as organizations adopt electronic payment processes, there’s another strategic opportunity for AP to consider: electronic credit card.

Most companies’ payments flow through AP, yet few AP departments today are making significant use of credit cards to their fullest potential. Historically, companies use credit cards as a decentralized way to manage expenses. In order to do their jobs, employees need to spend efficiently, without going through a bureaucratic process. Traditional commercial programs have been focused on companies giving their employees purchasing cards (p-cards) or travel and entertainment cards (T&E cards) which they could use for supplies, meals, or departmental expenses such as software subscriptions, and marketing expenses—items that would be classified as indirect spending. However, while the benefits of these programs are clear, even in a depressed travel environment, it falls short of the full potential of complete credit card utilization.

Old vs. New

Companies can establish guardrails for spending on these cards. They can add controls to limit employee spending or only allow them to spend in certain places. There are also mechanisms in place to do post-transaction reviews and allow for remediation for inappropriate spending. Due to the combination of convenience and control, finance departments often think about cards as tools for employee productivity, with customizable spending controls.

This only touches on one aspect of company spending, however. Companies spend far more of their budget through traditional purchase orders and invoices for direct expenses like materials, components, freight, and labor. The idea that AP could utilize a card for direct expenses has still not been widely accepted.

Cards provide easy access to working capital and offer rewards like cash back or points. Many companies appreciate that cards are a better electronic payment option due to these benefits. The question then becomes: how do you build a successful card program in accounts payable? Generally, businesses have to make card processes work within their pre-existing AP infrastructure, which usually includes a supplier interaction component and a technical component that traditional players (banking institutions) in this space are not fully equipped to handle.

For example, banks primarily look at credit cards as another form of lending. They offer credit lines, which their customers spend against and pay back. Paying supplier by card usually enables businesses to reach their top 10 or 20 suppliers. That’s usually considered a successful lending program, but to interact with more suppliers, integrate with an ERP, or offer enhanced reconciliation data, banks don’t usually have the technical resources, because it’s beyond their traditional lending model.

Incorporating the New

Bank business models usually focus on building and maintaining a vast merchant acceptance network. You can walk into tens of millions of locations worldwide and if they have the Mastercard or Visa logo, you can use your credit card there, no questions asked. But when it comes to payments for suppliers, the acceptance network is inconsistent. Some suppliers don’t accept payment by card, or only accept them from certain customers depending on speed of payment, the margins, and the type of product that they’re selling. Due to these factors, paying by bank-issued card requires the vendor engagement process to include finding suppliers that already accept specific card types, ensure they accept that payment type from other customers, and locate new card-accepting suppliers.

That’s where fintechs really shine, because their business models are built to incorporate a supplier engagement process aimed at getting more spend on cards. Where banks generally looking for the top 10 to 20 suppliers, which might account for 70 percent of your total spend, fintechs go after the tail—that 30 percent of spend that probably accounts for more than 60 percent of your suppliers and takes more work to get on board. Essentially, they build out a B2B acceptance network inside the credit card acceptance network.

Scaling the Mountain Towards Change

Operationalized re-engagement models are a particularly important component of this business model because most companies churn 10 to 20 percent of their suppliers each year. Within two years, business’ supplier pools are different by 20 percent from when they began, so they must reach out constantly to maintain certain payment acceptances. While banks don’t always have the capacity to offer supplier acceptance maintenance, fintechs thrive when they include those services in their business model.

There are multiple benefits of capturing tail spend on cards. For example, doing so opens the door to paying more suppliers electronically, earning businesses more working capital and a higher potential for rebates. Virtual cards come with security and controls that plastic cards do not usually possess, including single-use numbers that are tied to unique suppliers and payment amounts. Tag on reconciliation data options, and the system becomes something that benefits accounts receivable as much as accounts payable. This opens more suppliers up to the idea of accepting electronic forms of payment.

Fintechs—technology-focused by nature—build their systems with a holistic viewpoint in mind, preferring to create software that doesn’t sacrifice one business’ operations for another’s. By enhancing the system end-to-end, previously reluctant accounts receivable teams, who felt strong-armed into giving up outdated payment processes, often become more willing and interested to learn about electronic alternatives.

_____________________________________________________________________

Rick Fletcher is the Comdata President of Corporate Payments, where he specializes in sales, marketing and product strategy, operations, and customer service.

Archives, Banking, Global Trade Daily

The European Legislation That’s Giving Businesses a Better Deal with Banks

December 27th, 2020 Anna Jones Leave a comment

New legislation has been rolled out across Europe with the aim of increasing competition in the financial services market – and America is taking note.

‘Open Banking’ legislation forces the big financial institutions who dominated the market place to share data belonging to businesses and individuals with their competitors. This happens only when the customer has requested it – and is designed to help the customer to get a better deal when managing their money.

Using these Open Banking provisions, third-party financial institutions can access things such as balances, transaction information, spending details, borrowing and overdraft use. It means those institutions can then analyze the data and use it to offer linked services and offers. Only specific data that is required to enable a particular service is shared and only when the customer has consented. That consent can be withdrawn at any time.

Across Europe, legislation – in the form of the Second Payment Services Directive (PSD2) – is now in place to require banks to engage with Open Banking and enable customers to consent to the sharing of their data in this way and sign up for services that require it.

Though the concept of financial firms sharing customer data to enable products has been around for a while in Europe and the US, the European Union’s PSD2 legislation has arguably been a driver in making the way it is done more secure and raising the profile of the opportunities it creates across the globe.

Open Banking is certainly allowing individuals and businesses to access a wider variety of financial services.

Mastercard firm Finicity, with corporate headquarters in Utah, is an established Open Banking provider and recently announced a data access agreement with Brex, a finance management system for businesses.

Finicity CEO and co-founder Steve Smith said: “Finicity has been collaborating in earnest with financial institutions in signing data access agreements with banks and other traditional financial institutions.

“With our agreement with Brex, we are now extending our approach to fintechs. We look forward to working with Brex in pioneering the way financial data is utilized to help businesses grow and achieve their goals.”

The growth of Open Banking is undeniable.

In the UK alone, more than two million customers were said to be accessing Open Banking services by September 2020, according to the Open Banking Implementation Entity (OBIE).

Apps and services using Open Banking have made a wide variety of business banking services easier or more affordable.

Open Banking makes it feasible for a service provider to create an app that links directly to a business account to assess how much tax is payable and to move those funds into a tax account, for example.

In one of its simplest forms, Open Banking allows accountants, financial personnel, and business managers to set up and access a dashboard where accounts held across a multitude of different institutions can be viewed and managed in one place.

Disrupter services are also forcing intensified competition on things like fees and charges for overseas spending and transaction costs.

One aspect of Open Banking allows merchants to tap into new streamlined options for accepting payments and making refunds directly between customer accounts without the need for credit or debit cards.

Kieran Hines, Senior Banking Analyst at financial services technology research, advisory and consulting firm Celent, said: “Open Banking on the face of it is a quite alien concept. If you say to people ‘there is this great new concept where third parties can access your bank account information’, people are naturally quite hesitant and tend to reject the concept.

“What we will see happening, and to some extent is already happening, is that people will engage with Open Banking services because they provide value. Customers will be less and less aware of the realities of what happens to power these services and more interested in taking advantage of what they can offer.

“In the same way that people don’t need to know how an ATM works in order to use it. What we need to know with Open Banking is ‘if I provide consent to this mobile app to see my data, they can give me something better than I have now’.

“Over time, Open Banking will become something that is just part of the experience customers have and they’ll be aware of how that can be used to improve the services they receive.”

Archives, Banking, Global Trade Daily

Digital Technology for your Financial Reconciliation

December 11th, 2020 EKA Leave a comment

Businesses today have a clear need for a financial reconciliation management system that is fast, streamlined, and audit ready. Volatility and disruptions are the order of the day at the markets and the 2020 pandemic has added to the mix, resulting in a state of confusion.

In most businesses, the financial reconciliation process is a manual and a recurring task – a series of interconnected and complex processes that require the reconciliation process to be managed across general ledgers, sub-ledgers, and bank accounts. Limited resources, siloed data, and error-prone spreadsheets add to the complexity that compromise accuracy, control, and transparency – making the financial close process highly inefficient.

Today businesses need to:

Close faster

Eliminate unnecessary status update meetings to manually review account balances before closing the accounting cycle.

Streamline and centralize the close process

Get rid of error-prone spreadsheets and track reconciliation progress in real-time while identifying bottlenecks in the close process.

Be audit-ready

Achieve an accurate reconciliation that is fast, reduces risks and costs, and ensures regulatory compliance with a clear audit trail.

Improving agility and accuracy of financial processes requires better use of data and automation. There are significant tangible benefits to implementing modern technology that helps increase speed and agility, while ensuring accuracy and freeing up time for strategic and transformation efforts.

It is a known fact in the industry that companies spend too much time reconciling reports that are output by different systems. Furthermore, the reports need to be reconciled across all functions, including accounting, trades, stocks, commissions, and more.

To meet the existing challenge, there is a clear requirement for a solution that collects, blends, and analyzes data from disparate systems automatically. All manual reconciliation activities need to be replaced with a simple and seamless solution that will identify and avoid fraudulent activities as well as eliminate manual/system integration errors in journals.

This is why there are significant and tangible benefits to implementing modern technology that helps increase speed and agility while ensuring accuracy and freeing up time for strategic and transformation efforts.

What needs to be done?

If we are to analyze the problems at the root of it all and suggest a simple and direct solution, that would be automation. By automating repetitive tasks across broker, invoice, and stock reconciliations, users can continuously perform data reconciliation eliminating the risk of manual errors. Businesses need to connect all their disjointed systems and bring data to one place, ensuring that the users have complete access to this data in real-time, on-demand, whenever they need it.

Identify deviations and isolate root causes

Businesses need to streamline and centralize the close process by getting rid of error-prone spreadsheets and track reconciliation progress in real-time while identifying bottlenecks in the close process. They also need to be audit-ready by achieving an accurate reconciliation that is fast, reduces risks and costs, and ensures regulatory compliance with a clear audit trail.

Close faster with automation

As simple as automation sounds, financial reconciliation is inherently complex and layered, and businesses need to close faster by eliminating unnecessary status update meetings to manually review account balances before closing the accounting cycle. This includes:

-Broker reconciliation: Helps match trades from transaction or ledger systems with broker statements as well as identify breaks and differences between systems, modules, and reports. with ease. Replacing manual reconciliation activities reduces end-of-day/month time pressure.

-Invoice and stock reconciliation: The process includes streamlining reconciliations and increasing control by matching payments, adjustments, receipts, contracts, stocks, and commissions. Avoiding errors, monitoring breaks and breaches across entities while automating complex grouping and calculations to reconcile trades, stocks, commissions, across disparate systems

Ensure transparency through a foundation of connected data

It’s common for traders, risk managers, finance specialists, and supply chain managers to spend inordinate amounts of time reconciling reports that are output by different systems. The time they spend manually reconciling reports could be better spent analyzing data to help make better decisions.

Despite having multiple tools and systems, organizations, both large and small across multiple industries, still struggle with a very manual, time-consuming, and tedious process of a day end and a month-end close. An automated solution could save huge amounts of resource power, reduce manual errors, and bring in tremendous process efficiencies.

Way forward

The faster pace in the industry today means that the businesses need to gain a more comprehensive and accurate view of the business. A single source of truth, greater visibility, and control over operations and risks essentially allow the business to gain from improved collaboration, data accuracy, and consistency throughout the organization. How fast can you move to automated and continuous financial reconciliation? In days? minutes? This is the question that needs to be answered.

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Learn how a leading sugar company reduced monthly reconciliation time from 15 days to a few minutes

For more details reach out to an Eka expert by writing to info@eka1.com

FinTech Blockchain Market Booms: US$ 325.6 Billion Revenue

Key Market Segments

Application Analysis

Provider Analysis

Enterprise Size Analysis

Industry Vertical Analysis

Emerging Trends in FinTech Blockchain

Top Use Cases for Blockchain in FinTech

Major Challenges

Attractive Opportunities

Recent Developments

April 2024 – Strategic Collaboration between GDF and FINTECH.TV

October 2023 – Ankr and XDC Network Partnership

Conclusion

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Introduction

Statistics

Market Demand

Opportunities and Expansion

Impact Of AI on Finance

Emerging Trends

Top Use Cases

Major Challenges

Business Benefits

Conclusion

Introduction

Generative AI in Fintech Statistics

Deployment Analysis

Application Analysis

Top Use Cases of Generative AI in Fintech

Emerging Trends in Generative AI for Fintech

Business Benefits of Generative AI in Fintech

Conclusion

Prioritizing value over volume

Some butter is better than no butter

Switching to usage-based pricing was a win for Livestorm

Embracing the strategic churn journey

Conclusion

What is Central Bank Digital Currency?

China’s digital Yuan

Where does the United States stand?

The Future of CBDCs

Conclusion

Saudi Arabia: A New Frontier?

Growth Across the Region

Open Banking and Inclusion

The Challenges

The Bottom Line

Today businesses need to:

Close faster

Streamline and centralize the close process

Be audit-ready

What needs to be done?

Identify deviations and isolate root causes

Close faster with automation

Ensure transparency through a foundation of connected data

Way forward

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