The trends set to define the fintech, banking and finance industry in 2020

As we enter the new decade, it is important to look forward towards the emerging trends within the fintech, banking and finance industry for 2020. Doing so will allow financial institutions to future proof for the upcoming challenges and developments they face.

Foreign exchange payments will continue to be an essential part of business growth – no matter how big or small the business. Foreign exchange payments allow businesses to open up new markets, find new customers and suppliers, and partner with the biggest innovators in their fields across the world.

However, the cost of doing so is currently substantial, with high upfront fees being just a small part of the problem. Businesses face further issues through hidden costs, commonly absorbed into exchange rates, making it even more difficult for small businesses, in particular, to understand exactly how much they are being charged.

Currency exchange costs come in other forms too. Organisations of all sizes engaged in transactions in foreign currencies continue to be exposed to currency risk. This has a significant impact on commercial margins, and is particularly risky for small businesses because their banks are less likely to offer currency hedging solutions.

In 2020, more fintechs offering better currency exchange solutions and access to real-time information on the foreign exchange market will continue to emerge. In response, traditional banks will be forced to make the availability of currency hedging options and the transparency of foreign exchange costs a priority. With businesses continually making use of new offerings in the fintech industry, the importance of providing cost-effective, clear and efficient international payments to businesses of all sizes will become increasingly clear.

Regulation is continually on the minds of the fintech, banking and finance industry – and 2020 will be no different. New regulations continue to focus on the protection of customer data and the utilisation of competitive product offerings as these factors become increasingly important to customers.

Earlier last year we saw the introduction of PSD2 accelerate Open Banking, opening up APIs to third parties. This created a revolution in product offering and more choice for customers who require FX payments. Thanks to this facilitated data contribution, fintechs will keep their internal data infrastructures running at full capacity. In addition to the best customer knowledge, the entire marketing apparatus and service offer will be transformed for the best.

Although the industry is still getting up to speed with compliance around PSD2, it will also need to prepare for the upcoming PSD3 regulation – set to eliminate fragmentation by providing a concrete specification of API services, directory services and infrastructure. This will aim to ensure customer security, recognising it as the most important factor contributing to improved customer experience.

The impending impact of Brexit on fintech, banking and finance raises uncertainty for what this could mean for the industry. This becomes increasingly concerning as the results of the recent election revealed the UK is planning to leave the EU on the 31^st January 2020.

The aftermath of the Brexit referendum result in 2016 can be used as a rough predictor of what may be coming. This saw the pound subject to sharp devaluations, losing 6% of its value against the euro. As a result, there was a substantial knock-on impact to companies’ finances, with many small businesses experiencing subsequent double-digit losses.

Despite the economic sentiment being more positive in the eurozone when compared to the UK, the uncertainty linked to Brexit has left many institutional traders holding a broadly negative sentiment towards the British currency. Traders are reluctant to believe there will be a quick resolution to the political process, therefore financial institutions are looking to avoid the risk of further depreciation of the pound.

As the risks associated with exchange rates continue to be a prominent issue, especially as we inch closer towards the Brexit date, we will see increased movement towards the use of fintechs offering real-time exchange rates, free international transfers and transparent foreign exchange costs. In order for traditional banks to stay competitive and keep a hold of their customers, they will need to develop their offerings to accommodate those trying to avoid the risks of fluctuating currency exchange rates.

Evolution of the CFOs role will develop as the digital era continues to have a dramatic impact on businesses’ financial functions. The role of the CFO will progress as new emerging technologies are introduced. Duties of the job role are set to, not only include the responsibility of recognising new technologies such as Internet of Things, Artificial Intelligence, cloud-based systems and blockchain, but also the ability to identify how these can be used to best benefit their business.

As well as continual challenges faced due to emerging technologies, CFOs will also be facing the likes of big data in 2020. This means they will need to expand their understanding so they can use tools that analyse data efficiently. Furthermore, CFOs will also be expected to ensure cybersecurity throughout the company, compliance with regulatory frameworks and the security of financial data, in addition to navigating the fluctuating exchange rates.

 In order for CFOs to transition into their more strategic job role, they will need to make use of new emerging fintech services – as they provide greater visibility of financial processes across the business. By utilising new technologies, CFOs will be able to fulfil the emerging duties and challenges they face.