Although the financial services industry has undoubtedly changed considerably over the past 18 months, FinTech’s rise remains unabated, with global Financial Tech investment reaching $98 billion. It is impressive that FinTech investment in the UK reached a record high of £18bn in the first half of 2021, second only to the US, even during a time of considerable uncertainty due to the pandemic and the short-term fallout from Brexit.
FinTechs involved in digital payments and processes have indeed thrived during this period as well, showing extraordinary resilience in the financial sector.
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The industry is experiencing rapid digitalization, adoption of embedded financing (includes buy now, pay later) and decentralised finance, which are all trends that will further democratize access to financial services. These along with some general hints about software engineering trends in the sector are discussed in this post.
eCommerce and digital payments are growing in financial tech
The payments industry is evolving constantly; our customers like The Clearing House in the US and P27 group in Scandinavia use our Immediate Payment System (a Mastercard company) to process payments in real-time. Mastercard found that consumers spent nearly $900bn worldwide with online retailers in 2020, as a result of a more significant shift in payment preferences towards digital payments in the first quarter of 2020 than in the preceding five years. Visa’s touch-free limits have doubled in less than a year, with 400 million touch-free transactions in the UK, where the restrictions increased.
As a result of this spike in digital payments volume, businesses are retooling their systems to align more closely with customer preferences, and in order to take advantage of advances in payments technology. As a result, embedded finance, point-of-sale lending, and buy-now-pay-later financing offerings are reshaping lending and payment processes to create better experiences.
A lot of other demographics and late adopters are now joining the millennials and Generation Z in managing their finances digitally. The new system won’t result in a fundamental rollback to the past, which presents an opportunity for fintech innovators in the B2C domain.
Among the ways monetary models are changing, cryptocurrency has received the most attention. Distributed Ledger Technology (blockchain), which underlies cryptography, is a technology we have been working with for quite some time. This technology offers the potential for exciting enterprise solutions within Financial Services. As blockchain networks and protocol layers become more robust and stable, application layer innovation can now move to where the real differentiation potential lies. During Fintech Week London, we co-hosted an interesting panel discussion on blockchain use cases in financial services – you can watch it here.
Due to the nascent nature of the higher stack application layer, it is especially important to hire developers with experience in order to avoid wasting time and resources. A wide range of blockchain projects have been undertaken by the Erlang Solutions team of domain experts. The development of real production systems is increasingly replacing the deployment of PoCs in FinTech and beyond. In spite of most use cases still being private and permissioned, this is a promising sign for those who wish to utilize this technology.
What’s Next For FinTech
There will need to be a permanent way to implement some of the lessons learned during the lockdown periods for more productive, creative, and collaborative workforces in the FS industry. FIs will look to increase their investment in FinTech in order to remain competitive, not only in digital tools that provide customer service but also in back office processes that improve efficiency and reduce costs. In fast-moving industries like FinTech, software engineering is increasingly fundamental to the creation of value, so the methodologies employed have a huge impact on results.
With over 20 years of experience in building critical digital infrastructure that scales to billions of users without crashing, Erlang Solutions know digital infrastructure inside and out. Talk to us about moving toward a fast, easier to maintain, more reliable, and cheaper to operate future-proof system. Francesco Cesarini, Founder and Technical Director of Erlang Solutions, explains how the 2008 crisis influenced Erlang Solutions’s operational model in day-to-day operations.