The financial services industry is undergoing transformation on a global scale, driven by digitalization, cutting-edge technology, and a focus on customer centricity. Mastercard, a global technology company in the payments industry, recently conducted a comprehensive study focusing on the Maltese Fintech sector. Among several noteworthy findings, this study unveiled a set of international trends that are reshaping the financial sector, and consequently affecting the future of Malta’s payments ecosystem. As we delve deeper into these trends, we expect to see their influence propelling the financial sector towards online and mobile banking, the adoption of new technologies, and the provision of services tailored to consumer preferences.
One of the foremost trends shaping the financial industry is the escalating demand for digital offerings. As consumers increasingly embrace digital channels for financial transactions, institutions are required to adapt and provide seamless digital experiences. This transformation is poised to continue its trajectory in the coming years.
From Fintechs to super-apps
Advancements in technology have empowered financial institutions to develop more sophisticated solutions, underpinned by modern technology in what is being referred to as a race to become a super-app for clients. Fintech companies exemplify this trend by expanding their offering from basic services such as P2P transfers to other financial products, such as investment accounts including also cryptocurrencies and consumer loans. Such players prioritize user-friendly interfaces, swift onboarding processes, responsiveness to customer needs, and competitive transaction fees. Their success is attributed to their consolidated digital approach in a single app, which also enables the monetization of robust datasets. Moreover, this wave of innovation incorporates enhanced financial tools with a range of applications effectively targeting the business industry as well, offering B2B services such as business accounts, payroll management, working capital credit lines, and expense management.
Sustainability
Another key component driving the promotion of Financial Institutions is their association with Sustainability. The adoption of ESG (Environmental, Social, and Governance) practices is gaining traction, with 67% of consumers valuing ESG initiatives in practice when selecting financial providers. Sustainability initiatives include using eco-friendly materials for cards, minimizing physical cards, promoting paperless communication, implementing CO2 offsetting measures, and more.
Blockchain and Cryptocurrencies
In the new era of financial inclusion, blockchain and cryptocurrency use cases are applicable across all issuers’ and acquirers´ solution portfolios. Both blockchain and cryptocurrency solutions allow the unbanked population to access financial services without the need for a centralised authority. By 2030, it is projected that there will be 1.7 billion global cryptocurrency users. Neobanks have played a pivotal role in this shift, enabling customers to buy, sell, and earn cryptocurrencies.
Open Banking, the enabler of Banking-as-a-Service and Embedded Finance
With the adoption of Open Banking, customer interactions with banks and other financial service providers move towards a completely new direction. Open Banking refers to the permissioned feasibility of accessing account data and services via APIs. With Open Banking, the data of the customers that have opted in is shared with financial institutions and Fintechs to develop enhanced financial services such as budgeting tools and personalised financial advice. Open Banking enables businesses to put forward lending requests faster and more efficiently as it assists significantly in credit scoring processes. It is also considered as the main enabler of Banking-as-a-Service and Embedded Finance in a way that is reinforced as a trend.
In the meantime, Banking-as-a-Service (BaaS) is expected to increase revenues globally in the upcoming years and is a true disruptor of the financial industry: It enables businesses outside traditional banks to offer banking products and services through third-party distributors, such as carrying out digital transactions, issuing loans and opening bank accounts. This approach accelerates the introduction of specialised propositions to the market through API-driven platforms. Through the integration of BaaS into consumer and merchant financing, brands increase their revenues and banks increase their customer insights by utilising additional information to generate tailored offers for customers.
Embedded Finance, a closely related service to BaaS, focuses on the seamless integration of financial services within consumer value chain. It facilitates increased convenience and faster transactions by centralising them under a single service provider, thus delivering a more user-friendly interface.
Real-Time Payments
Furthermore, a surging demand for Real-Time Payments (RTPs) emerged, as consumers and businesses seek immediate transaction results. Identified as another international trend to look out for, RTPs facilitate real-time clearing and settlement of transactions, as opposed to the traditional Automated Clearing House (ACH) system, which can take 1-3 days to settle. The SEPA (Single European Payments Area) scheme in Europe exemplifies this trend, enabling payments to be processed in as little as 10 seconds across 27 EU countries and 17 additional territories.
Buy Now Pay Later
Lastly we look into the Buy Now Pay Later (BNPL) service, a trend that remains in the foreground, offering consumers the flexibility to obtain products upfront and defer payment or pay in instalments at minimal or zero cost. The global e-commerce growth contributes to the expansion of BNPL payment solutions that are steadily replacing credit card lending. It has been observed that consumers are leaning towards BNPL for moderately expensive items, while it is estimated that by 2027, 10.5B transactions will take place via BNPL.
In conclusion, according to Mastercard’s study findings, the financial sector both in Malta and on a global scale, is witnessing a paradigm shift driven by a convergence of digitalisation, technological innovation, and customer-centricity. A series of international trends is reshaping the industry and challenging traditional financial institutions to adapt and evolve. To remain competitive and relevant, Maltese institutions would align with these trends, providing the frameworks that accommodate and regulate the operations of Fintechs and other innovative players in the market. Mastercard, an organisation that fosters growth within the international Fintech ecosystem, is offering a comprehensive array of initiatives aimed at empowering Fintechs, through platforms for collaboration, access to resources, expert guidance and more.