We recently ran an essay competition with the University of Birmingham for their MSc in Financial Technology students. It has been to pleasure to read through the entries from those whom I am sure will be at the forefront of future innovation in the industry, challenging established ways of thinking and operating.
We challenged the participating students to write on what they saw as the most exciting trends in the fintech. Our winner, Christopher Dy, MSc Financial Technology, University of Birmingham, zeroed in on payments and digital wallets. His entry follows below.
In addition to writing the winning essay, Christopher has also secured himself the best prize fintech has to offer – a complimentary pass to the Fintech Talents Festival on the 14 and 15 November in London. I have no doubt that Christopher will be able to immerse himself in the innovative world of fintech and fill his boots across two days of content, connections, and craft beer. Well done Christopher!
***
“What is the most exciting Fintech trend that you’ve read about? Explain why it’s exciting to you and why other people should get excited about it.”
The most exciting FinTech trends
Open banking and blockchain pose a revolutionary financial system built on ease, accessibility and trust. Open banking allows applications to have in-app transactions without entering card details. Decentralized finance within blockchain allows capital to be more efficiently allocated. Through smart contracts, lower borrowing rates are achieved through peer to peer lending, and traders can benefit by paying lower spreads on decentralized exchanges.
Whilst these areas are changing the way we interact with money, an area often overlooked is payments. This industry is the backbone of economies as payments facilitate spending, global trade, and cross-border transactions.
Digital Wallets
An exciting trend within FinTech, specifically payments, is the rise of digital wallets.
Since near field communication (NFC) payments, also known as contactless payments, were released in 2004, there has been a shift in how we transact with money. Using cash became tiresome as you carry change that sounds like you’re asking for donations. Whilst paying with a card meant tediously entering your PIN every time would lead to missing the train and being late for work. NFC technology revolutionised payments being just as secure as before but saving time and effort.
The developments of NFC technology led to the rise of digital wallets being introduced a little over a decade ago. Google Wallet and Android Pay allowed contactless payments via a phone instead of a card. Apple Pay was shortly introduced three years later. Since then, we have seen significant developments. For example, Google Pay now allows you to split expenses, pay rent, redeem coupons, review spending habits, and more. Likewise, Apple Wallet can allow you to add multiple cards including loyalty cards, train tickets, and event tickets within one place. Apple recently integrated Tap to Pay allowing contactless payments to be made to another Apple device. The combination of NFC technology and facial recognition has provided a suite of applications all in one place that is secure and straightforward.
In a publication by PwC, digital wallets were mentioned as one of the six macro trends affecting the future of payments. These include the wallets aforementioned above in addition to WeChat Pay and Alipay in China. FIS, a financial services technology group, predicts digital wallets will account for more than half of all e-commerce payments worldwide by 2024. From the above diagram, we can see that digital wallets will play a pivotal role in accelerating the adoption of other areas of FinTech, such as cryptocurrencies and central bank digital currencies (CBDCs). We can see some of these changes happening at pace with the likes of Revolut incorporating cryptocurrencies, investments, and savings all in one app. This can interoperate with digital wallets such as Apple and Google Pay.
As we move towards a cashless society, digital wallets will govern the interactions we have with individuals and businesses. They will allow a one-stop place for everything needed, from payments and travel to savings and loyalty cards.
You don’t need a physical wallet anymore. The future is digital.
Written by Christopher Dy, MSc Financial Technology, University of Birmingham
References
https://www.globalpaymentsintegrated.com/en-us/blog/2020/09/15/the-history-of-contactless- payments
https://blog.google/products/google-pay/reimagined-pay-save-manage-expenses-and-more/ https://www.apple.com/newsroom/2022/02/apple-unveils-contactless-payments-via-tap-to-pay-on- iphone/#:~:text=Apple%20Pay%20is%20already%20accepted,the%20US%20later%20this%20year. https://www.pwc.com/gx/en/industries/financial-services/publications/financial-services-in- 2025/payments-in-2025.html#macro4
Join us at the Fintech Talents Festival on the 15 & 16 November at the Brewery in London to hear more about exciting Fintech trends!
