Financial technology has come a long way in a short time, with the industry rapidly evolving by utilizing advanced technology such as Artificial Intelligence (AI). Such advancements allow the industry to set the pace for the future of digital payments and transactions among consumers and merchants.

During the last several years, financial technology has undergone tremendous change, making transactions among consumers more convenient and safer. Merchants, such as small and large enterprises, can tap into new tools, such as instant and virtual payments, allowing them to reach their customers wherever they may be.

As the year gradually unfolds, experts predict a more cohesive partnership between technology and finance, combining two industries that will help reshape how people work, transact, and think about finance while enabling businesses to provide customers with more convenient and accessible financial tools.

A Look at the Year Ahead

As last year, the financial technology sector is poised for continued transformation in 2024. Consumer demand for more seamless payment and transaction options is leaving merchants to quickly adapt new tools and find advanced solutions that can meet the needs of their customers.

While economic uncertainty persists, and fintech companies are being pressured to raise profits sooner rather than later, the year ahead could see companies pushing the boundaries of technological innovation to provide users with more prolific and lasting financial solutions that align with forward-looking demands.

Despite the challenges created by the high-interest rate environment, cutting the free-money era short, and decreased venture-backed funding, fintech continues to provide promising upside potential in the near term. A report by Boston Consulting Group and QED Investors suggests that fintech could reach $1.2 trillion of $22 trillion Global Financial Services Revenue by 2030.

Artificial Intelligence and Generative AI

For the last several years, companies have been experimenting with the capabilities of AI and Gen AI tools. However, this pace is only starting to pick up steam following the launch of OpenAI's ChatGPT platform in November 2022.

Now, fintech companies are racing to stay ahead of the curb, looking to build native tools that can help provide more accessible, safe, and convenient transaction solutions to both customers and merchants.

What may have traditionally started as the foundations of digital banking has now led to innovative solutions that carefully consider the future of the online banking ecosystem but further encourage the financial institutional experiences.

On the one hand, fintech firms have been building on existing models and systems that can help customers with more tailored experiences, such as financial records management, instant payments, financial tracking and spending, and providing digital customer experiences that are naturally accessible and convenient.

For smaller firms, the trouble with AI and Gen AI is that building the foundations of Large Language Models (LLM) and Natural Language Processors (NLP) requires tremendous resources and institutional support. For bigger banks and financial service providers, this creates a new opportunity to leverage the capabilities of fintech companies by establishing a technological partnership that helps combine expertise and experience.

Diverse Service Offering

At the same pace, fintech companies and multinational banks are investing in the future of artificial technology. Many will look to provide customers and merchants with more diverse services that aim to meet demand yet offer a more personalized banking experience tailored to individual or business needs.

Contactless payments: Already in recent years, there’s been a strong drive for contactless payments that give consumers the ability to pay for goods and services without the presence of a physical credit or debit card. Applications such as Apple Pay, Google Pay, and Samsung Pay allow merchants to utilize third-party platforms to accept and process transactions.

Digital wallets: Sometimes referred to as e-wallets, consumers are finding more convenience in having access to a variety of financial products within arm’s reach. Digital wallets enable consumers to store and utilize a variety of selected merchant-specific products without having to physically present a credit or debit card.

Consumers can store bank cards, tickets, receipts, and other important financial information on their digital wallets by making use of third-party payment gateways such as Apple Pay, Google Pay, or Samsung Pay. The rise in popularity of e-wallets has soared in recent years, with 53% of Americans now saying they use a digital wallet to pay for goods and services.

Acceleration of Open Banking

In the last several years, customers have begun taking more interest in financial transparency that empowers them to further utilize automation tools, such as real-time payments and digital banking, and minimize the need for manual payment processes.

By creating a more transparent and sophisticated network, banks and payment processors can now provide consumers with important financial information through the use of third-party providers and banks.

By using APIs or Application Programming Interfaces, users can now access multiple bank accounts within one app. Perhaps the most common and useful example is the use of Apple Pay, which allows consumers to access, load, and use different bank accounts without the need for manual processes.

Yet, open banking is not only restricted to digital wallets on phones, tablets, and smartwatches. Instead, advancements have enabled customers to use open banking services for in-app purchases, such as social media or video games.

Data by Mastercard found that services rendered by open banking applications have already started to witness steady adoption among consumers. More than half of respondents (57%) said that open banking services and tools help them feel safer conducting online transactions. Moreover, a robust 83% of respondents have said that they are using these tools for at least one financial transaction.

Convenience of Social Commerce

Social commerce has already been a trending facet of financial technology due to increased online shopping and changing consumer trends.

In 2024, social commerce could potentially be heading towards a completely new hemisphere that could see more merchants harnessing these capabilities and consumers taking advantage of personalized customer experiences and convenient payment and transaction processes.

Across the board, consumers are now using social media platforms as an all-in-one social and retail experience. Instead of companies targeting audiences through traditional marketing channels, many brands are turning towards social media to draw in customers.

Research by Deloitte found that roughly 64% of digital customers discover new brands and products via social media, enabling them to shop and transact within one digital ecosystem. The rise of single in-app experiences means that fintech companies can expand transaction options for their consumers.

Surge in Mobile Point-of-Sale Devices

On a hardware level, fintech innovators are fast-tracking development for more advanced and affordable mobile point-of-sale (mPOS) devices, as demand has been surging in recent years, and with total transaction value for mPOS payments reaching more than $3.3 trillion globally last year. This is only the start for a pocket of the fintech industry that is expected to see more than $5.5 trillion in transactions within the next three years.

For many merchants, mPOS has become the go-to solution that enables them to reach their customers and provide them with a digital transaction and payment alternative. MPOS devices are more than a traditional point-of-sale system that captures and verifies payments.

These devices ensure businesses can utilize multiple ways of letting customers pay for products and services. Merchants can now offer customers the ability to pay by scanning a unique QR code, using a virtual card to transact, or completing transactions through contactless payment options.

Above consumer-centric benefits, small merchants can easily build a more robust transaction network within the business by saving them time and money and reducing the need for conventional cash registers.