Deep dive into 2024 fintech trends: Part 2

Welcome to part 2 of our deep dive into the fintech trends shaping 2024. In our previous installment, we explored the current state of fintech and delved into key areas such as AI in finance, embedded finance, digital payments, personal financial management, and the buy now, pay later phenomenon.

Now we’re diving into four more trends (and some regulatory changes) that are reshaping the financial world.

Join us as we uncover how these developments are driving innovation and creating a more decentralized, accessible, and tech-savvy financial landscape.

Peer-to-peer lending

Peer-to-peer (P2P) lending, also known as crowd lending or social lending, is a financial practice that allows individuals and businesses to directly borrow and lend money without the involvement of traditional financial institutions such as banks. This is enabled through online platforms that match lenders with borrowers.

For borrowers, P2P lending often provides lower interest rates compared to traditional banks and offers access to loans for people who may not qualify for conventional financing.

And with P2P lending, lenders can earn higher returns on their investments compared to traditional savings accounts or fixed-income products.

P2P lending market overview

P2P lending is another major fintech trend of 2024. The P2P lending market is projected to experience substantial growth, with estimates indicating a CAGR of over 25% from 2024 to 2032. The market was valued at approximately $209.4 billion in 2023 and is expected to reach around $1.5 trillion by 2032.

Key drivers of this trend include increased acceptance by both borrowers and investors, along with more flexible terms and lower rates than those offered by traditional banks. As platforms diversify their loan types, they’re attracting a wider audience. This is supported by regulations that boost market confidence, while technological advancements improve accessibility, particularly in underserved areas. The sector’s focus on financial inclusion, especially for small businesses and marginalized communities, is also expected to drive continued expansion, solidifying P2P lending’s role in the evolving financial landscape.

P2P lending market segmentation

The P2P market is primarily divided into consumer credit loans, small business loans, student loans, and real estate loans. Consumer credit dominates the market, offering personal loans for debt consolidation and home improvements. But small business loans are rapidly growing as entrepreneurs seek alternative funding through P2P lending software.

P2P lending apps typically operate on two main business models: marketplace lending, which directly connects borrowers and lenders; and traditional lending, involving partnerships with established financial institutions. These P2P platforms serve diverse end uses, from personal financial needs to funding business expansion.

These segments illustrate the diverse P2P lending market landscape and highlight the adaptability of P2P lending to various consumer needs and market conditions. The consumer credit loans segment remains the largest, while small business loans are the fastest-growing category, reflecting the demand for accessible funding solutions.

Neobanks

Neobanks, also known as digital banks or challenger banks, are financial technology firms that offer banking services exclusively through digital platforms. Unlike traditional banks, neobanks operate without physical branches, providing their services primarily through mobile apps and web interfaces.

Prominent examples of neobanks include Chime in the U.S., Monzo and Revolut in Europe, and Nubank in Latin America.

The rising popularity of neobanks

The neobanking market has experienced explosive growth in recent years:

• Total transaction value in the neobanking market is projected to reach a staggering $6.37 trillion globally in 2024, compared to $4.96 trillion in 2023, and $3.46 trillion in 2022.
• The sector is poised for continued expansion, with an expected annual growth rate of 13.15% from 2024 to 2028 (potentially reaching $10.44 trillion by 2028).
• User adoption is on the rise, with the number of neobank users expected to reach 386.3 million worldwide by 2028.
• User penetration is set to increase from 3.89% in 2024 to 4.82% by 2028, indicating growing mainstream acceptance.
• The United States leads in neobank transaction value, with projections of $1,785 billion in 2024.

These figures emphasize the impact neobanks are having on the global financial landscape, challenging traditional banking models and reshaping consumer expectations.

Factors driving neobank growth

There are several drivers of neobanking market expansion:

• The widespread adoption of smartphones and internet connectivity has created fertile ground for neobanks to flourish. Consumers increasingly prefer digital solutions for their banking needs, aligning perfectly with the neobank model.
• Neobanks operate with lower overhead costs compared to traditional banks, allowing them to offer competitive pricing on things such as transaction fees and account management. This cost advantage translates to savings for consumers, making neobanks an attractive alternative to traditional banks.
• Neobanks prioritize user-friendly interfaces and streamlined processes. Features like fast account setup, intuitive mobile apps, and personalized financial insights cater to the preferences of tech-savvy consumers, particularly among younger demographics.
• Integration of cutting-edge technologies such as artificial intelligence, the blockchain, and cloud computing enables neobanks to offer innovative services and personalized experiences that traditional banks often struggle to match.
• Initiatives like the EU’s Payment Services Directive 2 (PSD2) have created a more favorable regulatory environment for neobanks, promoting open banking and facilitating market entry.
• The COVID-19 pandemic accelerated the shift towards digital banking solutions, with consumers increasingly seeking contactless and remote banking options.
• Neobanks are forming alliances with traditional financial institutions and fintech firms, expanding their service offerings and reaching broader customer bases.

As neobanks continue to evolve, they’re playing an increasingly important part in the global financial ecosystem. Their use of new technology and focus on customer needs combined with favorable market conditions mean they’ll likely keep expanding. This challenges traditional banks and gives customers more banking options.

DeFi

Decentralized finance (DeFi) is a new way of handling financial services using technology: specifically, the blockchain and cryptocurrency. DeFi aims to remove the need for traditional banks and financial institutions as intermediaries. Key aspects of DeFi include:

• Decentralization: There’s no central authority controlling your money or financial services.
• Accessibility: Anyone with an internet connection can access DeFi services.
• Transparency: Transactions are recorded on a public blockchain that is visible to all.
• Programmability: Financial services are run by smart contracts (automated programs) rather than people.
• Interoperability: Different DeFi applications can often work together easily.

Common DeFi applications include lending and borrowing platforms, decentralized exchanges, and yield farming (earning rewards for providing cryptocurrency to a platform).

DeFi market overview

In 2022, DeFi startups attracted over $2.7 billion in funding, indicating robust interest in the sector despite ongoing market volatility and regulatory uncertainties. The DeFi ecosystem has matured, with a notable increase in the number of users and the volume of transactions. Decentralized exchanges recorded $850 billion in trades in 2022, and user numbers tripled, reaching 4.8 million in the same year.

The funding landscape for DeFi has evolved significantly since its inception. Total funding for DeFi projects was considerably lower even a couple of years ago, with substantial growth observed from 2020 onwards. The introduction of liquidity mining and the rise of decentralized exchanges contributed to a surge in interest and investment.

Today, the DeFi market is growing fast and is predicted to expand even more in the coming years.

According to Statista, in 2024, the market is projected to generate substantial revenue of $26.17 billion. This figure is expected to grow at a compound annual growth rate of 9.07% between 2024 and 2028, potentially reaching a total market value of $37.04 billion by 2028.

Average revenue per user in the DeFi market is estimated at $1,378 in 2024, indicating a notable level of user engagement and value creation.

Consumer trust in DeFi

Consumer trust in DeFi is a bit of a rollercoaster right now. On the one hand, we’ve got a revolutionary technology that’s changing finance as we know it. On the other hand, we’re dealing with some serious growing pains.

We’ve seen high-profile DeFi projects go belly up, and the regulatory landscape is about as clear as mud. Plus, crypto scams have been making headlines — we’re talking over a billion dollars lost in just the 14 months leading up to early 2022. That’s enough to make anyone think twice before jumping in.

Now, let’s talk about risk. For a lot of people, DeFi feels like walking a tightrope without a safety net. Managing your own digital assets? Dealing with complex platforms? It’s not exactly user-friendly for the average person. And when you’re responsible for your own transactions, that’s a lot of pressure.

But it’s not all doom and gloom. The DeFi community is working hard to build trust in a few key ways.

DeFi projects that emphasize transparent operations and robust security measures tend to foster greater trust. Features like transparent recordkeeping, automated asset management, and decentralized governance models can enhance user confidence. For example, platforms that use smart contracts and provide clear documentation of their operations are seen as more trustworthy.

Decentralized reputation systems can help users assess the reliability of platforms and participants within the DeFi ecosystem. These systems allow users to make informed decisions based on past behavior and performance, which can mitigate risks. Think of a service like Yelp but for crypto platforms and users.

Regulation is also starting to play a significant role in building trust in DeFi. Platforms that play by the rules (implementing KYC and anti-market abuse measures, for instance) are seen as more reliable, especially by bigger institutions.

On top of that, DeFi platforms that involve their users in decision-making are building loyal communities.

DeFi isn’t perfect, however, steps are being taken to make it better, more secure, and more trustworthy. As these efforts take hold, we might see DeFi become a lot more mainstream. Remember: like any new technology, DeFi comes with its risks. But it also has the potential to revolutionize finance as we know it. The key is to stay informed, be cautious, and watch how the space evolves.

Blockchain

A blockchain is a type of digital record-keeping technology. It works like a shared database spread across a network of computers. Information is stored in blocks that are linked together, forming a chain. Once data is recorded in the blockchain, it becomes very difficult to change or hack, making it highly secure. A key feature of a blockchain is that it’s decentralized, meaning no single person or company controls the entire system. It’s also transparent, as everyone on the network can see the records.

While blockchains are most famously used for cryptocurrencies like Bitcoin, they have many other potential applications. Their combination of security, transparency, and decentralization make blockchains a powerful tool for various industries beyond finance.

For instance, in healthcare, blockchains can securely manage electronic health records, ensuring data integrity and facilitating easier access for authorized users, which can improve patient care and medical research.

In supply chain management, blockchains can streamline trade finance by automating document verification and reducing fraud as well as supply chain inefficiencies. Companies like Walmart use blockchains to track the origin of food products, improving food safety and quality control.

Moreover, a blockchain can enhance the security and transparency of voting processes, reducing the risk of fraud and ensuring accurate voting results.

Blockchain market overview

The blockchain sector is on the cusp of a remarkable expansion. Market analysts anticipate the global blockchain industry will undergo a massive transformation between 2024 and 2029. Starting from a valuation of $20.1 billion, the market is expected to skyrocket to $248.9 billion by the end of this period, which translates to a phenomenal CAGR of 65.5%.

One of the primary catalysts for this growth is the influx of capital from venture firms and other investors. These financial backers are increasingly recognizing the blockchain’s transformative potential across multiple industries, leading to a surge in funding for blockchain-related projects and companies. This investment wave is not only accelerating technological advancements but also driving wider adoption of blockchain solutions in various sectors.

In Q1 2024, venture capitalists invested approximately $2.49 billion into crypto and blockchain-focused companies, marking a 29% increase compared to the previous quarter. This surge in investment activity was driven by a notable rise in the deal count, with 603 deals completed, reflecting a 68% increase quarter over quarter.

Companies that already use the blockchain

Many companies across various industries are already using blockchain technology for a wide range of functions. Let’s list some notable examples.

In supply chain management, Walmart, De Beers, and Ford are using blockchains to improve how they track products and materials.

In banking and finance, several companies are leveraging blockchain technology to innovate their services. Visa has introduced a blockchain-based platform for B2B payment services and launched a crypto-linked debit card, bridging traditional finance with cryptocurrency. Coinbase has established itself as a major player by providing a user-friendly platform for buying, selling, and storing various cryptocurrencies, making it easier for the general public to participate in the crypto economy. Oracle, while not strictly a financial company, offers a blockchain service that allows organizations to share data securely and efficiently across applications, which has significant implications for financial operations.

The energy sector is also embracing blockchain technology. Samsung is investing heavily in the blockchain to enhance security and efficiency in energy management and transactions.

Healthcare is another field where the blockchain is making significant inroads. Change Healthcare is using the blockchain to manage patient claims and improve the efficiency of healthcare data sharing. Pfizer is participating in initiatives that use the blockchain to enhance the clinical trial supply chain, tracking inventory and events to reduce paperwork. Even government agencies are getting involved, with the FDA implementing a blockchain to improve food traceability and quickly identify sources during outbreaks of foodborne illness.

Regulatory trends in the financial industry

The fintech industry’s growth comes with increased access to personal data, giving fintech companies more influence over our financial choices. This has opened the door to new cybersecurity risks.

As fintech gets more advanced, so do cybercriminals. They’re finding smarter ways to attack these new systems. And this means fintech companies need to be extra careful about security.

It’s really important for financial companies to follow all security rules set by regulators. By doing this, they can better protect their customers’ information and keep their customers’ trust.

The AI Act

The European Union has introduced the rules for artificial intelligence, called the AI Act. This law came into force on August 1, 2024, and affects how companies use AI.

The Act says that AI can’t be used for certain things like scoring people’s social behavior, sorting people by their physical features, or guessing who might commit crimes.

For other uses of AI, the Act creates three levels of risk: high, limited, and minimal. Each level has its own set of rules.

Fintech companies need to figure out which risk level they belong to based on what they do.

If a fintech company is in the high-risk group, they have to:

• Create a plan to reduce problems with their use of AI
• Make sure their data is fair
• Write clear instructions on how to use their AI
• Keep track of how their AI works
• Have people oversee the AI
• Use strong computer security
• Check their work carefully to make sure it’s high-quality

These rules are meant to make AI in finance safer and more trustworthy.

PSD3

The Payment Services Directive 3, or PSD3, is expected to significantly impact fintech companies in several ways, offering both challenges and opportunities as the regulatory landscape evolves. Here are the key effects of PSD3 on fintech firms:

• More competition: Better access to payment systems and bank accounts helps fintechs compete with traditional banks.
• Easier integration: Standard APIs make it simpler for fintechs to work across different markets and offer more services.
• Tighter security: Fintechs will need to meet stricter security rules, which could help build customer trust.
• New regulations: Companies face more complex rules but clearer guidelines for operating across Europe.
• Better data sharing: Emphasizing secure data sharing, PSD3 allows fintechs to improve their services while protecting customer privacy.

PSD3 is still being discussed, but it might go into effect in late 2024 or early 2025. It will replace PSD2 and should make payments in Europe more stable and consistent.

The Fair Lending Act

The Fair Lending Act refers to various U.S. laws aimed at preventing discrimination in lending practices.

Despite the focus on decentralization and autonomy in fintech, a parallel trend is emerging: increased collaboration between fintech companies and established financial institutions. This shift is primarily driven by the rise of open banking and the growing prevalence of bank-like products offered by non-banking entities.

Lending has become a cornerstone of fintech offerings. Fintech companies are actively expanding their services to include buy now, pay later (BNPL) options, personal loans, student loans, and auto loans, among others. These products represent a significant portion of the fintech lending landscape and demonstrate the industry’s growing influence in traditional financial services.

The Fair Lending Act governs lending practices for both banking and non-banking organizations. Its primary objective is to prevent discrimination in credit provision based on gender, race, or religion. This act ensures that all lenders, regardless of their traditional or fintech status, adhere to fair and equitable lending practices.

To comply with the Fair Lending Act, fintech lenders must adhere to guidelines and prioritize user interests and rights in their loan decision-making. This ensures that as fintech companies expand their lending operations, they maintain fair and equitable practices. The onus is on companies to integrate these principles into their automated systems and algorithms, ensuring that their innovative approaches to lending do not inadvertently introduce bias or unfair treatment.

Decentralized financial regulation

Both the US and EU are grappling with the complexities of regulating DeFi, as traditional regulatory frameworks may not be directly applicable to decentralized systems. The focus is on developing clear guidelines that protect consumers and mitigate risks while allowing for innovation in the financial sector.

United States:

• The Securities and Exchange Commision and the Commodity Futures Trading Commission are key regulators, pursuing enforcement actions against DeFi platforms.
• The Treasury Department emphasizes financial crime risks, particularly Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) concerns.
• Regulators aim to balance effective oversight with innovation.
• 2024 is expected to be crucial for establishing clearer DeFi guidelines.

European Union:

• The European Commission is exploring DeFi-specific frameworks.
• The European Securities and Markets Authority and the European Central Bank are involved in discussions on effective regulation.
• Embedded supervision has been proposed to integrate compliance into DeFi infrastructure.
• Focus on AML/CFT standards, aligned with Financial Action Task Force recommendations.

Both regions stress the need for consumer protection, financial stability, and collaborative approaches between regulators and industry participants.

A glimpse into the future of fintech

The fintech landscape of 2024 is evolving rapidly, driven by technological leaps, stricter security demands, and shifting regulations. To stay ahead, companies can’t just innovate; they need to do it smartly and by the book.

As we look ahead, a natural question arises — what’s next for fintech? That is a question that only you and your clients can answer. To stay ahead in this dynamic landscape, it’s crucial to listen closely to customer demands and leverage advanced analytics to anticipate customers’ next moves. The most successful fintech solutions will be those that address real pain points and meet genuine needs, impressing customers with innovative products.

Differentiation through unique value-added offerings will be key. Fintech companies should strive to align their products and offers to their customers’ lifecycles and financial needs. A holistic approach that considers long-term financial journeys will foster loyalty and sustained engagement. Equally important is earning trust through transparent and seamless experiences. In an industry built on handling sensitive financial information, trust remains paramount.

As the industry continues to evolve, fintech companies must prioritize their tech investments and product development. Strategic allocation of resources will be critical in navigating the complex fintech landscape. Those who can balance innovation with regulatory compliance and customer-centricity will be best positioned to lead the way in shaping the future of finance.

How Globaldev helps financial companies

Globaldev offers tailored fintech software development services that address the unique challenges of companies in the financial sector, from investment houses and fintech startups to established banks and insurers. At the core of our offering is a commitment to robust cybersecurity, ensuring that sensitive financial data remains protected through advanced encryption, multi-factor authentication, and blockchain technology.

Our expertise spans more than a decade and extends to revolutionizing payment systems and enabling seamless multi-currency transactions and cross-border operations that are essential in today’s global marketplace.

With over 350 specialists working in-house, we not only provide end-to-end software development but also build teams of fintech development experts to close our clients’ capacity or skill gaps. Each team is carefully built according to a client’s requirements, which is why our relationships with clients last over three years on average.

The case studies below are just a sample of our portfolio. You can check out all of our cases here.

Consultant–client digital environment for an advisory company

We partnered with an Australian financial advisory firm to create a comprehensive digital environment that consists of a custom CRM system and a client portal. It is designed to streamline operations for the firm’s 300 advisors, who serve over 10,000 clients across 27 offices in Australia.

Key features include:

• A data-driven CRM with modules for client management, finance and payroll, document management, and task management
• A client portal with automated risk profiling, report generation, and fact-finding capabilities
• Multiple user roles and permissions to accommodate the firm’s large team structure

This digital transformation has significantly improved the firm’s efficiency. The risk profiling process that previously took two weeks using printed questionnaires now takes just seconds. Similarly, report generation has been reduced to a three-click process, allowing advisors to focus on strategy development rather than paperwork.

By automating data collection and financial service delivery, Globaldev has enabled the firm to optimize sales and marketing processes, evaluate performance, gain insights into client behavior, and offer tailored financial consulting services based on individual risk profiles.

Team extension for a B2B credit card company

We provided crucial team extension services to Pliant, a German fintech startup that is revolutionizing corporate credit card solutions.

As Pliant experienced rapid growth, expanding into seven European markets and diversifying its product offerings, they recognized the need to bolster their development capabilities. Globaldev stepped in to meet this challenge, sourcing experienced fintech developers from around the world with specific expertise in financial projects. The extended team brought valuable skills in Java, React Native, and JavaScript development, enabling Pliant to enhance both their web and mobile platforms.

This strategic partnership has empowered Pliant to increase their market visibility and continue innovating in the competitive B2B corporate credit card space, offering flexible, integrated solutions to businesses across Europe.

Mobile employee expense management solution

ECIT, a company specializing in financial software, acquired Travis, an app for employee expense management. However, due to Travis’s poor functionality, ECIT decided to rebuild it from scratch. They hired Globaldev to develop a new version of Travis using Flutter.

Simultaneously, ECIT faced challenges with their other products, Intect and NettLønn (both payroll systems), as they were losing customers to competitors who were offering combined expense and payroll solutions.

Globaldev’s solution involved:

• Creating a modular white-label Flutter app for employee expense management
• Designing the app to be easily adaptable for integration with ECIT’s payroll systems or third-party software
• Implementing dynamic configuration files for branding and customization
• Developing a centralized asset management system and reusable UI components
• Onboarding a full-time product owner to gather customer feedback and integrate it into the development process

The new app includes features such as:

• User profiles
• Receipt uploading and management
• Expense reporting and tracking
• Mileage logging
• Data integration with an existing expense dashboard for company admins and accountants

This solution helps ECIT adapt to market demands, meet client needs, and compete more effectively in the financial software space by offering a comprehensive expense management tool that can be integrated with payroll systems.

Ready to elevate your fintech offering?

Looking to develop a cutting-edge fintech solution? We’re here to help. Our team will analyze your project needs and provide expert guidance on the most effective implementation strategies. Contact us today to start creating your competitive fintech product.