Market Overview

The Top Fintech Trends Of 2020

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As the year gradually draws to a close, it’s worth noting some of the Fintech trends that have taken the world by storm. Here are some of the top trends in fintech that have stood out in 2020.

Cryptocurrencies

Cryptocurrencies have been one of the top technological trends in the past few years, period.

Over the years, many have come to see the potential for cryptocurrencies to shape economic policy and bring nations out of financial challenges. This year as well, they’ve continued to make headlines.

Generally, there are two areas where cryptocurrencies have shown the most in 2020 — privacy and investments.

As for the investment aspect, there are pointers to believe that cryptocurrencies are a great hedge against financial uncertainty. The graph above shows bitcoin’s trajectory this year:

 

Source: CoinMarketCap

Digital Payment Processors

Digital payment processors are another fintech trend that has caught on this year, thanks in no small part to the novel coronavirus pandemic.

When the pandemic hit, governments declared lockdowns and closed public places. Stuck at home, people have had to go online to purchase items.  According to data, the share of global e-commerce volumes rose by almost 30 percent amid the pandemic. This has led to a growth in payment processors’ volumes.

Even in physical stores, most declined to accept cash as a payment solution. Instead, they encouraged customers to open digital payment accounts and send the money directly to them.

The deVere Group said in a research report that Europe saw a 71 percent surge in fintech and digital payment adoption in March 2020. PayPal, one of the top payment processors globally, also reported in the same month that it had recorded 20.2 million new accounts in the first quarter of the year.

It’s no accident that these companies have benefitted directly from the pandemic. With their infrastructure so important to just about everyone, digital payment processors are definitely one of the top trends of the year.

Decentralized Finance

Decentralized finance (DeFi) broke into the scene in 2020 and has already become a multi-billion-dollar industry.

DeFi has become attractive because of the freedom it provides. Customers can make investments, provide loans, and do much more without dealing with financial institutions and other centralized bodies. DeFi is also free of any bias and discrimination, thus allowing anyone with enough money to earn and make a living.

Currently, data from DeFi Pulse shows that the amount of money locked in DeFi platforms is $8.75 billion. For a sense of how much they’ve grown, this metric stood at $275 million last year. In February, the number was just $1 billion.

This surge, as well as the dangers of some DeFi platforms, has raised a lot of interest from many.

Central Bank Digital Currencies

Central Bank Digital Currencies (CBDCs) are an offshoot of actual cryptocurrencies. Essentially, they are digital assets that have backing from governments across the world.

Primarily, CBDCs work this way – every country has its sovereign currency that citizens use to make transactions. A CBDC is essentially a digital version of such a currency. Currently, CBDCs are still a bit of a novelty and there isn’t any country that actually has one. However, they are significant trends nonetheless.

As of this moment, several countries are currently working on CBDCs. We have China, which is the global leader in CBDC research. Other countries like England and France are also working towards CBDCs. The Bahamas announced earlier this week that it would launch the “Sand Dollar,” its CBDC project, later this year

In fact, CBDC talk has even gotten to the level of the European Union. Christine Lagarde, the President of the European Central Bank (ECB), recently pointed out that the demand for digital currencies is currently growing at a rapid pace. This could point to the emergence of a possible CBDC for the entire European Union, although that would be a significant undertaking on its own.

There are several benefits that a CBDC can provide. Some believe that these state-backed assets can help improve economic inclusion by reducing the unbanked population, while others have pointed out that their government backing can bolster the adoption of cryptocurrencies in general.

While some questions still linger about them, the increase in interest is a significant thing.

 

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