The evolution of fintech has been rapid, but there is still scope for enormous advancement across a broad range of categories. And 2024 holds huge potential, particularly regarding the end-user experience. But these advancements may be tempered by increased scrutiny in areas including regulation and security. So, what can we honestly expect from fintech this year? 

Five predictions for fintech in 2024 

Embedded finance for SMEs 

Embedded finance has already crept into the B2C arena. Although many independent traders have yet to adopt solutions, most of the bigger brands have had finance options in place for the last few years. But where we haven’t seen much progress is B2B, where suppliers have remained tied to outdated analogue financing options. That is about to change. We know the technology is already available – this year, we just need to encourage more adopters. To make that happen, we’ll see a focus on the creation of more tailored user journeys, the wider availability of ‘1-click’ lending, and solutions that can provide choice and rapid decision-making, opening finance to the SMEs that have traditionally struggled to access the cash they need to grow.  

Open banking/open accounting  

Open banking and accounting hold a lot of potential for small businesses, supporting the move into new markets, driving revenue, and boosting the ability to leverage customer data in various ways. That’s why they are becoming much more widely accepted within the SME sector. But for open banking and accounting to gain lasting traction truly, they need to provide better services and solutions tailored to SMEs' needs. Part of that will doubtless be enhanced fraud prevention strategies – including monitoring and business insights. But data will be the key. Data is the most valuable resource in the current business market, so open banking and open accounting solutions need to find a way to make that data as accessible, understandable, and useful as possible to end users. While the larger businesses with bespoke solutions are already doing that, we’ve not yet seen it in the SME space. That has to be addressed in 2024. 

AI and ML rollout 

Machine learning (ML) and artificial intelligence (AI) are no longer considered as breaking technology. But AI and ML applications have remained largely out of reach for small businesses, and this is going to be the year where accessibility increases. AI is already being used by around half of all fintech companies to enhance services and build new products. We’re now where these solutions are ready to be passed on to end-users of all descriptions – conglomerates, SMEs, and even individuals with an interest. So, in 2024, we will see developers targeting SMEs with a range of customisable tools, from forecasting and business intelligence to chatbots and other generative AI solutions. 

Within fintech, we’re also likely to see AI and ML being deployed for a wider range of administrative tasks, from assessing customer creditworthiness and risk management, to algorithmic trading. The aim will be to improve the overall experience of fintech for end users, while enhancing productivity and accuracy for brands.  

Regulation 

Regulatory changes within fintech are almost inevitable this year. Not only has the sector been largely unregulated until this point, KYC (Know Your Customer) and AML (Anti-Money Laundering) notwithstanding, but the technology being increasingly deployed – including AI and ML – have no compliance standards. In order to protect all parties, there must be a more proactive approach to fintech regulation across the board. This should focus on decentralised finance (DeFi), such as cryptocurrency and blockchain.   

We’re also going to see a greater focus on compliance, as the Brexit grace period comes to an end this year, meaning that any UK fintech companies still operating under a Temporary Permissions Regime (TPR) are going to face the challenge of gaining full FCA authorisation if they wish to continue operating. This may lead to the loss of some of our burgeoning fintech companies.  

Consolidation 

One of the drawbacks of the rapid evolution we’ve seen in fintech is that it’s brought too many solutions for the market requirement. Consequently, some attrition and consolidation will be inevitable, and we’ve reached the stage where we will likely begin to see that happen. So, while we’re far from a point where product generation is being sidelined, the focus for new products is likely to be on things that can offer tangible benefits to the customer, with ease-of-use front and centre. In contrast, products that deliver poor user experience or are less beneficial will quietly disappear.  

Fintech is thriving. It’s more vibrant and active than at any other time, but it is also beginning to mature. With regulation and consolidation, and the focus on customer experience, that’s going to become clear in 2024. We’re no longer at the stage where endless startups are racing to be the first to the top. Instead, the emphasis is on delivering what can make fintech work for the customer. And that will mean a real focus on the valuable SME market.