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The financial services industry has seen some ground-breaking changes in the past year, with fintech innovations driving the sector forward and fast-paced developments in artificial intelligence.
Participants in the fintech sector expect 2024 to be another transformative year as further investment by financial services companies reshapes the banking landscape.
Marius Galdikas, CEO at ConnectPay, a financial platform for online businesses, offers insight into whats going to be hot in 2024 and what possible risks are lurking.Artificial Intelligence
Galdikas says: As the transformative potential of generative AI has become clearer throughout 2023, fintech companies are looking to integrate AI more fully into the financial services sector in 2024.
Beyond chatbots and virtual assistants, he sees AI models being considered as a solution to more complex tasks such as risk assessment, fraud detection and customer authentication. However, achieving AIs promise in a responsible way wont be an easy task.
He adds: It will be important to understand AI's mechanisms, its biases, and its overall limitations before trusting it to solve some of the more difficult problems in the financial sector.
Stocks to watch in this sector include Microsoft MSFT in partnership with OpenAI.
Also Read: Redefining Communication In The Age Of AIRethinking The BaaS Model
Embedded finance or banking-as-a-service is likely to expand rapidly in 2024 as businesses, such as online retailers, integrate financial services into their core offerings.
Flexibility will become ever more important as interests and business models shift focus, while increased regulatory scrutiny will also call for greater adaptability as risk management requirements become stricter and as security and reliability issues surface.
One approach to dealing with this shift is for BaaS providers to embed compliance into their offerings. Alongside traditional services, like accounts, payments, and cards. BaaS providers could also handle onboarding, authentication and monitoring by offering compliance-as-a-service, Galdikas says
Stocks to watch in BaaS in 2023 included Green Dot Corporation GDOT .Loading… Loading… Payment Services Directive 3
Financial services companies will have to prepare next year for the enactment of Payment Services Directive 3 (PSD3), a new set of rules governing the EU payment markets.
Enhanced fraud prevention measures are expected to be a key provision in the new rules, and will likely require payment service providers to apply stricter adherence to customer authentication and protection of account and personal information.
Galdikas says: To prepare for the changes PSD3 will bring, it will be necessary for fintech companies to thoroughly review and adjust their processes and compliance protocols.
Stocks to watch in this sector include Mastercard MA and PayPal PYPL .Increased Regulatory Scrutiny
The collapse of Silicon Valley Bank sent shockwaves through the financial industry, which hadnt witnessed a bank failure since the financial crisis.
Regulatory changes could subsequently include heightened reporting requirements and closer supervision of risk management practices.
Fintech companies should expect to conduct thorough internal reviews to identify and address potential vulnerabilities and fortify their compliance measures, Galdikas says. A key part of this process should be clear and open communication with regulatory bodies, stakeholders, and the public, to emphasize the steps taken to enhance security and compliance.
Now Read: Fintech Leaders Emphasize Responsible AI Use, Its Transformative Potential
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