The US is a frontrunner in innovation, and finance is no exception. The US has the most fintech unicorns, and the market is projected to be worth $324.3 billion by 2026. The five biggest fintech companies in the world are North American, which comprises Visa, Mastercard, Intuit, Fiserv, and Shopify.
We’ve seen a massive shift in how we interact with banks and financial institutions. In this article, we’ll look at the explosive growth of fintech and some key players. We’ll also look toward the future and ask the following questions: Where does the US fintech industry go next, and what issues might it face?
The history of US fintech
Bank of America launched the first credit card in 1958, which many consider the beginning of fintech. Telephone banking began in the 1980s and was mostly made redundant by Internet banking in the late 1990s. The late 1990s also saw the launch of PayPal, which would become one of the world’s biggest payment platforms—more on that later.
Fintech, as we know it today, didn’t start to take shape until after the 2008 financial crisis. This is when traditional banks came under scrutiny, and consumer expectations changed, creating room for innovation and an opportunity for change. The US fintech industry includes aspirational startups and huge existing financial institutions, both supported by advancing technology.
There are many moving parts, but the key players are blockchain, crypto, mobile wallets, and digital payment platforms. Consumers and businesses alike utilize each of these financial services. For example, an individual might use crypto to make a private purchase, or an online casino may use PayPal to facilitate deposits and withdrawals.
What’s next for US fintech? Our future predictions
As we look towards the future, several trends will likely shape US fintech in the coming years. We’ve covered some of the main ones below.
Increased consolidation
It’s no secret that conglomerates acquire many startups. This has become a business model for both sides of the deal—tech-savvy founders want an exit, and big institutions want to eradicate competition. Everybody wins. In some cases, big banks also acquire big banks, a recent example being Capital One’s acquisition of Discover Bank for $35.3bn.
Such deals enable financial businesses to add new products and offerings without developing them. For example, if a bank acquires a loan company and a crypto exchange, it can consolidate everything into one market-leading platform. We expect to see more of this in the coming years, and there will likely be a handful of fintech giants and very few smaller offerings.
Artificial Intelligence
Artificial intelligence will transform Fintech, most of it for the better. AI is already working to identify and prevent fraud, make smarter lending decisions, and streamline customer service.
As technology develops, fintech businesses will start using AI in new ways, including for financial planning and management. There will be some regulatory hurdles and accuracy concerns to overcome, but we expect AI to play a significant role in the development of US fintech.
Financial inclusion
Despite financial technological advancements, we still have an inclusion issue. Many underserved communities still struggle with access to banking and credit. Fintech can transform the US economic landscape by addressing these issues.
It’s optimistic, but we hope to see fintech create low-cost banking solutions for those who need it. This could include micro-investing opportunities or credit score alternatives used for lending decisions.
Regulatory evolution
Fintech continues to grow, and it’s not without its risks. With most banking now done online, there are concerns over data privacy, security, and compliance. Fintech companies will face increasing scrutiny, and we expect to see more regulations in the coming years.
Sustainability
Environmental considerations are becoming more important in finance. From crypto mining’s carbon footprint to the electronic waste generated by frequent technology upgrades, fintech has a sustainability problem. One of the biggest challenges the industry will face as it grows is how it manages such issues.
We expect the future of fintech to include more energy-efficient technology and better recycling and reuse programs to reduce waste.
Conclusion
Fintech has transformed exponentially in the last few decades, but more is to come. We will see even more technological advancements that should lead to a better and more efficient banking experience. But it’s not without its challenges.
The companies that will come first in the fintech race are those that can adapt quickly to the changing landscape, including regulatory pressure and consumer expectations. Some of the biggest fintech companies, like Revolut, didn’t even exist a decade ago, so perhaps the next big player in the industry is still to come.
With so many unknowns regarding what’s next for fintech, one thing’s certain: the future is bright for consumers. More services and accessibility will result in a better experience for everybody.
