Artificial Intelligence (AI) emerged as the paramount factor set to impact the FinTech industry in the next five years, according to the WEF and Cambridge University report. Titled “The Future of Global FinTech: Towards Resilient and Inclusive Growth,” the report showcased the industry's robust growth despite a challenging fundraising environment. John Rwangombwa, Governor of the National Bank of Rwanda, emphasized the report's importance.
“It’s highly encouraging to see FinTech performance remain strong after the pandemic.” — John Rwangombwa, Governor of the National Bank of Rwanda
The research covered 227 FinTechs across all things digital: lending, capital raising, payments, banking and savings, and InsurTech, spanning six regions. The key findings reveal the following:
Among the biggest drivers and barriers influencing the FinTech landscape, according to the report, are:
The study emphasized the need for regulatory innovation to match the rapid pace of financial innovation. AI, embedded finance, the digital economy, and open banking were identified as crucial factors for future FinTech development. Notably, 41% of respondents emphasized the necessity for sustainable finance schemes.
Who wouldn’t want to be in the room when it happened?
CEOs of global banks, including Jamie Dimon of JPMorgan Chase, convened privately at Davos to address the escalating competition from FinTech firms and neobanks, regulatory challenges, and the overall economic climate. The threat posed by neobanks and FinTechs, coupled with onerous regulations, topped the agenda. Here’s what was in focus during the meeting.
CEOs expressed concerns about the growing competition from FinTech disruptors. The industry is undergoing a transformation, with neobanks currently leading in customer satisfaction as traditional banks digitize their value chains.
Regulatory challenges, particularly proposals to increase capital requirements, are causing uncertainty among banking executives. The impact of such measures on the economy and banks' ability to compete and lend is a focal point of concern.
Against the backdrop of FinTech challenges and regulatory uncertainties, global economic uncertainty looms large. Volatility in global forex rates and geopolitical changes, with pivotal elections in 2024, adds complexity.
A notable development at Davos was the call from over 250 billionaires and millionaires to introduce higher taxes on extreme wealth. In an open letter, signatories urged political leaders to tax their wealth for the common democratic future. Concerns were raised about extreme wealth concentration, wielded to accumulate political power, potentially undermining democracy.
Generative AI took center stage at Davos, with discussions centered on increasing accuracy. Industry leaders, including Intel CEO Pat Gelsinger, stressed the need for higher accuracy in AI models, especially in critical sectors like healthcare and manufacturing. Human co-pilots and confidence level testing were identified as crucial steps to build confidence in the technology.
WEF Davos 2024 brought to light the dynamic landscape of FinTech and banking.
The joint report by WEF and Cambridge University highlighted the continued growth of the global FinTech industry, driven by factors like consumer demand and regulatory support. Meanwhile, banking leaders engaged in closed-door discussions addressing the challenges posed by FinTech disruptors, regulatory uncertainties, and the broader economic landscape.
As the industry navigates these challenges, the call for wealth tax and the spotlight on generative AI underscore the multifaceted nature of discussions shaping the future of global finance.