The financial market is rapidly progressing and has been supported by digital innovation, societal changes and customer expectations. As we look to the future, there are several trends in digital finance emerging that could reshape the industry over the next decade. What could the future of digital finance look like?

Emerging Central Bank Digital Currencies (CBDCs)

CBDCs have enabled customers to have accounts directly connected with central banks, reducing the dependence on traditional intermediaries. Other benefits include a more seamless and cost-effective process for cross-border payments and for central banks to strengthen their ability to introduce supportive monetary policies.

The rising challenge of data privacy and cyber security

While digitalisation has brought many advantages to finance, it inevitably will create challenges, specifically the rise of persistent and sophisticated cyber threats. As cyber-attacks become more regular, stricter standards will protect personal data and financial assets. Creating resilience, and trust, and ensuring customers’ data is secure will be critical.

The progression of big tech and fintech

Technology and finance are becoming progressively more intertwined, providing continuous opportunities for innovation and disruption. Fintechs provide new solutions, and Big Tech businesses are exploring financial services on a deeper level, competing against conventional banking businesses. The progression of data analytics and AI has enabled the delivery of tailored financial services. Furthermore, big tech and fintechs have enabled access for previously inaccessible groups, strengthening financial accessibility for many.

The rise of mobile and digital payment options is inevitable, with a growing demand for contactless options. The demand for contactless payments and digital wallets is rising. With the increase of digital wallets globally, there may be a need for a worldwide protocol for seamless global transactions.

How open banking is transforming the sharing and access of financial data

Open banking has empowered the consumer, giving people more control over their finances and enabling control over who can access it and for what purpose. With greater access to data, financial institutions can deliver more tailored and innovative products for customers. Open banking provides a stronger collaboration between traditional banks, fintechs and other associated providers, creating further innovation across the board.

Open banking isn’t just a trend, it’s a significant shift in how we recognise and determine financial data. It’s predominantly about giving power to the customers, accelerating innovation and supporting collaboration in the industry.

Sustainability and Integrating ESG in Digital Finance

Digital finance must consider the implications of ESG becoming a global priority. Green Finance Platforms, for example, that incorporate sustainable investment and ESG-associated portfolios, will likely rise in popularity. Progression in tech will enable real-time reporting and measuring sustainability measures within financial operations, strengthening stakeholder transparency. Digital financial solutions will be critical in securing resources required to tackle global challenges, like climate change.

The next few years in digital finance will involve considerable transformation, from the disruption of cybersecurity to the increase of open banking and sustainability-related services. As the industry evolves, all stakeholders must be prepared and willing to adapt and innovate to maintain pace with the future.