Open banking, real-time payments and more AI -- fintech predictions for 2022

It's that time of year again, when tech experts like to swirl their tea leaves, polish up their crystal balls and try to predict what lies ahead for the coming year.

To get our annual series of predictions round-ups underway we're taking a look at the world of banking and fintech.

Smaller banks will need to embrace open banking technology in order to remain competitive thinks Benjamin Conant, co-founder and CTO of MANTL. "Widely utilized overseas, the global Open Banking market is forecast to grow to $43.15 billion by 2026, boosted by a surge in adoption of new applications and services. Open Banking is poised to make a significant impact in the US because it opens the door for many opportunities that can benefit consumers, fintechs and, most importantly, financial institutions grappling with digital transformation. Open Banking can democratize the digital experience and empower smaller FIs to compete with the Top five Banks. In 2022, we'll see community banks and credit unions partner with fintech companies who use open source technology responsibly and effectively to overcome their legacy infrastructure challenges and provide better digital experiences at a lower cost of maintenance and development. This includes utilizing the vast amount of online data to quickly verify customer information, enabling easier account funding through instant account verification (IAV) and real-time reading and writing to the core to eliminate batch processing. Smaller banks that embrace innovation and harness the power of Open Banking will be well-positioned for future growth and resilience."

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Vijay Ramnathan, president of MineralTree expects more automation, driven in part by the Great Resignation, "It's been one of the biggest stories of 2021 -- people at all levels abandoning jobs to do any number of different things -- or in some cases, nothing at all. Regardless, businesses are left in the lurch. This will drive even more investment in automation technologies to fill the labor gap. Manual, paper-based processes in finance, accounting, human resources (ironically), and customer service will be prime targets as businesses look to fill in for hard-to-find talent, and expand on existing, digital transformation initiatives."

On a similar note, Benoit Grangé, chief technology evangelist at OneSpan expects to see more use of AI, helped by changing legislation:

The use of artificial intelligence in finance has expanded massively in 2021, and it will only increase in the coming years. According to a recent OneSpan survey, 32 percent of FIs are already putting AI in place to comply with regulations. Jurisdictions across the world are eagerly looking to develop AI-based solutions, while also considering the ethical implications of its use such as addressing racial bias that creeps into facial recognition algorithms. Policies and legislation pertaining to the use of artificial intelligence will lead to regulations in 2022 and beyond.

In March, US Financial Regulators issued a Request for Information to get input from financial institutions on their use of AI. The regulators wanted to understand how AI is used in their provision of services to customers and for other business and operational purposes. These insights will likely lead to a Notice of Proposed Rulemaking, a precursor to a regulation. We expect these to be published in 2022. Federal regulatory action should not surprise financial institutions based on our recent research conducted by Arizent: 43 percent of US FIs noted that anticipated federal AI regulations are a top concern.

The European Commission's proposed Artificial Intelligence Regulation seeks to encourage the development of AI, while classifying and regulating AI solutions according to risk. The regulation is currently progressing through the legislative process. If the legislation passes, it won’t occur until late 2022 or 2023. We expect the first regulations to be published in 2023, so it can go into effect in 2024.

Subrah Iyar, CEO and co-founder of Moxtra believes businesses need to improve their internal processes, "As we head into 2022, digital businesses must focus on optimizing their internal processes to improve the customer experience of their clients as a whole. For example, despite 24/7 availability offering instant responsiveness to clients, from a staffing perspective, the on-demand delivery of services not only drains limited resources, but also erases human touch points as many businesses rely on chatbots to be able to offer 24/7 access. On the other hand, a just-in-time assistance model allows teams to respond when it is convenient, while still delivering timely, high quality service in a cost-effective manner for an overall better customer experience."

Jed Rice, CEO of Aliaswire thinks real-time payments are about to take off, "Bank-powered real-time payment (RTP) rails not only increase the speed of payments, they also reduce the cost of the payment and reduce the risk of fraud. Consider: when a customer pays on a website, the responsibility for fraud is on the seller. If the product gets returned and the buyer used a card, the seller has chargeback rates. RTPs shift that chargeback risk (#1 in the credit card business) to the buyer. The seller sends a request for payment to the buyer, the buyer approves the payment, and the bank sends the funds. The push versus pull is the biggest shift. RTP eliminates the friction of the buyer initiating the transaction and getting it approved on the bank side. That’s been the major obstacle to date."

Finally, experts at Acuant believe we'll see digital wallets enter the mainstream, "Over the last year, the COVID-19 pandemic accelerated the rise in digital banking and need for digital wallets. In addition to offering a frictionless user experience, more and more businesses have started accepting digital wallets for contactless payments. In addition to potentially gaining more popularity than the credit card as the preferred method of payment, we will also likely see digital wallet adoption expand beyond payments to combat identity fraud as brand-new types of fraud such as synthetic or COVID-19 vaccine verification fraud have emerged. Users will not only add their driver’s licenses but will rely on their digital wallets to share their identity credentials as they choose. This includes sharing their COVID-19 vaccine verification status to travel and enter places of entertainment."

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