US fintech status report February 2024

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Interviewed By Emmanuel Daniel

Greg Palmer, head of strategy and host at Finovate conference series, analyses the developments in the US financial industry, highlighting how intense competition for deposits drives the adoption of fintech among banks, and allows digital wallets to prosper

  • Younger people choose digital wallets over traditional banks for deposits
  • Digital wallets disrupt traditional banking practices, highlighting the need for banks to adapt to changing customer preferences
  • AI-powered solutions hold significant promise for fraud detection and prevention

Finovate’s Greg Palmer has long had “a front row seat in big picture trends” in banking and financial technology, as established and emerging industry players gather in his annual conference.

Palmer’s knowledge and keen observations shed light on the industry’s current issues and new prospects. Among these, he highlighted the fierce competition in the US banking industry as a result of consolidation and technological disruption. As traditional banks struggle to retain customers and secure funding, they turn to fintech to win over customers, increase deposits, and enhance operations. 

The battle for deposits is central to the US fintech ecosystem, as younger customers diversify their financial holdings across several platforms. As a result, banks risk losing deposits to alternative providers such as peer-to-peer payment app Venmo. Deposit attrition threatens the solvency and competitiveness of smaller financial institutions, notably community-based banks and credit unions. 

Digital wallets have altered the way customers manage their finances. Palmer observes that, while established players like Apple (Apple Pay) and Samsung (Samsung Pay) are widely recognised, Venmo stands out for its exceptional market penetration and brand loyalty. 

The rise of digital wallets, however, raises questions about the changing concept of banking. Palmer stated: “You have to start asking yourself the fundamental questions. What is a bank? At what point do we call something a bank any longer?” 

As fintechs enter the financial space, banks face pressure to adapt to shifting consumer expectations and implement creative solutions to remain competitive. As a result, an increasing number of financial institutions are incorporating artificial intelligence (AI) and machine learning (ML) into their offerings. Palmer underscores the difficulty of distinguishing between genuine AI-driven solutions and insubstantial implementations. Despite the challenges surrounding AI, he recognised that practical applications in fraud detection and prevention show tremendous promise for improving transactions security and efficiency. 

In the payments space, incumbent players still wield considerable influence owing to brand recognition and market saturation. While fintech disruptors seek to provide cheaper and more efficient alternatives, they face formidable barriers to entry because of the entrenched position of conventional payment processors like Visa and Mastercard. 

Growing interest in digital assets, particularly cryptocurrencies, created opportunities and challenges for financial institutions. While consumers in the US, increasingly seek access to digital assets, banks remain cautious due to regulatory uncertainties and skepticism about the crypto market. Nonetheless, the growth of platforms like Coinbase underscores the potential for fintechs to carve out a position in the expanding digital asset industry. 

Keywords: Fintech, Innovation, Strategy, Financial Industry, Deposits, Digital Wallets, Artificial Intelligence, Machine Learning, Fraud, Cryptocurrency, Consumers, Venture Capital, Credit Unions, Community Banks
Country: USA
Region: US
People : Greg Palmer


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