Fintech, the wider arena of merging technological and digital advances with the traditional financial industry, has become a hot-button field of interest in 2021 and 2022. With customers keener than ever for smart, easy-to-access, and technologically up-to-date financial products, where to from here? Let’s take a look at Fintech opportunities and trends to keep your eye on this year.
Smarter, Holistic Banking
It often surprises consumers to learn that the developing world, not the developed world, has been a major driver in smarter fintech banking solutions. It’s easy to see why, however. Historically, banking access for people outside of well-developed cities in poor nations has been tough. Only as the pandemic changed how we interacted with others and did business did offering smart, off-site, secure banking facilities become a developed world priority. Embedded finance and access to banking facilities and products have become a cornerstone of the fintech market in the last few years, however.
What is embedded finance? It involves adding more products to transactional platforms. If you’ve ever browsed for a ‘big-ticket’ item online, and seen financing offered, then you’ve experienced embedded fintech. It also occurs when investing is made accessible through easy, inexpensive access to investment platforms. Buy-now, pay-later, has become a particular growth sector.
Increased Regulatory Status
Many existing embedded fintech solutions, however, have been operating through non-regulated financial entities due to this interest. We fully expect to see more and more regulatory intrusion into the fintech space over the next year. While some are not fans of regulation, of course, specifically in the crypto markets, this does also add an extra layer of security, so there are pros and cons for users. Add to this an increased focus on cybercrime, secure solutions, and questions around how much data gathering is too much, and you have an area of interest that is going to gather a lot of scrutiny going forward.
Increased Products and Diversification
We’ve also seen fintech concepts expand into more and more finance-related markets in recent years. Fintech and forex trading now go hand-in-hand. We’ve also seen ‘easy-access’ stock platforms, crypto trading platforms, and more enter the fintech market. Many fintech companies are also rebranding as ‘data organizations’, offering easy payment methods and other financial services to stand out from the crowd.
ESG-Focus is Booming
Environmental, social, and governance, otherwise known as ESG, has captured a lot of interest in the last few years. We fully expect to see a greater focus on climate change, decarbonization, and the wider circular economy come to the fore in fintech arenas. Likewise, of course, the strong growth of underdeveloped markets in major regions is likely to continue to boom.
The Loss of Unicorn Status
A Unicorn company is defined as one worth over US$1B while remaining a startup. It’s been a craved status for a while now, but the allure is already dying off in developed markets as the number of startups meeting this metric surge. While it will remain a building block for fintech in emerging markets, it will become less intriguing for the wider market over the next few years.
Web3, or the Blockchain
While many think of the blockchain as only applying to crypto, it offers much potential towards allowing greater ownership of digital goods in an undisputed manner. This makes peer-to-peer transactions easier and removes financial service providers as intermediaries. This concept is being referred to as Web3 and offers the potential to drive better consumer protection, usability, and accessibility. Defi, or decentralized finance, is a concept we will see reworked and addressed a lot in the next few years.
Cross-border E-Commerce
With the pandemic creating the space for greater e-commerce solutions, we’ve seen a growing interest in taking e-commerce solutions over international borders. International transactions are now a viable pool for small and medium-sized businesses that once would have looked to local-only traffic. This means a concurrent need for simple, easy-to-use, and safe payment options that work across currencies and markets. We may even soon see real-time payment capabilities boom.
There’s an App for Everything
Tied as fintech has become to our ability to access financial services ‘on the go’, there’s no surprise here. Central hub apps, such as Uber (now offering beyond rideshare to food delivery and courier services) and Amazon (offering a bit of everything, including streaming), allow customers to access multiple products and services in one place, make reservations, and simplify their daily life. Offering diverse fintech-related services in one platform is not a new concept- look at Paypal- but the idea of a connected app ecosystem with financial products and services inbuilt is going to only get stronger.
And there you have it. These critical cornerstones of fintech are going to become more and more important in the next few years, and for anyone interested in the wider fintech space, keeping them on your radar should be a priority.
