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2021 Digital Transformation: What Should We Expect?

As 2021 begins, The Fintech Times asks three fintech-focussed companies from across the globe what this year will hold in terms of payments, lending and digital transformation as a whole.

Alexander von Schirmeister, Executive Vice President (Europe) at SumUp

Alexander von Schirmeister is the Executive Vice President for Europe of SumUp, a financial technology company that allows businesses of all sizes to receive payments quickly and simply, both in-store and online. Named as Europe’s fastest-growing company in the ‘Inc. 5000’, SumUp has over 7,000 companies joining the platform every day. 

“Next year we should expect continued growth all around as consumer behaviours keep demanding
better and more innovative products. The general acceleration towards online (which was particularly accelerated by the 2020 pandemic) will continue, and fintech will be a natural beneficiary of that trend.

“The push from regulators to go cashless will speed ahead, with Italy as a forerunner, and we’re
certain to see the continued closure of branch banks in small towns across Europe, eliminating easy
access to cash. Concurrently, we’re likely to see a wider variety of mobile payment solutions, in
addition to new ways of paying via QR codes.

“Within the fintech industry by and large, we also expect some consolidation. This may be in the form
of larger players acquiring smaller players, or as national champions merge to create bigger regional
players. We’re sure to see some of the larger legacy banks go shopping among the fintech scene in
order to introduce innovation into their offerings.

“An important trend of “rebundling” will also continue to reshape our industry in 2021. Until fairly
recently, fintechs used to focus on narrow product categories in which they excelled, for example, in
lending, current accounts, payments, etc., where they essentially unbundled a wider range of
financial services traditionally offered by banks. Customers will surely continue to look for one-stop-
shop solutions with transparent pricing, so fintechs that have reached a certain scale will follow the
reverse trend of rebundling (by going broader in product categories) in order to drive greater
revenues.”

Joey Kim, CEO, PeopleFund

Joey Kim is the Founder and CEO of PeopleFund, a Korean digital lender focused on consumer finance and first and only digital lender in Korea to partner with a bank to originate and process loans within the national banking system. He thinks that we will see a boom in digital lending over the next year. 

“Looking ahead to 2021, there are two key trends that I see going on in the digital lending space. 

“First, digital lending is becoming more mainstream and entering a more mature stage globally with new regulations tailored to digital lending. As an example, the new digital lending law in Korea is the first law in the world solely dedicated to digital lending and it recognises digital lending as an official sector of the financial industry. Enactment of this law signals credibility and validation of digital lenders like the company I founded, PeopleFund, and the overall Korea lending market. Unlike China, Korean digital lenders worked with the government early on to draft the regulations to ensure that consumers were protected, but industry growth would not be hindered. The new law will sift out the bad lenders and encourage more global institutional funding to the market leaders in Korea. These kinds of changes in digital lending regulation is happening universally and is great for the industry.

“Secondly, if the debut of digital lenders between 2010 and now focused on newcomers proving their worth, 2021 and beyond will be focused on coexistence in a world with more deeply integrated collaboration between digital lenders, big tech companies and incumbent banks. Initially many partnerships between these three parties were all about leveraging each other as a source for new customers or meaningful, but cursory partnerships that bolstered branding efforts.

“Going forward, digital lenders will forge deeper partnerships with big tech companies and banks by co-developing products or literally combining through M&A deals as we have already seen this past year such as the Lending Club acquisition of Radius Bank or Metro Bank acquisition of RateSetter. The number of digital lender, big tech, bank partnerships is rapidly increasing because the relationships are mutually beneficial, with partnership returns resulting in significant profitability growth. Therefore, as digital lending becomes more mainstream, incumbent banks and big tech companies will want to find ways to leverage digital lenders’ proven worth and technology.”

Nicky Cotter, Head of Fintech and Co-Founder, ICON

Nicky Cotter is Head of fintech and Co-founder of ICON, a firm of corporate finance advisers specialising in selling tech companies in high growth sectors. Like many others, the digital transformation has been a particular trend for her this year.

“Harsh lessons learned in 2020 created a sweet spot for fintech companies and an uptick in deals involving US tech giants.

 “Pre-pandemic, organisations were unprepared for the scale of disruption that Covid-19 would bring to their operations: technology became the hero in a world where ‘normal’ no longer existed and provided a sharp wakeup call for organisations. It’s why digital transformation became the year’s most important buzzword and a priority for businesses. It fired acquisition of fintech companies worldwide and will continue to do so into the foreseeable future. 

“In San Francisco, the US tech sector became fiercely acquisitive, capitalising on demand for digital solutions and the pursuit of deep tech, disruptive companies that transformed communication and solutions in 2020. US tech markets have strengthened too. Together, they have driven demand which has seen significant acquisitions that included Amex acquiring digital lender Kabbage Inc; Visa’s $4.9 billion cash acquisition of Plaid; Insurity acquiring Epic Premier Insurance Solutions and Sofi acquiring Galileo.

“Looking at the hottest sectors, the scale of opportunity is greatest in financial services where, despite traditionally restrictive regulatory practices, the pandemic has revolutionised attitudes to fintech solutions. Our #1 prediction for 2021 is for unprecedented leaps in this sector as fintechs continue to accelerate innovative partnerships with the behemoths. Financial platforms like BaaS will make it easier to develop integrated financial products and deliver them to market through established channels. The world may have changed in 2020 but expect no less in 2021.”

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