Fintech is finding itself at a turning point amid rumblings the industry is ‘losing its lustre’. We’ve seen firms struggle to raise fresh funds, reports of falling valuations, fire sales, staff layoffs and recruitment freezes. Some fintechs have abruptly closed while others have bid their farewells before they’d even had the chance to say hello.
Throughout January on The Fintech Times, we’ve asked industry experts to share how we can move ‘fintech forward’ in the next 12 months.
Today we share the views of Carta Worldwide, Ageras, IDA Ireland, Earnest and Plaid.
We need a ‘step change in regulation’
The massive layoffs seen in recent months will likely continue into 2023 but out of the ashes of 2022, expect to see the second coming of fintech, says Richard Wray, chief operations officer, at paytech, Carta Worldwide.
“Fintech has always held disruption at its core and is known for moving fast, and occasionally breaking things. In stark contrast, regulation has largely been cautious, slow, and unable to match the relentless pace of fintech innovation.
This has created problems – from a runaway BNPL market to acquirers overcharging merchants and crypto firms going under and losing customer’s money. For fintech to not skip a beat, we’ll need to see a step change in regulation in 2023, including new rules to consumer credit across Europe to cover BNPL, the PSR stepping in to protect merchants, and MiCA to regulate crypto assets.
“Fintechs, previously resistant to more regulation, are now demanding rules to bring stability and order to a market that has faced a year of uncertainty and upheaval.”
‘We need to innovate to help people more’
Ripsy Bandourian, head of Europe for Plaid, says there needs to be a bigger push for innovation.
“The fintech sector has come a long way over the last few years, with millions of customers across the globe educating themselves on new processes, apps and available services, including open banking. However, there is a sector-wide need to embrace this further, push the innovation limits we haven’t imagined yet, and help consumers in a time of need.
“While many people across the UK and Europe may turn to a ‘back to basics’ approach to finance, that doesn’t mean abandoning digital tools. There is a huge opportunity for fintech companies to innovate as more and more people report fintech is creating real benefits in their financial lives.
“To enable continued growth, further development will be required – and a large part of that lies in moving regulation from open banking to open finance. Open finance has the power to provide consumers with a holistic view of their finances, by opening up mortgage, investment, and pensions data.
“Without permissioned access to these data sets, there’s only so much fintech companies can create to help people manage their money. More access to more types of data means more innovation, and we hope regulators can see that and evolve policies soon.”
‘We need to add value’
Martin Hegelund, CMO and co-founder of fintech Ageras, says that as an industry we must focus on applying our focus and investments into truly beneficial and value-creating products that can be monetised with a viable business model.
“As fintech valuations are being dealt bigger blows compared to any other sector in the current economic downturn, the industry will have to keep the emphasis on real-life use cases with a proven track to be profitable.
“Speculative solutions that are not monetized or bring sufficient ROI will likely face the end of the road. Customers and investors should focus on tools that save time, cost, and/or strengthen revenues.”
‘We need to collaborate more’
Companies will look for a critical mass of expertise via the ‘cluster’ concept, says David Gaskin, VP & head of financial services, Western USA, IDA Ireland – the Irish Government’s economic development agency responsible for attracting foreign direct investment to Ireland.
“It’s a powerful approach to propelling innovation forward that’s common in Europe but not so in America, is clusters. The cluster concept is a collaboration between companies, government organisations, universities and research centres. Clusters usually occur in a geographic area where participants can direct their energies to specific technologies.
“In the fintech sector, clusters often focus on AI, blockchain, cybersecurity and machine learning, However, the overall idea is the development of regional ecosystems of related industries and competences featuring a broad array of inter-industry interdependencies.
“An economic phenomenon. Clusters also create a concentration of skilled workers attracted by the critical mass of aligned entities with a common goal. To move the fintech industry forward, we need to collaborate and come together to innovate and thrive.”
‘We need to stop thinking in siloes’
“Fintech is an interesting industry with great momentum, but we will create true change only when we stop thinking in silos,” says David Green, CEO of fintech Earnest.
“I’m excited to see what 2023 brings in terms of unexpected collaboration across industries that incorporate fintech, and to see new ways of bringing financial services to products or companies people are already familiar with.
“I hope through this consumers gain accessibility to personal finance in a way that helps them understand how to set themselves up for financial success. Ultimately, a product where form meets function is a great one!”