As 2021 draws to a close, it’s safe to say that this year has been full of ups and downs. With the world very cautiously emerging from the global pandemic, one thing has remained constant: the innovation and growth the fintech industry continues to bring. While the year has been a whirlwind for most, the fintech sector has seen many challenges and opportunities that will no doubt continue into the next 12 months.
This December, The Fintech Times is asking industry leaders for their ‘View from the Top’ to gain an insight into the decisions behind the last 12 months. Today, we hear from Joe Channer, Phillip McGriskin, Sean Salas, John Rayment, Sendi Young and Richard Prime on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Joe Channer, CEO of Delta Capita, said:
“Banks traditionally are challenged with innovation and are slow to adopting new technology, particularly fintech’s. They have multiple legacy platforms with which to interface, and bringing fintech’s into their ecosystems creates operational and financial risks which take time to overcome. Additionally, banks are reluctant to allow fintech’s access to customer data and coordinate with their IT infrastructure in a slow process.
“During 2021 I have observed an increasing trend around banks using innovation and testing providers (innovation intermediaries) to allow the safe testing of how their APIs and systems will perform, using synthetic data and outside their firewalls. I expect this trend of innovation intermediaries to accelerate and this in turn will speed up both bank adoption of fintech – not only for an individual bank – but also to allow certification of fintech’s for wider adoption across multiple banks.
“The shift to supply chain models has already happened and continues to grow – and banking is one of the last to go. Banks need to learn the lessons of more mature industries like the automotive industry, where there is clear differentiation between mass production and niche luxury labels, but with many shared common components with a supply chain that is taking advantage of specialisation and economies of scale. Banks more and more are going to need to exit these services that are non-differentiating and to leverage partners where they can achieve the benefits of volume, scale, and efficiencies that you can’t achieve when you operate alone.
Phillip McGriskin is CEO of Vitesse, a dual-regulated provider of near real-time international payments and treasury management solutions for its extensive insurance clientele.
He said: “Vitesse focuses on specific verticals, with insurance and insurance claims payments being the main vertical. In the insurance “fintech” space, I think the biggest ’21 trends are towards customer focused outcomes on the payment side of things. By that, I mean insurers are moving away from the old paper cheques that have been the slow and efficient primary method of payment of claims, and they’re moving towards customer choice, which typically revolves around faster payments. So we’ve seen a big continued move towards FasterPayments in the UK and equivalents elsewhere.
“We’ve also seen a shift towards offering customers the ability to receive claims payments back onto their debit/credit card through mechanisms such as Visa Direct, a service that Vitesse launched with Brit insurance for the first time in 2021. On a wider fintech level, the talk has definitely been about open banking.”
In terms of the future, he said: “In insurance (Vitesse’ area of focus) I think speed of payment and customer choice on claims payments will become a topic as the neo-insurers, such as Anansi, Urban Jungle and BoughtByMany, push into the space a little harder, with their newer technology and slightly different customer focus lens. It will be a case that the incumbents sort themselves out or loser customer share. More widely, I think open banking will continue to be a buzz. However, I’m interested to see how the card companies respond. They have efficient networks, big balance sheets and a vested interest in keeping their businesses secure. And my previous experience has definitely shown me that they’re not afraid of competing on a price basis.”
CEO at Camino Financial, Sean Salas thinks “Artificial intelligence (AI) and machine learning (ML) remain a top fintech trend as one of the main influences behind the rapid growth and development of new technologies in the Fintech ecosystem.”
He continued: “With the help of AI and ML models, Camino Financial has built a digital lending platform that has the ability to provide a deeper understanding of our niche market – the latino small business segment. With the use of AI, we are able to track hiccups in a market that would otherwise contribute $1.4Tn to the economy if properly funded. Having access to these underbanked and unbanked consumers has allowed us to reach and capitalise on markets that have been underserved to date. By prioritising diversity in our data sets and practitioners, this form of technology is becoming a force for good as it relates to financial inclusion.
“In 2021, financial inclusion presented a more altruistic side of fintech. Fintech has proven to solve the financial inclusion dilemma by providing accessibility and ease of use to financial products and education. Most recently, there have been an emergence of bank and fintech partnerships that aim to provide credit to underserved populations. Utilising Financial Inclusion as a service has been a growing trend that, in turn, helped the growth of the economy as a whole.
“The pandemic highlighted the need to digitise on a global scale. Today, more consumers – especially those in underserved communities – are pivoting toward digital banking as a means for obtaining more capital and credit. Digital-only banks also help financial inclusion with zero fees, increased interest rates, access to digital payments, and ease of opening an account with minimal requirements.
“Credit scoring is critical to modern finance, and we have been putting it to work — profitably — to support underserved communities. In the US, credit scoring plays a vital role in economic growth by helping expand access to credit markets and lowering the price of credit. At Camino Financial, we have developed our ‘Camino Score’ Technology software to aggregate data and drastically reduce financing costs for thin-file, cash-based microenterprises. In comparison to the traditional FICO Score, our Camino Score frees up more capital for growth in underserved communities. As we pivot towards a more financially inclusive world, alternative credit scoring models will become a trend for more financial institutions.”
John Rayment, CEO of Identitii, thinks ISO 20022 is a hallmark of the year.
“Noise around ISO 20022 has dominated headlines a lot this past year,” he said. “The migration promises a lot of great benefits, like richer data, more harmonisation between domestic and cross border payment systems, enhanced screening, increased innovation, and better analytics.
“Chatter around ISO 20022 will continue on well into next year. And although the new standard will solve some transfer issues, we still don’t have interoperability on a global scale. One standard will exist for SWIFT but domestic rails outside of that network could be different.
“But ISO 20022 isn’t just about payments.
“The change is an opportunity for institutions to fundamentally evolve their systems and services in the pursuit of innovation and growth. We perceive a lot of financial services businesses realise this and use the migration as a change to transform and innovate.
“Overall we’re going to see more competition in the market between SWIFT and alternative rails, buy-now-pay-later vs credit cards, and between various currencies like crypto and CDBCs.
“We’ll continue to see the adoption of other real-time payment schemes and CDBCs as SWIFT loses some of its foothold as the go-to for cross-border payments beyond a certain value.
“There has been an increase in technology systems that are more network agnostic, connecting to SWIFT as well as other payment networks like Mastercard Send or Currency Cloud. Some of these systems can also simultaneously connect to companies like Ripple, who are offering tokenised crypto coins.
Sendi Young, Managing Director of Europe for Ripple is a fintech executive with more than 16 years of international experience in financial services, payments and consulting.
She said: “The most significant trend that I’ve seen throughout the past year is cryptocurrency becoming the new normal in finance. Even while attending events and conferences this year, crypto was front and centre, and seeping into every conversation. The biggest difference now is how cryptocurrency is discussed. Historically, it was centred around when it would be mainstream and its potential. Now, in 2021, the conversation has moved on to focus on real-life use cases and benefits that crypto can afford both organisations and individuals.
“Linked to this, is the increased adoption of blockchain and cryptocurrency to facilitate cross border payments. While the pandemic initially slowed down remittances, the global economic recovery this year has seen remittance numbers rise, creating a more competitive landscape for remittance companies. With this intensification of competition, I’ve seen more companies turn to crypto and blockchain solutions to provide more competitive solutions in the form of faster and more cost-effective remittances and more effective internal cash management.
“Financial institutions are becoming more receptive to emerging technologies and they are beginning to include cryptocurrency in their strategies to enhance their service portfolios, as demonstrated by Goldman Sachs’ recent announcement. As we move into 2022, I expect to see more partnerships between traditional financial service providers and crypto firms to enable the successful implementation of crypto-enabled services. At Ripple, we are in a strong position to support organisations on their digital transformation journeys and integrate blockchain and digital assets into their business models.
“I’m anticipating an increase in digital asset firms as the industry matures and more organisations register for cryptocurrency licences to ensure they are able to operate securely with customer protection. This will come as the industry becomes increasingly regulated to enable cryptocurrencies to become more mainstream. Frameworks such the EU’s Markets in Crypto Assets (MiCA) framework will be vital to enabling the harmonisation of crypto regulations across Europe. 2022 will be an important year for this framework, even though it may not become applicable until 2024. Regulation plays a critical role in calming the hype around nascent technologies and enabling them to become the new normal. It’s exciting to see discussions around regulating this space are being taken seriously.”
Richard Prime, co-founder and co-CEO, Sonovate said:
“We have seen fintech playing a primary role in the rise of both independent work, and distributed work, as we emerge from Covid. On the surface, at worker level: global employer solutions (Deel, Remote, Papaya), independent worker tax solutions (Coconut), and more intuitive and integrated banking solutions (any number of Neobanks). Below the surface, dozens of fintech rails and technologies allow this innovation to happen, whether it be connectors to banking/accounting apps, KYC/AML verification, credit checking technology and more. Here at Sonovate we are in a unique position to gauge the rise of independent work and the technology that supports it. We are seeing >10% growth per month in invoices funded since the summer – clear evidence that the future of work is changing, and fintech is at the heart of enabling this.”
“Fuelled by the pandemic, consumers have embraced e-commerce and digital services, and their expectations for seamless customer experience – with frictionless checkout and payment – have increased exponentially. This is a significant shift that has raised the bar and expectations for the business world, and this is why embedded finance and banking-as-a-service are amongst the most exciting and promising trends. They also offer significant opportunities for financial inclusion – opening up financial services to more people and making it easier, faster and more seamless than ever for businesses to access finance.”
This article is part of our 2021 December series, View from the Top, to see others like it and our special edition from December 2020, please click here.