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 Sabrina Del Prete, Colin Brown, Rob Rosenblatt, Andries Smit and Tony Craddock on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Kore’s CEO & Founder Sabrina Del Prete thinks regulation has been a hallmark of the year.
She said: In all regulated industries the Regulator sets the tone. In 2021, regulatory investigations concluded that financial institutions have very poor recordkeeping and their audit trails are often broken or incomplete. Throughout 2021 remediation or redress schemes by financial institutions have been common, often following an enforcement investigation.
“With a shift in focus Regulators are likely to redouble efforts to empower consumers to make good decisions. As 2021 comes to a close there is a change of pace – Covid is no longer an excuse for inaction, and RegTech adoption is rising.
“Regulators have shown their ability to be proactive during the pandemic. Their agility is likely to remain a feature of their interventions going forward. With a raft of new regulations throughout 2021 – and with the 2022 agenda set by COP26, climate risk reporting and commitments to Net Zero – there will be a myriad of demands on all firms, which fintech is ideally positioned to address.
“Throughout 2021 firms have embraced Cloud and fintech to digitise customer service, shorten due diligence and compliance lifecycles, and reduce time to market. Modernisation, transformation and the data analytics that fintechs deliver are the beating drums that will continue to set the pace in 2022.”
She continued: “In 2022, RegTech solutions will become “must-have” not “nice to have”. In the remote and hybrid working world we now live in firms must repay the regulatory debt they accumulated during Covid, when regulators were somewhat lenient. Now that the scale of the issue is profound, and regulation looks set to change further post-Brexit, there are few or even no excuses for firms failing to take all necessary measures to digitise compliance – very quickly.
“Investment in intelligent automation will continue to boost efficiency, contain costs, increase productivity (under increasing scrutiny since Covid), better support remote working and accelerate time to market. AI-enabled decision-making and hybrid relationship management will unveil practical and value-laden use cases for AI.
“Data-driven analytics and decision-making enable better controls and more robust evidence of controls. For example, a huge amount of data is captured for compliance. Firms are recognising that with the right analytics this data can be used to generate actionable insights that inform business decision-making.
“Post COP26, as firms race to introduce more ethical and ESG financial products, RegTech will be relied upon to evidence to Regulators and internal stakeholders that they are correctly classifying products as being ethical and compliant, over time.”
Colin Brown CEO at Aryza thinks “2021 has been a challenging year”
He continued: “The fintech sector played an important role in supporting both businesses and consumers. Banks, lenders and debt advice providers have sought to develop their digital capabilities, all seeking to take a more consumer-centric approach.
“Towards the end of 2020 we launched our Aryza Recover product in partnership with Experian, a digital tool that allows consumers to take control of their financial situation and make better financial decisions. This has already helped improve engagement rates across a number of business, with most consumers now taking a digital-first approach.
“I anticipate that the digitisation of customer journeys will continue at pace in 2022 with fintechs playing a leading role.
“When the pandemic first hit, businesses had a matter of weeks to change their processes and implement digital solutions, which was a big challenge. This created both logistical and financial hurdles and I can see why every business didn’t rush to deploy new technologies. After all, no one knew how long it would take before life returned to normal.
“As we’ve seen recently, COVID-19 continues to impact the lives of people across Europe with a number of nations re-imposing restrictions to curb the spread of the virus. The businesses that managed to get through the initial lockdowns without investing in their digital infrastructure should now realise that these solutions are integral to the future success of their businesses.
“In 2022, businesses should look to move away from simply collecting customer data via an online form. In order to provide the best possible service, they need to be able to view a complete overview of an individual’s finances and this is where open banking technology really comes into its own.”
Rob Rosenblatt is the CEO of Behalf, a fintech that provides in-purchase financing solutions to business merchants. He said:
“Innovations in B2B payments have lagged B2C for many years. But the pandemic forced B2B merchants to take a very hard look at their business and how payments were enhancing or detracting from the experience they were offering their customers. Many had to make some very hard decisions about their commitment to e-commerce and the experience they were offering their customers at the point of sale.
“As a result, 2021 saw B2B merchants rushing to make up for lost time; making major investments in their commerce processes with the goal of making it as frictionless and differentiating as their customers experience in their B2C worlds. This included not only the shopping experience but also customer payments and in-purchase financing. Building on the momentum for Buy Now Pay Later (BNPL) in consumer retail, B2B merchants have started to invest in capabilities that enable them to automate the offering of net terms and financing at the point-of-sale. These capabilities have the potential to provide their customers with greater buying power and bigger average order value size, while also improving cash flow, building customer loyalty, and creating important operational efficiencies internally.”
“In 2020, lending to small businesses was squeezed. According to the Biz2Credit Small Business Lending Index, loan approval rates in December 2020 were down over 50% vs. December 2019. Big banks only granted about 13% of SME loan applications and small banks only 18%. As the economy bounced back in 2021, small business lending did too, but not entirely. In October 2021, after six straight months of increases in small business lending rates, big banks were still only granting about 14% of applications and small banks were only marginally better at about 20%.
“Small businesses desperately need more flexible alternatives to traditional business loans that are better suited to their specific needs. And I believe that fintech will be the solution to that problem in 2022 with the emergence of new alternative lending solutions specifically for small businesses. These will come in different forms — from BNPL-like solutions purpose-built for B2B relationships, to all-in-one small business and spend management credit cards, to new neobanks and defi solutions. These areas are all active today, but largely focused on consumers and large businesses. 2022 will see a laser focus on addressing the issue of working capital for small businesses.”
Andries Smit CEO and Founder of Upside believes partnerships have been a major trend this year.
“One of the major fintech trends we’ve seen this year has been the rise of partnerships between retailers and fintech companies. Using open banking these highly beneficial partnerships are enabling non-bank sectors, like retail, to offer customers new financial products that were previously beyond their remit. Open banking has accelerated fintech growth and will continue to do so while these partnerships not only increase in popularity but become necessary for businesses to retain a competitive edge in various markets.
“An extension of this trend that is particularly exciting is the growing collaborations between fintech and telco, which has also been an emerging trend this year. Upside announced a partnership with telecommunications company Tribe this year to help bring mobile contracts to 9 million overlooked adults in the UK who fail a credit check. This is just one example of many powerful collaborations launched in 2021. By giving fintech access to telco’s unrivalled network of customers and enhancing telco product offerings via open banking, the partnerships further solidify the importance of telcos in our daily lives.
“What we’ve seen this year is only the beginning for these partnerships and I look forward to seeing where they go next. They have huge potential to disrupt and entirely transform their respective markets by driving competition and enhancing customer offerings in a way that was unimaginable not so long ago.
“Across the next year and beyond, it will be particularly interesting to see how Variable Recurring Payments (VRPs) will continue to develop to allow businesses to connect to authorised payment providers to make payments on the customer’s behalf. Direct Debits, which is the main mechanism in use today, is expensive, slow and has a painful mainly paper-based process today. It’s long overdue for digital transformation.
“I anticipate 2022 will also be the year we see end-user adoption of open banking, which currently sits at just under 4 million, double to over 10 million. As account-to-account payments become common practice, and new use cases emerge we can expect end-users to become increasingly comfortable and familiar with this technology.
“It will also be important to address issues that work against the great benefits of open banking in the near future. The 90-day reauthorisation rule, which requires open banking providers to re-confirm consent with the customer every 90 days, must be addressed. This rule currently undermines the principles of convenience and ease that open banking has been working on showcasing. The FCA has already consulted on the matter and issued guidance for possible changes in the future. We must be able to rethink this rule to prevent ongoing friction between the user experience and customers to truly allow open banking to flourish.”
Tony Craddock, Director General of The Payments Association, discussed the future of fintech post-pandemic.
“Although the idea of Open banking has been around for some time, 2021 was when the technology and marketplace aligned, and it became a gamer. Companies working in open Banking are proving the critics wrong and are deploying new solutions that are helping customers. We can expect Open Banking to continue to be an important theme for years to come, but let’s not forget that contactless was not an overnight success either – it was first launched in 2007.
“We also saw the fintech industry, and the finance industry at large, come to understand that their customers are very different, and that their needs extend beyond just having the best functionality in their financial products. We have seen fintech companies launch products aimed at addressing the specific needs of elderly people, people in religions with rules around money, the LGBTQ community and people concerned about sustainability and ethical practices. We believe that this trend of financial innovation that treats people as individuals with shared preferences and interests rather than simply consumers is here to stay.
“In 2022 we’ll see the growth of social commerce, where payments are embedded into Facebook, Instagram or the Metaverse. The time it takes retailers to receive their funds will fall and the use of wearables, especially among women, will rise. API will allow plug-and-play for all technology integrations, and as a result, payments will become increasingly interoperable. We will start to incorporate the right amount of friction into the payments process (not too much, not too little) and we’ll see the arrival of last-mile traceability, where we can really understand what people spend their money on. With luck we will see leading payments companies weaving ESG into their business models and gaining a sense of their moral and ethical responsibilities, especially relating to crime and inclusion.
“China will feature large in 2022, especially relating to its soon-to-be-launched CBDC. Companies will continue to believe that Data is the Holy Grail, and struggle to find it – again. We will see pilots for micro charging, where we pay micro-pence for a few minutes of time for a service. The FCA will cut down its waiting time for new authorisations because it will double the size of the team processing applications. APP fraud will continue to rise and the industry will fail to stop it. We’ll see Pay.UK trying to improve the UK’s payments architecture but failing. The Digital Identity bus will leave the station but it’s a long road. AI will have promise in payments but we’re not sure how. And with a fair wind, we will all stop thinking like bankers, and think like passionate payments people.”
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.