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 Stan Mlatac, Ivan Zhiznevskiy, Paul Fannon, Carl Hasty, Fizzah Shahid and Jeremy Nicholds on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Stan Mlatac, CFO at RedCloud, is responsible for leading the finance team and supporting the growth of the company with the executive team.
He said: “In 2021, nearly a year of COVID lockdown has profoundly affected the fintech sector, due to the sharp increase in the need for new digital financial services from consumers. Players have responded to this new demand by hyper-personalising their services, enabled by a growing innovation of increasingly sophisticated tools. First and foremost among these tools are AI and machine learning, data analysis, mobile payments, and open banking, as well as increased specialization to deal with certain functions of the financial ecosystem (such as reg-tech, insurtech and robo-advising). B2B services have benefited greatly from this favourable environment. Cyber security remains a fundamental trend, driven by increased user demands.
This transformation has generated impressive performance and business volume and doubled the amount of global fintech fundraising in both the public and private sectors in 2021 vs. 2020. The growing number of M&A transactions is another sign of the sector’s vitality.
All these factors have resulted in an exceptional improvement in the valuation of fintechs, a value which is expected to more than double year-on-year, and continue in 2022.
On the future, he said: “The innovations made in 2021 to meet this new demand will be extended in 2022, accompanied by the generalisation of “as a service”, whether for platforms, software, banks, or infrastructure. They will be reinforced by considerations of ethical and sustainable frameworks, increasingly demanded by users, of which the cloud will be the backbone.
On the environmental side, the pandemic has highlighted climate issues and made any responsible company understand that it has a role to play in meeting the challenges of global warming. Sustainable finance will grow strongly in 2022. The use of cloud infrastructure will accompany this growth, as the shift from on-premise hardware to the cloud makes financial organisations more energy-efficient.
Social issues were also brought to light as work became virtual. Last but not least, cloud computing will play a major role in optimising the delivery of exploding digital services, offering ultra-fast networks where new types of data can be disseminated.
Ivan Zhiznevskiy, CEO at 3S Money said that “Investment in fintech was at an all-time high in 2021.”
He continued: “We’ve witnessed frankly ridiculous figures – stand out examples include TrueLayer’s $1bn valuation and Varo Bank’s $510m Series E funding. Both are shocking. All this epic growth in investment has caused fintechs to lose focus, with many transfixed on bagging all the investor cash they can to achieve ‘unicorn status’. What I’d like to see in 2022 is fintech’s demonstrating business profitability by providing genuine value so that their customers start paying for their services. Not investors. They cannot continue to feed into start-ups forever.
“Cryptocurrencies are trendy at the minute. But with the market now worth over $3 trillion, it’s clear the phrase is no longer just a buzzword. But the moment of truth is coming in the crypto space, compliance-wise. Despite crypto enthusiasts disapproving of heavy regulation, at the end of the day consumers need to be protected. And there is a lack of general understanding on their end. To avoid any unsophisticated investors being ripped off we can expect more protection to come for consumers around crypto.
“The impact of COP26 will also play a huge role in the landscape next year. The UK government is demanding banks and financial institutions police customers, to ensure no one is servicing anyone involved in fossil fuels. While a great idea in theory, it means more compliance, more policing functions and, ultimately, customers will suffer. Instead of focusing on lobbying groups and fossil fuel companies directly, the government is outsourcing their pledges. And its banks and financial institutions who are going to pay the price. More questions mean less trust with customers.”
Paul Fannon is the Managing Director of Global Business Solutions at Bottomline Technologies. He said:
“The obvious trend from 2021 centres around the pandemic and the unanimous decision that we won’t return to our analogue lives. Virtual cards for businesses and contactless payments for consumers will be as entrenched as online shopping. The workforce has shown it can be productive and happy from home, and will continue to do so. But it’s not just an interesting by-product of COVID. Hybrid working has been a key factor in driving insider fraud to high levels, and we need to embrace the technology that goes beyond the filters that once worked when everyone and their devices were under one roof.
“In fact, general payments fraud and other financial crimes have soared during 2021, and are just as urgent to deal with as pandemic-driven changes. But the trend toward more frequent and innovative fraud tactics has been countered by innovations like Confirmation of Payee (CoP). It has proven to be a solid defence against authorised push payment fraud (APP), in which a fraudster impersonates a trusted individual or company. CoP should inspire confidence that fraudsters can be checked by innovative technology.
“2022 will be the year of data – whether its data that runs along with real-time payments and gross settlements, or data that comes along with the continued proliferation of open banking.
“As instant or real-time payments increase their consumer adoption, banks will see it generate a windfall of data. Much of this will be due to ISO 20022, as the richer datasets contained within ISO messaging improves payment processing speed and reliability, while creating more reliable cross-border payments in 2022. My concern is the speed at which banks need to adopt it. Recent research at Bottomline shows that 13% of FIs banks have implemented ISO 20022 to date, 15% are mid-way and 13% are done. Great progress, but many banks need to get a move on.
CEO and Founder at Finwrks, Carl Hasty, believes that fintechs collaboration with banks has been a hallmark of the year.
“It’s clear that banks want to work with fintech’s, but it’s been far too slow. This year I think I’ve seen more partnerships and acquisitions between the two than I have for the last five years. Banks are starting to wake up as a number of these Fintechs are now not only getting their clients but also their revenue as they start to charge for their services and products. Also, there is a lot going on around the banking-as-a-service proposition where fintech’s can leverage the resources and products of banks to deliver stronger solutions to consumers and businesses This space alone could be detrimental for the banks and their revenues.
“It will be interesting to see how the banks react to this as they start to lose revenue or get squeezed. A number of banks have started to review the opportunity of creating better front-end platforms, with more choice, automated workflows and ease of access to their products. To support this we have also seen several tech businesses launch recently that are looking to work with the banks to deliver this and help in the loss of clients and increase in retention of customers for the banks.”
Fizzah Shahid, an associate director at Brainchild Communications Pakistan believes that “payments are here to stay.”
She said: “We saw the payments, PropTech, blockchain, and cybersecurity space ignited, reaching new heights of importance within a few months of the pandemic. Open banking drove increasingly integrated payments solutions. Once it goes mainstream, it will support and facilitate banking-as-a-service platforms. On the other hand, Insurtech, Regtech, and Wealthtech took a very temporary backseat. We expect to see ESG factors playing a big role in fintech IPO valuations and how this impacts the RegTech space.”
“Payments are here to stay. Services that offer banking as a service, buy-now-pay-later such as Dastgyr, embedded insurance such as Extend, and more examples of embedded finance will grow in popularity as corporates and end-users can never go back to the way things were. If people – who want hybrid working arrangements – are willing to be unemployed in order to avoid going back to the office, rest assured that the customer experience can never revert to the way things were.
“Given the number of expected IPOs around fintech, we can expect that local exchanges will make themselves much attractive for technology listings. Incumbents looking to accelerate their acquisition of digital capabilities will lead to the resurgence of M&As, leading to healthy exits which will spurn a new generation of job creators. The cross-border payments Thunes Reinforces Their Cross-Border Payments Capability With Acquisition of Limonetikspace will be changed forever thanks to digital ledger technologies and central bank digital currencies.”
Jeremy Nicholds, CEO, Judopay discussed the elevated transition to digital payments during the pandemic and what this means for digital payments in 2022.
He said: “We’ve seen the normalisation of the changes that have happened because of COVID – customers paying by QR codes at restaurants, increased usage of apps, Apple’s app clips and kiosks in quick-service restaurants. Companies are realising that some of the changes that they have had to make out of necessity are not only valuable but also increase profits and are in fact embraced by customers because it is a better service. 2021 was the year that it wasn’t even remarkable to order via an app at a restaurant, and that is going to have a long-term effect on how customers pay.
“We are already seeing these concepts refined and expanded – Amazon Go stores for example, in which there are no service staff and no formal checkout process. There are a lot of changes that have happened because of the pandemic that will last for many years, and this is one of the most radical changes to the payments space that we have ever seen.
“Credit cards have been with us since 1966 in the UK, but app-based, merchant funded Buy Now Pay Later has gone from being a niche idea to a standard part of the retail experience. You can’t walk down a high street today without seeing Klarna stickers in shop windows, and that looks to be a change that is here to stay. What this means for 2022 is more companies moving into this space and with more innovation, which will mean that established companies will have to improve their product offering to keep up, which will be good for consumers.
“As with any new innovation, there is always a period of pushback, but with BNPL, the use case is so strong and the underlying factors that make it attractive to people are so unlikely to change that we can fully expect it to become a standard part of payments for the foreseeable future.”
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.
