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 Eduardo Martinez, Paul Byrne, Kelly Gratz, Hamzah Almasyabi, Brad Goodall and Matt Kelley, on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Eduardo Martinez, Co-founder & CEO, TOQIO thinks Embedded finance was one of the key trends in 2021.
“The rapid adoption and the fast-evolving landscape of Digital Banking has been a big trend in 2021. The ability for anyone from challenger and neo-banks to corporates to develop and release propositions to market quickly has changed the landscape drastically over the last year. The increased adoption was inevitable in light of the pandemic.
“Another key trend has been the growth of BaaS and fintech SaaS platforms, such as Toqio, that has enabled non-bank financial service providers to deploy ever-advancing propositions to customers across payments and lending. This development has started to move these providers away from the usual transactional style delivery into building experiences capable of delighting customers on a recurring basis and generating more sustainable revenues in the process.
“This evolution has also fuelled one of the other megatrends in 2021, the rise of Embedded Finance. This trend has been growing since the advent of ‘Buy Now Pay Later’ but as new BaaS and payment providers have evolved in the market, the use cases have expanded dramatically and allowed people to bring really innovative solutions to consumers.
“Embedded Finance was a key trend in 2021 and we will see its continued evolution in the SME and corporate markets in 2022. More experiences will be transformed by the ability for small businesses and corporates to consume and offer finance. As an integral part of customer journeys this will transform user experiences and drive enhanced loyalty and revenues.
“Another key trend next year, enabled by modern BaaS and Platform as a Service providers, will be the proliferation of hyper niche user propositions. For example, products being launched rapidly to market for specific use cases in areas such as the gig-economy, or propositions that fuel vital financial inclusion across different demographics or geographies, that can now be achieved profitably to make them a reality.
“We’ll also see the growth of Platform as a Service providers coming to the fore in fintech delivery. These platforms allow very specific propositions to be taken to market rapidly whilst allowing access to a wide partnership base, delivered via a SaaS model. With regulatory and security compliance in-built, they allow founders to focus on their customers and go-to-market without the hassle of building their own teams, whilst benefiting from ongoing innovation in the market.”
Paul Byrne is CEO and President of CurrencyFair, a rapidly-growing global payments business providing consumers and businesses with access to low-cost foreign exchange rates and faster international payment services.
He said: “There has been a continued and growing of investment in solving business payment challenges, with some very high profile fintech IPO’s as well. I see more interest in security and identity for crypto products, whether coins or crypto-backed assets
“In 2022, Fintech’s will make significant inroads into solving the complexity of business payments, and identity management will be mandatory as more countries adopt open banking. Plus speed of payment settlement will increase across all businesses. The US market will start thinking seriously about the future of checks and how to upgrade their payment infrastructure to match Europe’s”
Kelly Gratz, CEO of g2o, thinks that “2021 has continued the trend toward digital everything.”
She continued: “While 2020 necessitated a quick switch to online experiences, 2021 has highlighted the importance of improving online interactions and providing the highest-quality experiences for consumers. As financial organisations look forward to 2022, they must be strategic about building positive customer experiences that are integrated across all consumer touchpoints. To do so, organisations must take a deep dive into customer journeys and understand all of the different ways individuals interact with your brand. Taking this big picture approach can be overwhelming but it pays dividends in the long run.
“You must also consider the culture of your organisation and how it impacts both your customers and your employees. Perhaps more than ever before, culture is driving a lot of both purchasing and recruiting decisions. The Great Resignation and other employee trends will continue to impact your ability to attract and retain top talent that provides the highest-quality customer experiences. Therefore, it’s important to listen to your employees and understand their journeys with your brand as well. At g2o, we’ve been working closely with our customers to identify triggers that cause employees to leave, and proactively work to reduce these triggers.”
Hamzah Almasyabi CO-Founder CEO, Minted, said:
“It’s been an interesting time for Fintech. Many digital banks and investment platforms have reported a rise in user activity during the pandemic, some actually reporting their best numbers to date have come during this period.
“As traditional banks were perhaps less prepared for digital operations, the more agile Fintechs who based their business models on being a digital-only service were perfectly positioned to capitalise. With lockdowns and other measures being enforced, those customers who were lagging behind when it came to digital banking, had no option but to catch up. Digital banks looked an appealing option for many, particularly with the superior user experience that many of them offer compared to some of the traditional banks.
“We also saw a rise in the use of investment apps and a surge in investments into Cryptocurrencies, particularly by first-timer investors or those with very little experience who were now willing to take a leap of faith and dabble in the world of investment. This was perhaps fuelled by economic uncertainty, lack of confidence in the financial system and an increase in the number of easy to use investment apps now available.
In terms of 2022, he said: “I expect that despite the latest crackdown in China on Bitcoin, we will continue to see more users investing into Cryptocurrency. The growing popularity of NFTs may open up interesting new opportunities for new NFT based investment products.
“I would also expect to see further developments in Open Banking products particularly in the provision of Variable Recurring Payments solutions. With such solutions, I would also expect increased implementation and use of Open Banking in Fintech apps.
“Another area I’d expect to grow is the use of Blockchain technology in Fintech. Blockchain technology offers a high level of security and transparency for transactions whilst removing the need for intermediaries and also reducing cost. As such, one would expect that many up and coming platforms would be based on Blockchain technology.
“Fintech-as-a-Service is another area I expect to see growing. We are seeing an increase in partnerships and platforms that are offering their services to other businesses. Minted is one of those and we are launching our Gold-as-a-service solution called Minted Connect, which will allow partner businesses to offer our savings plans to their customers and create a new revenue stream for their business with minimal involvement. It’s a win-win and as a result I’d expect to see such solutions become more popular.”
Brad Goodall is CEO of Banked, powering Pay by Bank provides businesses with a fast and secure way for their customers to pay directly using their bank.
“2021 was a year focused on payments, open banking and a crazy amount of investment from VCs in fintech,” he said.
“The pandemic shifted a considerable amount of buying behaviour online and the companies who took advantage of this were those that could remove friction for consumers who were looking to spend or invest money. There was an explosion of Buy Now Pay Later (BNPL) activity as Klarna and its competitors successfully leveraged consumers wishing to spend online and merchants fighting for conversion of sales at checkout. The QR code made a big appearance due to COVID as it was seen as a way to get information to people of all demographics. The payments industry is now focused on using this moment in time to bring the West more aligned with the Easts use of QR codes for payments.
Banking-as-a-Service also continued to be a big theme in 2021. Brands are now having more conversations with BaaS providers to leverage selling fintech solutions to their customers which is continuing the pressure on disintermediation of bank relationships with end consumers at point of purchase.
“2022 is going to be the year banks go on the offensive with open banking. This will come in two forms. First, with acquiring banks looking to add value with payments and data to their merchant services. Second, with issuing banks seeking to monetise access to their payment infrastructure and forging partnerships with fintechs and payments businesses to stay connected to the end consumer payment journey.
“Open banking will continue to be a global trend with more countries seeking to connect open banking with real-time payments. The US will lead the charge, with Visa and Mastercard feeling genuine pressure about the future of cards.
“There will be regulatory pressure on BNPL and banks will have a role to play in this. Brands will start leveraging their trust with the consumer to take advantage of fintechs looking for partnerships.
“Fintechs that can help brands with profitable, long term value and closer consumer relationships will be the big winners in 2022.”
Matt Kelley, Director of the JAM FINTOP Bank Network believes the push to digital has been a hallmark of the year.
“In 2020, COVID forced banks to move much faster than normal on innovation and the move to fully digital delivery. These projects were largely quite successful (think PPP and digital consumer account opening) and bank leaders learned they could execute effectively with fintech partners, move faster and most importantly left them eager for more. As a result in 2021, US community and mid-size banks started to lean in much more actively on fintech investments and innovation projects. Banks started demanding more flexibility, open APIs and product marketplaces from existing key vendors and were increasingly willing to work with smaller, more nimble fintechs that could help them grow, become more profitable and stay relevant. All of this led to a lot more fintech product partnerships, direct equity investments and growth in venture funds with bank (and credit union) LPs. We think all of these trends remain in the very early innings.
“Community and mid-size banks will increasingly start to build new digital/direct bank businesses on modern cloud core technology in parallel with their legacy core, providing more optionality and innovation flexibility. For most banks, these new platforms will be primarily focused on growing commercial customers by embedding banking products into customer workflows in a fully digital way as the industry competes versus SMB challenger banks like Brex, Ramp and Mercury.”
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.