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 Alex Marsh, Vanni Parmeggiani, Ken Serdons, Sophia Guy-White and Jorge Camargo on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Alex Marsh, Head of Klarna UK, believes 2021 has seen an increased awareness of personal finances.
He said: “This year we’ve seen a major acceleration in the number of people turning their backs on high-cost credit cards and instead choosing to pay with the money they have.
“That’s in part why the short-term interest-free BNPL sector expanded so dramatically. UK shoppers want the flexibility and protection of credit, particularly when shopping online, but without the pain of extortionate APRs and a never-ending cycle of debt from minimum payments. Predictably we saw big banks move from being critics of BNPL to launching copycat products (often however another poorly disguised credit card…). A reminder of the positive impact of fintech disruption, bringing better choice and value for consumers vs the dinosaur incumbents.
“And on the topic of disruption, Open Banking is tantalisingly on the cusp of becoming mainstream, with around half of the small businesses and over four million UK consumers using game-changing apps and tools backed by Open Banking. At Klarna we are now leveraging our own Open Banking services in the UK, enabling consumers to securely share their financial information with us to confirm the affordability of future repayments. A genuine win-win situation.”
In terms of 2022, Alex said: “Expect to see more early-stage ‘super-apps’ coming to the fore, helping us to carry out a variety of different activities all in one place – and within these, thanks to Open Banking and the emergence of Open Finance, highly personalised services and offers, harnessing OUR data for OUR benefit.
“In terms of market developments in fintech, we can anticipate a further flurry of fintech unicorns for sure, and also consolidation as the dinosaur incumbents desperately seek to cling on in both their core markets of current accounts and mortgages, and carve out a space in new areas such as BNPL. This could well be the tipping point where ‘Fintech’ as a niche sector will instead subsume ‘financial services’ more generally, with technology, data, genuine consumer choice and mobility being integral to the new world.”
Vanni Parmeggiani, Director, Open Banking & Real-Time Payments at GoCardless, said: “In the wake of the global pandemic, digital payment usage continued to skyrocket in 2021 and spur innovation in real-time payments.”
He continued: “This was primarily driven by consumer payment preferences, as we saw Americans become more and more accustomed to fast, seamless payment processes that allow them to send and receive money when, where and how they want. A big reason for this is the increased amount of time spent online while living through a pandemic, and that younger generations entering the financial market are digital-first. We also saw consumer preferences shift more strongly towards mobile-first methods with a study from GoCardless revealing that more than half of Millennials (56%) and Gen Z (54%) are willing to fully switch from traditional banking to peer-to-peer and social media apps to make payments.
“We also saw buy now, pay later surge in popularity as consumers realized that through alternative payments, they are able to get credit without overextending their current credit limit or taking out a new card. Ultimately, this trend will be what lays the foundation for payment methods of the future in which consumers can transfer funds directly from one account to another.
“In 2022, I expect that US regulators will play an even greater role in bringing open banking to the forefront as they realize its benefits on consumer data privacy and security. We’ve already seen strides being made towards this – with Biden’s Consumer Financial Protection Bureau (CFPB) order – and consumers are taking note of how it’ll benefit them. According to a recent study from GoCardless, when educated about the benefits of open banking, 35% of Americans said they were most excited that their personal data will be more secure through open banking. Over half (62%) agreed that they are willing to provide financial information via open banking if it means they will be better protected against fraud.”
CCO at Mollie, Ken Serdons agrees with many that Buy Now, Pay Later will continue to thrive.
“Nearly 4 in 10 Brits say they have used BNPL to pay for goods to some degree,” he said. “As BNPL companies continue to gain market traction and valuation, usage will only increase. Merchants will continue to provide flexible payment methods for online purchases to grow revenues, BNPL will benefit and we will also see high double-digit growth for faster payments volumes in 2022. BNPL can no longer be ignored and will undoubtedly continue shaking up the payments industry for the foreseeable future.
“Additionally, the pandemic has made it critical to have an e-commerce platform if you’re a merchant, and many retailers have made the pivot to online for the first time. But now, SMEs must level-up their e-commerce experience to make it a viable long-term channel rather than a mere alternative to their high street stores. In 2022, small and medium-sized merchants will start to offer personalised experiences to their customers to compete against impersonal retail behemoths like Amazon.
“2022 will see an uptick in offerings that help SMEs deliver more bespoke services, including better shipping options, customer service and marketing support. We will increasingly see SMEs start to provide relevant and credible alternatives to larger retailers.”
Sophia Guy-White, co-founder, Generation Home (“GenH”), providers of practical, modern and human-oriented approach to mortgage lending.
She said: “The lockdowns of 2020 sent financial institutions scrambling to incorporate tech solutions into their workflows. This meant that customers in 2021 came to expect digital-first solutions from their finance providers. Whether that was verifying ID via a selfie and passport photograph, or digital signatures, Europe is catching on to what was commonplace in Asia pre-pandemic. Handing over your passport and utility bill in person now feels quaint.
“In 2021 over 50% of Generation Home customers used Open Banking when completing their mortgage application. This meant less paperwork, less back and forth, a speedier turnaround, and increased accuracy when calculating income and expenditure.
“Recent updates in Open Banking regulation will further remove application admin in 2022. We’re excited about how this could transform customer outcomes across finance providers. From better underwriting for those with irregular income to delivering personalised refinancing offers, the use cases are endless.”
Jorge Camargo, Digital Platform Executive, Bank of America believes digital will become even more relevant as we move forward.
“In the past year of continued uncertainty, financial institutions have stayed on pace with what they know is an absolute: technology. Banks have adopted, now more than ever, a high-tech, high-touch approach. The focus is still on delivering strong and personal in-person resources, while also expanding fintech capabilities.
“This year has shown that consumers want and expect to have control from anywhere. Technology makes it easier for them to do more with their finances and at an accelerated pace. AI has continued to boom – for example, more than 23 million Bank of America clients have used Erica, our AI-driven virtual financial assistant, to complete more than 430 million interactions. Clients are relying on digital capabilities to manage their day-to-day financial activity, while continuing to visit financial centres for their more significant needs. As digital sales and interactions continue to rise, digital trends will continue to evolve and as we adapt to meet consumer needs and wants – making digital a permanent factor for years to come.”
On the year ahead, he said: “As digital becomes more integral to consumers’ lives across all industries – including banking – clients are looking for solutions and capabilities that are highly personalised to their individual needs and aspirations.
“At Bank of America, we are going beyond personalisation to focus on individualisation through data, AI and business intelligence, paired with our industry-leading digital capabilities to provide clients with the ability to bank however and wherever they choose. For instance, since launching in the fall of 2020, Bank of America Life Plan, our digital experience that allows clients to set and track their financial goals and act on steps toward achieving them, has reached more than 5 million users – 1 million of whom have made follow-up appointments with specialists in our financial centres.
“The future of banking is delivering experiences that are uniquely relevant to every client at every life stage. We do this through a singular app where our clients can bank, borrow and invest through individualised content and solutions across all platforms, spanning and supporting the full breadth of each client’s relationship.
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.