2021 Digital Transformation: What Should We Expect?

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As 2021 begins, The Fintech Times asks three
fintech-focussed companies from across the globe what this year
will hold in terms of payments, lending and digital transformation
as a whole.

Alexander von Schirmeister,
Executive Vice President (Europe) at SumUp

Alexander von Schirmeister is the Executive
Vice President for Europe of SumUp, a financial
technology company that allows businesses of all sizes to receive
payments quickly and simply, both in-store and online. Named as
Europe’s fastest-growing company in the ‘Inc. 5000’, SumUp
has over 7,000 companies joining the platform every day.

“Next year we should expect continued growth all around as
consumer behaviours keep demanding
better and more innovative products. The general acceleration
towards online (which was particularly accelerated by the 2020
pandemic) will continue, and fintech will be a natural beneficiary
of that trend.

“The push from regulators to go cashless will speed ahead,
with Italy as a forerunner, and we’re
certain to see the continued closure of branch banks in small towns
across Europe, eliminating easy
access to cash. Concurrently, we’re likely to see a wider variety
of mobile payment solutions, in
addition to new ways of paying via QR codes.

“Within the fintech industry by and large, we also expect some
consolidation. This may be in the form
of larger players acquiring smaller players, or as national
champions merge to create bigger regional
players. We’re sure to see some of the larger legacy banks go
shopping among the fintech scene in
order to introduce innovation into their offerings.

“An important trend of “rebundling” will also continue to
reshape our industry in 2021. Until fairly
recently, fintechs used to focus on narrow product categories in
which they excelled, for example, in
lending, current accounts, payments, etc., where they essentially
unbundled a wider range of
financial services traditionally offered by banks. Customers will
surely continue to look for one-stop-
shop solutions with transparent pricing, so fintechs that have
reached a certain scale will follow the
reverse trend of rebundling (by going broader in product
categories) in order to drive greater
revenues.”

Joey Kim, CEO, PeopleFund

Joey Kim is the Founder and CEO of
PeopleFund, a Korean digital lender focused on
consumer finance and first and only digital lender in Korea to
partner with a bank to originate and process loans within the
national banking system. He thinks that we will see a boom in
digital lending over the next year. 

“Looking ahead to 2021, there are two key trends that I see
going on in the digital lending space. 

“First, digital lending is becoming more mainstream and
entering a more mature stage globally with new regulations tailored
to digital lending. As an example, the new digital lending law in
Korea is the first law in the world solely dedicated to digital
lending and it recognises digital lending as an official sector of
the financial industry. Enactment of this law signals credibility
and validation of digital lenders like the company I founded,
PeopleFund, and the overall Korea lending market. Unlike China,
Korean digital lenders worked with the government early on to draft
the regulations to ensure that consumers were protected, but
industry growth would not be hindered. The new law will sift out
the bad lenders and encourage more global institutional funding to
the market leaders in Korea. These kinds of changes in digital
lending regulation is happening universally and is great for the
industry.

“Secondly, if the debut of digital lenders between 2010 and
now focused on newcomers proving their worth, 2021 and beyond will
be focused on coexistence in a world with more deeply integrated
collaboration between digital lenders, big tech companies and
incumbent banks. Initially many partnerships between these three
parties were all about leveraging each other as a source for new
customers or meaningful, but cursory partnerships that bolstered
branding efforts.

“Going forward, digital lenders will forge deeper partnerships
with big tech companies and banks by co-developing products or
literally combining through M&A deals as we have already seen
this past year such as the Lending Club
acquisition of Radius Bank or Metro
Bank
acquisition of RateSetter. The
number of digital lender, big tech, bank partnerships is rapidly
increasing because the relationships are mutually beneficial, with
partnership returns resulting in significant profitability growth.
Therefore, as digital lending becomes more mainstream, incumbent
banks and big tech companies will want to find ways to leverage
digital lenders’ proven worth and technology.”

Nicky Cotter, Head of
Fintech and Co-Founder, ICON

Nicky Cotter is Head of fintech and
Co-founder of ICON, a
firm of
corporate finance advisers specialising in selling tech
companies in high growth sectors.
Like many others, the
digital transformation has been a particular trend for her this
year.

“Harsh lessons learned in 2020 created a sweet spot for
fintech companies and an uptick in deals involving US tech
giants.

 â€œPre-pandemic, organisations were unprepared for the scale of
disruption that Covid-19 would bring to their operations:
technology became the hero in a world where ‘normal’ no longer
existed and provided a sharp wakeup call for organisations. It’s
why digital transformation became the year’s most important
buzzword and a priority for businesses. It fired acquisition of
fintech companies worldwide and will continue to do so into the
foreseeable future. 

“In San Francisco, the US tech sector became fiercely
acquisitive, capitalising on demand for digital solutions and the
pursuit of deep tech, disruptive companies that transformed
communication and solutions in 2020. US tech markets have
strengthened too. Together, they have driven demand which has seen
significant acquisitions that included Amex
acquiring digital lender Kabbage Inc;
Visa’s $4.9 billion cash acquisition of
Plaid; Insurity acquiring Epic Premier
Insurance Solutions
and Sofi acquiring
Galileo.

“Looking at the hottest sectors, the scale of opportunity is
greatest in financial services where, despite traditionally
restrictive regulatory practices, the pandemic has revolutionised
attitudes to fintech solutions. Our #1 prediction for 2021 is for
unprecedented leaps in this sector as fintechs continue to
accelerate innovative partnerships with the behemoths. Financial
platforms like BaaS will make it easier to develop integrated
financial products and deliver them to market through established
channels. The world may have changed in 2020 but expect no less in
2021.”

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Digital Transformation: What Should We Expect?
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