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 Avital Sincai, Christoph Gugelmann, Louis Alexander, Helena Nimmo and Keith Sides on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Avital Sincai co-founded and is the COO of Cydome, a specialist in maritime cybersecurity. He said:
“Along with digital transformation, decarbonisation, fuel optimisation, cargo optimisation and increased use of more accurate weather data are all areas that have seen significant investment in 2021, particularly in the supply chain industry.
“With $11 trillion USD of cargo carried in 2019, shipping is the cornerstone of the global supply chain and the forces that power the global economy. It’s also an easy target when it comes to cyberthreats, whether they come from nation-states, ransomware attacks or bad actors looking to cause disruption. Hence why we have seen an increased level of cyber-attacks on vessels and the supply chain throughout 2019.
“2022 will see increasing investment in digital solutions in the maritime sector, but this will need to be matched by significant investment in cyber protection. The digital maritime market is estimated to be worth $350 billion USD by 2030, but with greater digitalisation comes greater potential for cybercrime. The sector has been slow to catch up with comparable industries when it comes to digitalisation, but it is gathering pace fast and will continue to accelerate throughout this decade.
“Where the money flows, cybercriminals inevitably follow. Every day we are logging and protecting clients from thousands of cyber-attacks on client vessels e.g. maritime ransomware has increased seven-fold in recent years as well as hijacking shipboard systems is increasing.”
Reducing the trade finance gap will be a focus but banks will have to do more with less in the face of greater capital constraints, Christoph Gugelmann, co-founder and CEO at Tradeteq comments.
He said: “The trade finance gap is widening, leaving many businesses without the funding they need. Basel III placed tight restrictions on banks active in trade finance lending and Basel IV is set to exacerbate the issue. It’s difficult for banks to fill the gap through additional lending but one approach banks are adopting is the distribution of trade finance instruments to other banks and the capital markets. They recognise that by adopting an originate and distribute model for their trade books, they can open up additional sources of funding.”
Louis Alexander, CEO at bridging and property finance business, SoMo, said:
“In 2021, we saw a large increase in cyber fraud in all industries. We also thankfully, saw some lenders adopting or catching up on digital anti-fraud and anti-laundering measures, but a lot of their processes are insufficient. SoMo is head of the game. We’ve had them in place for four to five years and have used that time to refine them and add a human touch to them. Other lending and credit checking organisations need to work harder on doing this themselves to prevent being hit by fraud.
“I’ve also seen a lot of broken technology this year; businesses have made the mistake of putting too much tech in place and it’s been counterintuitive. Smaller companies that have the tech in place, but aren’t updating codes and apps, will find their tech slow, cumbersome and not fit for purpose which in turn will annoy customers and prevent them from progressing.
“The other shift from 2020 and 2021 has seen bank and finance employees working from home and this has slowed processes down. Businesses can get hung up on technology. It’s dictating what they do as a business when it needs to be combined with human interaction for it to work best. There are lots of challenger banks, lenders and bridging companies hiding behind platform systems, asking customers to communicate via portals and because every opportunity is different, systems can’t pick up on the nuances the way humans can. That’s why we have everyone working from the office. There needs to be a balance. Fintech has become a ‘sexy’ industry but it’s not all about expensive portals – our employees also base decisions on their lending experiences and interactions with customers.
“For us, the most significant changes have already taken place so 2022 will be a year of continuous improvement, particularly in the areas of development, systems and tech, in order to make the lending experience more efficient and ensure safe and secure loans for borrowers and lenders alike.
“2022 will be a period of reflection on how well certain pieces of technology have worked and whether they’ve allowed businesses to grow over the last two years. SoMo is a big fan of technology and has been utilising it since the beginning so, when Covid kicked in, we were already in a strong position in the underwriting and legal space.
“I also think 2022 will be a year that banks buy certain fintech companies, but it’s important to bear in mind that tomorrow’s borrowers will be very different from the borrowers of yesterday. Long term, we believe consumers will move away from banks. We’re seeing more and more people coming for bridging loans to get their mortgages through. Next year, SoMo will be offering a buy to let product, which will put us in competition with banks – and we’re up for the challenge.”
Helena Nimmo, Chief Information Officer, at Endava believes the rise of Buy Now Pay Later was a major theme of 2021.
“One major fintech trend that has been hard to avoid in recent years, but particularly in 2021, is that of Buy Now Pay Later (BNPL). It has become increasingly popular with the likes of Klarna and micro-payments in the insurance space and has further increased the complexity of the global payments landscape. The same could also be said of the growing number of cryptocurrencies. The number currently sits around 5,000 and no doubt will continue to grow.
“If we think about the next five years, I expect we will see an accelerated trend around making payments as frictionless as possible. The focus will be on integrating payments technology into more consumer technology products like wearables, cars, home assistants and even fridges, whilst also making each interaction more intrinsic to our everyday lives. We are already seeing Amazon Alexa and HSBC enable voice-activated payments, whilst other technologies that have now become standard authentication mechanisms include face recognition, fingerprint activation and even a user’s unique heartbeat. Social media now also allows certain chatbots to facilitate the purchase of goods via platforms such as Facebook and WeChat.
“With all of this, it’s essential that businesses continue to implement all necessary measures to protect consumers. As such, we are now seeing an increase of data-driven identity services to combat fraud. Multi-factor authentication for payments is now widespread, and in the future, we are likely to see more international collaboration around identity authentication schemes. On a similar theme, with central banks continuing to invest and accelerate central bank digital currencies (CBDC), I expect we’ll see more regulatory frameworks emerging to manage these, as well as faster payments and the already advanced and popular open banking.
“From a technology perspective, the increased complexity will drive API development for financial institutions (banks, insurance, wealth management) to be able to manage the overall fragmentation of payment products and channels. We are seeing examples of super-apps connecting over 200 institutions in Asia using APIs. Whichever technologies or trends gain momentum in the near future, the need to maintain consumer and institutional confidence is and will continue to be, paramount.”
Keith Sides, SVP of Payments at Persistent Systems said payment systems have been a feature of the year.
“The introduction of more and more fintech companies and the omnipresent shift to digital has spurred major disruption in the payments space causing legacy institutions to consider how they are going to keep up with the near-constant innovation that users demand.
“With the widespread adoption of mobile payments and the jump in eCommerce during the pandemic, most consumers are ready to fully embrace real-time payments. Much of the last year has been about modernisation, preparing for instantaneous transactions and appealing to the consumer demand for immediate payment settlement.
“Peer-to-peer transactions are a dominant force in the payments space, particularly in the youngest generation of users, and are likely to continue to grow. We have seen increased attention on data and analytics and financial institutions are beginning to explore how artificial intelligence and machine learning will lead to more personalised banking experiences. As long as customers continue to be allured by the promise of easier, cheaper, and faster transactions, the payments ecosystem will continue driving forward well beyond 2022.”
He continued: “The focus of 2022 will be the continued modernisation, implementation, widespread adoption, and optimisation of real-time payment rails. The launch of the Federal Reserve’s FedNow program, predicted to arrive by 2023, will fundamentally change the way the average consumer thinks about banking. Customers will be able to have their transactions processed and settled at any time of the day, any day of the year. In a decade, the idea of writing a handwritten check will be as foreign as trying to explain a VCR to anyone born after 2010.
“With real-time payments, the need for real-time fraud detection and security become increasingly important—especially in the consumer space. Users will want to be assured that faster transactions don’t mean diminished security. We can also expect to see continued migration from distributed systems to cloud-based infrastructure for those organisations that have yet to adopt.
“In the meantime, banks should continue to focus on modernising their payments ecosystem by adding faster payment methods and investing in the most cost-efficient payment rail possible. Improving user experience should be a top priority in one’s digital modernisation strategy to avoid being made obsolete by fintech’s offering better, faster, more personalised service.”
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.