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 Nick Saponaro, Ben Richmond, Akhila Nagabandi, Sebastian Marchon and Nathaniel Harley on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Nick Saponaro, co-founder and CEO of the Divi Project has seen a huge uptake in NFTs.
Over 2021, NFTs, GameFi, and Decentralized Finance (DeFi) have dominated the space as these technologies offer investors the best opportunity to continue to earn yield, even with bearish price action. NFTs has been important with a shift towards metaverses and gaming will continue apace. Utility is paramount to the success of any NFT project, whether that means granting exclusive access to smaller communities, enabling recurring revenue for the holder, or simply as in-game items. Profile picture projects will begin to fade away. In addition, DeFi will continue to mature and more solutions will be built on top of the legacy chains, like Bitcoin and its derivatives like Divi. Bitcoin and many other crypto assets are hitting all-time highs over 2021which will extend into the new year and peak out in the middle of Q2 .
“In the future, DeFi will continue to mature and more solutions will be built on top of the legacy chains, like Bitcoin and its derivatives like Divi. Layer 1 blockchains, especially those leveraging a UTXO framework have been proven to be the most secure over the past 13 years (since bitcoin was incepted). Now smart contract layers are beginning to arise on bitcoin and the like, which offer the same flexibility as ETH or SOL, while continuing to rely on the inherent security of the primary layer. DeFi will also become easier, with solutions that enable more direct access to yield farming via USD. These innovations will become a new type of “on-ramp” into crypto.
“NFTs, GameFi, and DeFi will continue to dominate the space, especially if we see a downturn in the market. These technologies offer investors the best opportunity to continue to earn yield, even with bearish price action.”
Ben Richmond, CEO and Founder of regulatory intelligence provider, CUBE, said:
“In terms of regulation, we’ve seen a wealth of activity around ESG. ESG has been on the agenda for financial institutions and regulators for years, but 2021 has been the year when it’s had real impact.
“Not only did SFDR come into force in March, but a raft of regulatory activity has taken place around all three pillars of ESG – even the US regulators are getting on board. Climate change has been particularly pertinent, along with greenwashing (NB the pending case brought by SEC and BaFIN), which has led to a lot of regulation alongside considerable innovation, as fintechs and regtechs race to create products for ESG.
“In terms of innovation, artificial intelligence has come into its own. Historically, financial institutions have been sceptical about the benefits/trustworthiness of technology, but the pandemic has changed that. Financial services are now in a position where they not only use technology, but cannot operate effectively without it, therefore AI has lost a lot of its ‘scare’ factor.
“CUBE is in a fortunate position – our product picks up regulatory insights published over the year, therefore it can make data-driven predictions about the year to come.
“Continuing from 2021, ESG will be at the forefront of finance. In the last 12 months, 48,377 regulatory insights were published, up by 528% from 2020. These aren’t all regulations, but also guidance and consultations that will inevitably lead to black-letter law in the coming year. These will emerge around climate-related risks, green products and increased accountability for those at the top.
“We also expect to see a lot of regulatory activity around cryptoasssets. In 2021, there was a major shift in the way individuals invest – often gamifying the markets for entertainment, or making crypto investments off the back of celebrity endorsements. The UK’s Bank of England has earmarked crypto as an imminent threat to financial stability, so they’ll be keen to add a regulatory framework that tackles it and protects consumers.
“Finally, 2022 could be the year of cross-border, collaborative financial services. Regulators and firms are crying out for collaboration across jurisdictions and as open finance promises to take flight in 2022, no doubt we’ll see increased data and innovation sharing across countries, as well as a regulatory regime to match.”
Akhila Nagabandi, Head of HR at Pearl Lemon, agreed that NFTs have been the hot topic of the year.
She said: “First, we saw the rise of NFTs or digital assets, then we saw the waves of cryptocurrency including some rug pulls, and we saw the introduction of Meta, which promises new ways to communicate as well as a rebranding from Facebook. While it may not have been anticipated, it does make sense with the trajectory that Facebook has been heading in. With the introduction of the Metaverse, we can anticipate a growth in how social media platforms approach the fintech world. For the most part, social media has been hands-off with public affairs, but I think with the rise of virtual spaces, social media will have to step forward and actually play a larger role in the fintech space.
“We are predicting the rise of old-school techniques as some people will find nostalgia for old methods and there will be a resurgence in unexpected fields that have been seen as dead or no longer of use. We will see an uptick in the use of new digital media channels like TikTok, SnapChat, and, more recently, we will see the further development of NFTs and cryptocurrency. On top of old-school methods, we will also see young entrepreneurs introducing methods that haven’t been considered before. We will also see a rise in employees from non-traditional spaces. Actors and other celebrities will get involved in newfound industries, and there will then be a rise in those who follow such celebrities. NFTs will be refined and will be an indication of what the future looks like. We also believe that the rise of the Metaverse will also create new ways of innovation and there will be an easier means of communication as many companies will move virtual even if they haven’t already.
“This post-pandemic world seems to be looking at a lot of remote opportunities as companies will see the benefits of having global outreach rather than local outreach. There will most likely be a drop-off in some current cryptocurrencies, but the overall cryptocurrency will go up in value.”
CEO at Rydoo, Sebastian Marchon, thinks 2021 has been all about the adoption of digital payments.
“As the pandemic placed significant restrictions on the world, the use of contactless payment and innovative payment methods – from security biometric use to spend management – has now become the norm for millions.
“This technology first became necessary to restrict the transmission of a virus that can spread rapidly through physical payment methods. However, once the technology was implemented, consumers and retailers quickly began to see the ease and convenience of digital payment methods, alongside the preventative social health benefits.
“We are also seeing significant advances in embedded finance, whereby integration across the Fintech ecosystem is continually increasing. Companies are beginning to use more and more integration services, from payments to insurance, through APIs. These integrations are adding more value to their platforms, while outsourcing operations to a third party.
“Developers no longer have to worry about building the stack from the start, allowing them more time to innovate. However, this is only the beginning. The last year has seen an uptake in embedded finance in non-finance brands, yet the coming year will rapidly accelerate usage through open banking.
On the future, he said: “It has been known for some time now that data is the new currency, having entered a digitally dependent world. It comes as no surprise that this trend of using data to drive technology forward is not going away anytime soon, and I predict over the coming year it will be everywhere, growing in popularity quicker and stronger than before. The use of data will then lead to more advanced services and applications that can be used in the finance industry.
“AI and Machine Learning (ML) will be among those. Strengthening customer relationships has been a focus for the finance industry for a long time, and has also been one of the greatest challenges. With AI and ML, automating processes will soon be standard practice, utilising algorithms and prediction models to quantify and reduce risk.”
Nathaniel Harley, CEO Mantl, said “2021 was another big year for fintech.”
He continued: “Neobank valuations continued to rise at an inordinate pace and innovations around embedded finance, real-time payments, buy now, pay later and lending are fundamentally changing the way people manage, spend and send their money. In the face of the pandemic, we saw bankers become more willing to embrace digital transformation and digital banking soared as a result. Crypto started making its way into banking as the margins are too incredible to pass up, and leveraging data for hyper-personalisation started giving smaller financial institutions a competitive edge.
“The digital enablement of small businesses began to take flight in 2021 also. Small businesses are the lifeblood of our economy and COVID-19 relief efforts created an opening for banks and fintechs to win goodwill among small businesses by making it easier for them to access capital and deliver better purchasing experiences to their customers. The small business community has traditionally been underserved by legacy banking providers and, as we embark on a new year, there will be significant opportunities for community banks and create unions to deliver elevated digital banking experiences for small businesses.
“Small businesses will become the new retail banking customer. With fintechs driving innovative experiences and national banks pouring resources into new products, community banks, regional banks and credit unions are fighting an uphill battle for the consumer market. In 2022, community financial institutions will prioritise providing core services for small business customers as this banking segment becomes the new retail customer.
“In the 2021 Banking Impact Report, 92% of small business owners agreed that community banks and credit unions are as or more vital to the U.S. banking system as large national banks. By prioritising offering innovative digital products that cater to the needs of the modern business owner – such as invoicing, online account opening and digital lending – community banks and credit unions will build upon the goodwill they’ve earned with the small business community to retain and expand business banking relationships.”
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.