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 Ian Johnson, Brittany Atkins, John Mitchell, Kevin Gosschalk, James Hickman and Abdeslam Alaoui Smaili, on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Ian Johnson, SVP and Managing Director for Europe at Marqeta said that digital transformation has been a priority for financial services.
“In 2021, financial institutions have relied less on legacy infrastructure to support the growing consumer demand for innovative and personalised payment solutions. Due to the onset of Covid-19, many trends in consumer behaviour were accelerated, with more people moving away from cash and adopting digital services, such as online and mobile banking. Whether it is AI-driven smart wallets, or data-driven personalised services, modern payments solutions have been adopted unexpectedly fast by the financial sector to address this huge shift in customer expectations.
“Modern digital banks have been able to innovate quickly, delivering new features and services to the market and matching the pace of changing customer expectations. Whether it’s by providing features that help users to save money, budget better, or block certain types of payments, the likes of Monzo and Starling Bank have revolutionised what digitally-savvy customers demand from their bank.
“Our research found more than three quarters (78%) of banks said digital transformation to improve the online and mobile banking experience had become a greater priority. This means banks are focusing more on offering new, differentiated payments services (70%), investing in security and anti-fraud solutions (70%), and modernising core banking and payment platforms (66%).
“In 2022, we could also witness a burst of innovation that sees mainstream banks begin to catch up with more nimble challenger banks. Be prepared for banks to come out with their own disruptive Buy Now, Pay Later (BNPL) solutions, flexible credit offerings, and more personalised services.
“Along with this boom in innovation, consumer pressure to act sustainably will continue to increase in the year ahead. Pushing this agenda further, the UK government will require financial firms to publish their net-zero plans from 2023. As a result, banks and fintechs will be pushed to take more solid steps to assess their environmental impact and ensure that offerings are as green as possible”
Brittany Atkins UK&I Country Lead, Streamtime, believes Buy Now Pay Later (BNPL) and alternative lending have been the major trends of 2021 continuing into the new year.
“My prediction for 2022 is seeing BNPL go mainstream and more lending alternatives coming into fruition as a result of this trend.
“While BNPL has had to defend itself against a lot of criticism for being seen as promoting irresponsible spending, unlike credit cards, BNPL has proven it’s value in not only reducing the cost of lending, but also by acting like training wheels for lending to younger generations and by decreasing the likelihood of overspending through making the lender and consumer make decisions on lending on a purchase by purchase basis.”
John Mitchell is co-founder and CEO of Episode Six, a company that provides a one-of-a-kind solution to easily design, issue, and manage payment products.
He said: “Even more paytech players have entered the space in 2021. Advancements made possible through application programming interfaces (APIs), cloud platforms, Banking-as-a-Service (BaaS) and the internet of payments are spurring mass innovation within payments and enabling the entrance of new payments providers.
“New entrants didn’t immediately mean new threats. We saw the convergence between fintechs and incumbents in 2021, as both looked to draw from each other’s strengths. Users demand the polished interfaces of fintechs, but regulated incumbents provide longstanding, trusted consumer protection. They realise they stand a better chance working with versus against each other.
“in 2022, the multitude of digital payment types will continue to increase, making multi-asset value transfer critical. Consumers are going to want to pay by means other than fiat currency. As such, paytech players must find opportunities to enable payments with cryptocurrencies, loyalty and brand points and other emerging digital currencies.”
Arkose Labs Founder and CEO, Kevin Gosschalk, believes that “the pandemic has accelerated trends that were already taking place.”
He continued: “Consumers became accustomed to adopting new technologies and operating in a digital-first world…opening online accounts at a pace never before seen so that they could do business and live their lives remotely. These behaviours that started with lockdowns in 2020 continued to evolve in 2021, and fraudsters have been taking advantage of the rise in digital traffic and increase in digital accounts.
“Additionally, fraudsters became more innovative and attacks evolved. For example, they quickly took advantage of government programs and attacked states and government agencies to siphon funds from PPE programs in 2020. In 2021 bad actors shifted to targeting accounts at Neo banks and Buy Now, Pay Later (BNPL) firms. We’ve seen fraud attacks in this quarter targeting BNPL grow substantially over the attacks targeting these platforms in April 2021; so much so that some people in the marketplace have started referring to BNPL as “Buy Now, Pay Never.” Financial inclusion increased in 2021, which gave fraudsters access to more data and personal information to steal. We’ve also seen a marked rise in micro-deposit fraud and automated phishing scams. Essentially, the trend toward digital commerce has fueled a concurrent rise in the increase in fraud in 2021.
“The financial sector witnessed 32% more attacks in Q3 2021 than all of H1 2021. This is one sector where we would expect to see a continued rise in attacks. Our 2022 prediction for fraud attacks on the FinTech sector can be summarised in one word: Acceleration. The speed of fraud was fast in 2021, it will be blistering in 2022.”
James Hickman, Chief Revenue Officer (CRO) of Fire, a company that helps businesses to manage payments with digital accounts and debit cards.
He said: “Embedded and Integrated Finance has been a hot topic this year in Fintech and will continue to grow,” he said. “These sectors allow non-regulated, non-financial companies to provide financial services to their customers through partnerships, giving their customers a slicker process, so that they do not have to go between a payment provider and a service provider in the payment process. It also offers them an added revenue opportunity.
“This year has seen the continued growth of Open Banking and it really feels like we are on the cusp of a huge wave. Whilst the card payments market share will remain dominant I can certainly see account to account payment methods making a big impact and 2021 has confirmed that consumers are ready to adopt Open payments.
“Following this, 2022 will be the year of Open Banking, both from an AISP and PISP level. On the AISP side for the lending market, loans will become more affordable because lenders have access to a much more granular level of detail which results in lower risk and better decision making processes. On the PISP side, we will see the rate of adoption grow and account to account payments become more widely available in e-commerce but also point of sale.”
Abdeslam Alaoui Smaili, CEO of HPS believes one of the biggest trends this year is payment fraud.
“The e-commerce boom has created new opportunities for fraudsters looking to exploit businesses and their customers, and thousands have fallen victim to techniques such as identity theft, password hacking, payment interception and refund fraud. As payments procedures become more streamlined, fraudsters adapt their methods and businesses will need to adopt new cyber security technology for protection.
“With consumers constantly on the lookout for the smoothest way to pay, we have also witnessed a sharp surge in the adoption of digital wallets. While consumers benefit from a safe and convenient way to pay, businesses are also benefitting with newfound access to valuable customer data which can be used to improve marketing messaging and enhance customer services.
“The number of instant payment schemes has risen significantly this year, with financial institutions on the lookout for the most efficient and profitable ways to implement them. Now commonplace across Europe, the appetite for instant payments is abundant and the number of partnerships between financial institutions, payments providers and technology providers has grown exponentially. Many are calling on the Bank of England to review regulations blocking their use in the UK, so expect to see this trend roll into 2022.”
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.