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 Romi Savova, Cormac Leech, Gabi Slemer, Alex Reddish and Billy Murray on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Romi Savova, CEO at PensionBee shares her thoughts on 2022:
“Next year, I’d expect to see more distinction between the companies that have scaled and are scaling, and the emergence of profit or lack thereof. This may lead to more M&A activity, and potentially more incumbents snapping up the competition.
“On the 3rd of December, new FCA public market rules came into effect – aiming to boost growth and innovation in UK stock markets, by enabling growing businesses to float a smaller amount of shares (now 10% instead of 25%). Given stable market conditions in 2022, I would expect to see flotations continue, now that this key barrier has been removed.
“In 2022 we’ll see an intensifying payments battleground with Amazon challenging Visa, and Open Banking penetrating large financial services providers. Over time we can expect to see more technologisation of the payment system, which will hopefully lead to better outcomes for consumers.
“In the realm of ESG we’ll see a tipping point for women in senior leadership roles, with fintech continuing to lead the way on other diversity initiatives that are yet to hit the mainstream agenda, such as ethnic diversity and social mobility.”
Cormac Leech, Founder and CEO of AxiaFunder thinks that alternative finance and blockchain have been hallmarks of the year.
“In 2021 we have seen a steady increase in demand for income products that have the potential to beat inflation that has been rising almost everywhere, driven by QE, covid-related supply chain constraints and the economic rebound. As everyone knows, bank deposits and fixed income products offer interest rates well below the inflation rate. Even a buy-to-let property portfolio in the UK is unlikely to beat inflation after deducting tax. So, fintech platforms that make alternative finance products accessible to high-net-worth and sophisticated retail investors that typically would only be accessible to private equity institutions have been of increasing relevance to retail investors.
“Another trend within alternative finance, clearly visible in 2021, has been the push towards tougher regulation of fintech alternative finance firms. In the UK, we’ve seen the FCA layout clear plans to better protect mass retail investors from potentially unsuitable alternative finance products. While somewhat challenging to adapt to in the short run, these changes are likely to make alternative finance fintech more sustainable in the UK in the years ahead.
“More broadly, in 2021 we have all seen fintech become more mainstream with contactless payments and buy-now-pay-later products seamlessly embedded into our daily lives.
“In 2022, I expect further improvements in the fintech infrastructure that supports alternative finance. One key area that seems poised to accelerate is the blockchain crypto sector that enables investors to conveniently invest in a diverse range of alternative investment products from fine art, to wine and litigation investments. Other infrastructure will continue to improve such as the rating agencies that help investors identify which products are of good quality.”
Gabi Slemer, founder of Finasana said one of the more significant trends seen this year has been the “Increased interest around investing from younger generations.”
She continued: “It’s gone from being something largely reserved for older and wealthier individuals (usually male-dominated) to attracting the attention and interest of Gen Z. Interest in financial markets, cryptocurrency, and personal finance has sky-rocketed, prompting an increased presence of YouTubers, social media “finfluencers”, and financial companies (both established and start-ups) who are vying to gain their trust. Self-directed investing is growing in steam – individuals are understanding the benefits of investing much earlier, however often taking outsized risk as they are betting on riskier assets without focusing on their own risk tolerance or different assets’ relative riskiness. Memestocks, cryptocurrency, and trading accounts that promote frequent stock trading, combined with the reliance on social media for financial advice and a lack of qualified financial guidance, pose a real cause for concern.
In terms of the future, she said: “We can expect to see an increased focus on products (especially investing related) aimed towards younger generations. Both educational resources, financial guidance, and trading platforms, from both newer digital banks and non-banking fintech firms, as well as incumbent financial institutions looking to attract younger clients.
“2020 and 2021 saw an increased focus on mental health resources offered by employer benefits, largely as a result of the pandemic. 2022 will focus on financial health and the employers’ role in helping individuals with their personal finances. Money is the #1 cause of stress today, and employees are looking for their employers to help as the onus is on the individual to manage their finances, invest money, and prepare for retirement. Corporations are beginning to respond to this by offering financial wellness benefits that go beyond traditional retirement accounts or “check the box” webinars and into more accessible and engaging alternatives with real-world applications.”
Alex Reddish, Managing Director at Tribe Payments thinks “the person will become the payment.”
“The acceleration of fintech disruption has been tangible this past year. In a matter of months, we’ve seen a transition that in many markets, that would normally have taken years. And this is just the beginning.
“As bank branches continue to close, mobile payments will be the global standard, and physical payment cards will disappear. The rise of e-commerce, digital wallets and card innovation, coupled with high smartphone penetration has meant that the UK has also been fast to adopt mobile payments. In 2022 the next wave of competition in UK payments will not just be between international card providers and cash, but also with new payment methods and digital wallets.
“Payments will become increasingly embedded into other technologies and less visible, we will then reach the point where customers won’t think twice about the way they pay at all. We will see the start of innovation that will fundamentally change our relationship with the act of payment. As the person becomes the payment, the simple financial functions will be transformed into nuanced, data-rich relationships. The intelligence from these relationships is a great opportunity to those who will make the best use of this innovation.”
Billy Murray, Head of Intertrader Prime’s thoughts revolve around ETFs and the uptake of electronic trading.
“The surge in electronic trading has been fostered in previous years by two significant developments: the availability of more accurate price data, and huge growth in the number of ETFs that track a wider range of indices,he said. “In 2021, extended market volatility has truly tested the mettle of electronic trading, but the technology has generally proved to be resilient, and facilitated high volumes of seamless transactions day in, day out. The growth in electronic trading is another result of the accelerated shift to digital-first behaviours that the pandemic has brought about.
“With the pandemic further accelerating uptake of electronic trading, it’s natural to expect providers to further capitalise on these developments in the next year to ensure their systems can handle greater capacity. Despite traders increasingly executing larger trades electronically in volatile market conditions, a factor they are becoming more mindful of is stability. Beyond purely executing trades, electronic systems can be harnessed to source data and asset prices, communicate with dealers, track positions and analyse a trade once it has been completed. With more sophisticated, algorithmic measurement tools alongside AI, data is becoming easier to interrogate and more reliable as a result.
“While the capabilities of these advanced trading systems develop, clients’ thirst for different products will grow even more. There is a risk that analytic tools within these systems may not keep up with client demands. If the market is to develop and innovate further, this technology needs to be upgraded, to include the likes of portfolio scanning systems. This upending of the trading ecosystem raises the question of regulation for the year ahead, with regulators likely to continue to keep a close eye on how novel technologies should best be leveraged.
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.