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 Mark Jenkinson, Andrey Yashunsky, Andrew Ralich, Marieke Flement and Malini Nagaria on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Mark Jenkinson, Director of Strategy at Chetwood Financial thinks that the pandemic has accelerated the adoption of mobile payments and digital wallets.
“There is a lot happening in the Fintech world, and post lockdown the buzz and hype in the industry seems greater than ever.
“The pandemic has accelerated the adoption of mobile payments and use of digital wallets, with customers seeing these more as the go-to, rather than a geeky alternative to cash and cards. Coupled with Strong Customer Authentication (SCA) we are truly seeing digital payments coming of age.
“The broader implementation of PSD2 and open banking have also come to the fore. Customers are starting to see better outcomes from open banking, beyond that of basic account aggregation, with the open exchange of data leading to better decisioning for lending, and the removal of friction in digital journeys for new account opening and funds transfer.
“Without doubt, the other big buzzword of 2021 is BaaS (Banking-as-a Service) – it seems banks, payments firms and fintechs are all vying for a position in this market. The market is vast however, with FIs and non-FIs all potential customers in a world waking up to the monetisation opportunity of embedded finance. The winners will come most likely come from new bank’s built on modern cloud-based architectures or banks who form partnerships with cloud-based providers
“Whilst all the above will continue to resonate strongly, we will undoubtably see more headlines around Crypto and De-Fi (Decentralised Finance) and its move to the mainstream, especially as many of the use cases come more into focus.
“The emergence of stable coins is attracting attention, particularly when it comes to their uses in global payments and remittance, vastly reducing the cost, and improving speed and efficiency for cross border trading. The move into mainstream consumer payment mechanisms is probably some way off, but regulators across the globe are looking seriously at the creation of digital national currencies.
“Away from Crypto, the ESG and climate agenda will feature heavily, with continued stakeholder scrutiny, issues around greenwashing and tools that track carbon footprints all playing a larger role.”
Andrey Yashunsky, CEO and Founder of Prytek, thinks its been “an exciting year for fintech.”
He said: “There’s been a rise in the number of banking infrastructure ‘spin offs’, with many new companies being created and designed to serve other banks from their own internal infrastructure. In parallel, we have seen an increase in popularity for Banking as a Service (BaaS). BaaS is an end-to-end model whereby providers offer their banking infrastructure through APIs. The main goal of the BaaS service is to enable FinTech start-ups to run finance operations and build new financial solutions without organising their own bank.
“We’re also seeing more marketplaces for value-added services. In other words, more platforms that provide value-added services from third side parties via API.
“Next year I expect that we will see further spinning off from banks’ entire technology IP with operations to third side parties. In addition to this, I predict that there will be reduced vendor on-boarding to banking platforms by the creation of external platforms that will orchestrate dozens of vendors.”
Andrew Ralich, CEO and Co-Founder of oneZero believes data sharing will be a hallmark of 2022.
“I have noticed a trend whereby aggregators, traditionally used exclusively for liquidity, are expanding their service offering through partnerships with vendors and becoming increasingly integrated technology platforms. Collaborative interfaces that improve connectivity, infrastructure and performance are now common within multi-asset class trading. In addition to this, aggregators have an increasingly central role in data stewardship, being the “go-to” source for data for banks and brokerages. This has led to a shift not only in how aggregators are perceived but also in client demand. Aggregators are no longer merely a necessary solution to real-time risk management, hedging and pricing. Core trading is fundamental – but it’s no longer the only benefit.
“If they have not already done so, I expect aggregators to incorporate data-sharing framework into their technology platforms over the course of 2022. We all know that data is crucial to all operations – for quantitative analysts, third-party vendors, and institutional clients. Clients need to access data to make informed decisions. They also need to steward this data: both to feed it back into their systems (and optimise their trading strategies) and to control how and to whom it is delivered. I predict that 2022 will see clients not only demand more data insights, but also more control over the usage and disclosure of such intelligence.”
Mettle’s CEO Marieke Flement said: “The continued rise of Open Banking APIs has created a flurry of new fintechs and new digital capabilities.”
She continued: “Instead of having to do ‘everything under one roof’, banks and companies can leverage others to build their customer propositions. As companies and banks have continued their digitalisation journey and moved to the cloud, there’s been a ‘platformisation’ of everything, such as Embedded Lending, Banking as a Service, Software as a Service, Identity as a Service and Payment as a Service in FinTechs.
“In addition, customers’ expectations have continued to evolve and they want access to fast, reliable tools and easy access to information. ‘Platformisation’ has now given them access to a range of mobile-first services that they can afford and are user friendly. We’ve seen companies implement easier and faster ways to self-serve, with better tooling and customer interactions.
“At Mettle, we leverage the benefits of platformisation and have built scalable, resilient, cloud-native platforms from the ground up using modern methods, tools and cutting edge technologies. As one of many examples, we use Onfido as Identity as a Service to perform our KYC checks.
“In 2022, the role of traditional banks will continue to evolve and be challenged from all angles – by both new and old fintechs but also non-traditional fintechs and big tech (eg. Blockchain, CBDC, StableCoins).
“Neo banks have come out of 2021 with major funding, but the jury is still out on who will be the winners and losers – and capital in the market might dry up.
“Some challenger banks aren’t making much money yet, but are market-leading. Eventually, investors will look for returns and over time, some might face tougher challenges, such as increased regulatory scrutiny and increased costs to remain compliant. Many also need to focus on building everything from the ground up – from their brand identity to the features they offer.
“On the other end, traditional banks are more stable and can foster innovation from within. Banks can innovate and create neo banks internally (such as Mettle) or leverage the emergence of technologies like open banking APIs, AI and blockchain which offer innovative solutions to adapt to customer needs.”
Malini Nagaria leads The Digital Insurer’s TDI Academy. She believes that after a year of quick fixes and then longer-term solutions, 2022 is “Destination New Normal”.
“Covid 19 was the main driver of trends in the insurance and insurtech space in 2021 as the industry focused on solving the challenges brought on by the pandemic including new risks, changing consumer behaviours, changing work patterns and motivating employees. At the beginning of the year, many companies were still using a “sticking plaster” approach in order to find solutions at speed. As the year progressed this trend moved towards finding more permanent solutions.
“The ability to be agile and respond quickly became a key asset which drove demand for input from insurtechs. New insurtechs came onto the scene, reflecting the significantly increased demand for solutions to the industry’s challenges. It was something of a wake-up call for some incumbent insurers who suddenly recognised that working with insurtechs is often a far easier and quicker route to find and deploy solutions. Thanks to this increased demand, we saw record funding levels in insurtech in 2021 (it topped $10bn as of Q3 2021 according to Willis Towers Watson).
“The trends that took hold in 2021 will not reverse. Investing in technology and upskilling people’s digital knowledge and practical skills will be a priority for many businesses. There will be demand for tools that drive efficiency and improve the customer experience. Some of this technology will become more mainstream such as the use of AI and Machine Learning to automate core processes, including underwriting and claims. Making the insurance experience frictionless and seamless will continue to be a big theme in 2022. We’ll see the concept of embedded insurance by bundling insurance with other third parties playing a greater role and partnerships and ecosystems will therefore become more important.
“Finally, workplace transformation and the people agenda will also continue to be in the spotlight as hybrid working models become the new norm. Attracting and retaining talent will be key as well as upskilling and creating digital mindsets. The companies that invest in people through training and development in new technology will be best placed to attract talent. The same is true with regards to flexible working. The trend towards personalisation of the working week with hybrid options and more individual choice will continue. All of this makes for an exciting year ahead in 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.