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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 Ruby Walia, Bhairav Trivedi, Vallejo Dabdoub, Kathryn Kaminsky and Derek White, on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Ruby Walia, Senior Advisor for Digital Banking at Mobiquity, a digital consultancy, said:
“Macro trends like changing customer expectations, the seemingly never-ending technology hockey stick curve, non-traditional competitors, and changing regulations have been, and will continue to drive change across the fintech space for years. Select areas that feel noteworthy in 2021 include:
“BNPL – the pandemic accelerated this payment capability and it made major progress in 2021. 60% of US consumers say they are going to use BNPL over the next six to twelve months. This has already evolved from the Pay-in-N model that BNPL is most associated with to include term loans that are almost as quickly and seamlessly enabled at point of purchase. The prominent BNPL players like Affirm, Afterpay, and Klarna have used the classic fintech play of going direct to consumer (D2C) with a service that incumbents either don’t offer or offer in a limited way and providing a compelling value proposition to consumer customers, thus creating value for themselves.
“Re-aggregation – Fintech caused the phenomenon referred to as the Unbundling or Disaggregation of a Bank. While that phrase seems to be used less these days, it clearly continues; BNPL is just another example. An interesting reverse trend also seems to be occurring; fintechs like SoFi buying community banks to gain a banking license and digital banking platforms like Alkami creating an integrated front end that ties together various, typically fintech created, novel and mainstream banking capabilities.
“Other areas that have seen a lot of movement include Payroll innovation (salary on demand, early direct deposit, etc.), Cross Border Payments, Embedded Finance, the enterprise use of RPAs to streamline processes, trading of cryptos, NFTs, and faster payments e.g. ISO 20022 based RTP. In 2022 and beyond, we will continue to see fintechs accelerate innovation to shape the future of financial services and stay ahead of traditional banks. In the next year we will see an increase in digital banks which will without a doubt push in-person services out and continue to draw in more and more customers as they go digital. As banks, merchants, Big Tech companies like Apple (and maybe eventually Amazon), payment networks (like Mastercard & Visa), and even payment processors and gateways (like Stripe and TSYS) hop on the BNPL bandwagon, we will see the early fintechs in this space evolve to find new ways to attract and engage customers.
“Web3 and DeFi based services have already attracted a lot of investment capital and more services in this space should launch in 2022. Blockchain as a technology may attract more attention with applications other than cryptocurrencies e.g. smart contracts.
“Other areas that should see a lot of movement include Banking as a Service, widening cross border payment capabilities (beyond a handful of frequently used corridors), and payment orchestration layers. The ongoing focus on customer experience will likely lead to better-integrated offerings from banks that continue to strive to be the primary provider of financial services to consumers.”
Bhairav Trivedi, CEO, Crown Agents Bank believes Central Bank Digital Currencies will feature in the next year.
“APIs (Application Programming Interface) have been around for decades and they have proven their potential to transform the way businesses operate. By the end of 2024, the global API management market size is expected to reach $6.2billion from $3.02billion in 2019. The introduction of APIs within banking gives both customers and businesses the freedom to access all banking data in real-time, offering more accurate and up-to-date financial insight as a result. By enabling financial institutions to connect with businesses and consumers to transfer information securely and conveniently, APIs are ultimately having a profound, transformative effect on banking.
“Over the past year or so, there has been increasing speculation around Central Bank Digital Currencies (CBDCs). With digital currency, central banks don’t need to print cash or hold physical money. Currently, countries can print as much money as they like, resulting in problems like paper waste but also hyperinflation. Using a controlled digital currency could eliminate this problem. We have seen interest in CBDCs rise drastically in 2021 and while I can’t forecast what will happen in the year or years to come, CBDCs are the way forward.
“In addition, next year, biometric technology will become even more mainstream. Biometric technology, such as voice recognition and touch ID fingerprint sensors, has been favoured by mobile phone providers in recent years. In addition to easing data privacy and security concerns, biometric technology is supporting the provision of low-cost affordable financial services, facilitating remittance flows into urban, semi-urban and deep rural locations in emerging and frontier markets. Ultimately, businesses will benefit by offering services and solutions fit for the modern consumer. By investing in digital transformation initiatives like biometric technology now, financial services companies will make themselves more competitive and adaptable in today’s digital world – and tomorrow’s.”
Felipe Vallejo Dabdoub is currently Chief Regulatory & Corporate Affairs Officer at Bitso, the largest crypto exchange in Latin America. He said:
“The cryptocurrency industry has grown rapidly over the past year – so much so that many of the most prevalent fintech trends have been within this category. Mainstream crypto adoption is, of course, the most obvious trend to point to, and this has been especially true in Latin America, where crypto has begun to be used as a store of value and for Peer to Peer payments. We will remember 2021 as a turning point for cryptocurrencies’ increased institutional and regulatory acceptance, with El Salvador as a perfect example of a country recognising the power of cryptocurrency.
“In 2022, we will see a major transformation within the regulatory landscape. As regulators become increasingly familiar with the benefits that come with blockchain technology and cryptocurrency, I’m hopeful that they will find ways to protect users while still allowing room for innovation. We might begin to see international actors level the playing field on crypto-currencies regulation among different countries. We will also see more countries passing laws to regulate cryptocurrency, and many of the current regulatory frameworks in place will shift as the industry continues to expand and evolve.
“We will also see the DeFi sector reach new heights in 2022. DeFi is changing the way that individuals make financial transactions. 2022 will see even more people taking notice of how DeFi makes it easier, faster, and more affordable to make and receive payments, which will result in increased adoption and new and improved products and services.”
Kathryn Kaminsky, Vice Chair – US Trust Solutions Co-Leader, PwC US, said: “Competition in banking is heating up.”
She continued: “We’re seeing many of the well-funded fintech players edging towards traditional banking services. The pandemic and increasing competition in the market forced financial services companies to innovate in new ways because of the disruption of their traditional business models. This included working to develop ways to sustain business practices virtually and automate internal processes. For example, software that enabled connectivity became critical. And many financial institutions focused on acquiring digital banking and payment services to improve their online payment process to better compete in the marketplace.
“We’ve also seen a lot of M&A activity as fintechs continue to attract investors—either to increase digitalisation as part of a business transformation or to generate returns in the short- to mid-term.
“In 2022, companies will be challenged with meeting the pace of change with transformation. Transformation is no longer a choice. It’s a necessity. And as competition between traditional banks and fintech continues to heat up, those who embrace technology in their business models will be able to better compete in the market. Overall, players in financial services will be competing on the effectiveness of their technologies that improve the customer experience.”
Derek White, CEO at Galileo Financial Technologies thinks the collaboration between fintechs and incumbent institutions was a major trend of 2021.
“A big trend we’ve been watching this year is around the continuing growth in collaboration between fintechs and banks. Where once this collaboration was somewhat forced – for example, the fintechs had a service that was simply too costly or complicated for the bank to build – now it’s far more opportunistic. That comes from a much broader understanding that banks don’t need to build all their own tech, they can – and should – bring in partners who are specialists in what they do. This dramatically cuts the deployment time for the bank, keeping them competitive against their peers, keeping their customers happy, and ensuring revenue levels remain strong while helping them be more efficient and effective. Going forward, this kind of model – whether banking-as-a-service or embedded finance – is going to grow exponentially.”
He continued: “We’re expecting to see exponential growth in two key areas in 2022. First, we predict much more activity around embedded finance solutions. The market opportunity in this area is considerable and expected to reach more than $7 trillion by 2030. This growth will be powered by below-the-glass technology that delivers above-the-glass experiences. More and more brands will add embedded finance tools—like point-of-sale loans, insurance or rewards products—into their tech stacks so they can help create better customer impact.
“A second trend we expect is around the deeper integration of data into the end-user experience. For example, when you buy a car currently on credit, the assessment is largely on your ability to repay the loan amount. But as data is freed to be used more widely, that same transaction could start offering a better user experience—where a customer’s typical day-to-day usage, history, vehicle choice and even driving style can be combined to deliver an integrated purchase, funding, insurance and rewards program.”
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.
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