Over the past few years, the Financial Technology or ‘FinTech’ industry has seen an explosion of activity.
Laura Normile, Market and Business Development Lead ICO, Northern Europe & Fexco and Women in payments member, reflects on some of the top FinTech trends from the past year and what’s predicted to dominate this space in 2022 and beyond.
1. Cross Border eCommerce and the Empowered Consumer
As a result of lockdowns and general recommendations by governments to stay home, the pandemic has rapidly accelerated the consumer shift towards online shopping. With all indicators pointing towards its continued growth post-recovery, and revenues of close to $4 trillion predicted from the cross border B2C market by 2027, post covid cross border eCommerce presents a golden opportunity for merchants.
As the marketplace is set to become more crowded than ever, it will be crucial for online merchants to differentiate themselves by more than just their range of products or prices. The modern global consumer doesn’t just desire a seamless digital experience, they expect it.
“While the pandemic has in many ways changed the way we live and do business, it has also helped us to appreciate the value and potential of technology, and driven organisations across the industry to find new and modern solutions to unprecedented challenges.”
This means providing a comfortable and localised experience with language and currency options to create trust and familiarity. Offering a variety of alternative payment options including digital wallets (e.g. Apple Pay, PayPal, MasterPass) will also drive conversion rates and reduce cart abandonment. Some of the most prominent players in the global eCommerce market today including Amazon, Alibaba and eBay are already harnessing these features to drive online sales.
2. Embedded Finance
Embedded Finance, which integrates financial services into products & services traditionally offered by non-banks, is predicted to see huge growth in 2022. With an estimated $7 trillion market opportunity and expected year-on-year growth of more than 25%, key industry players are now scrambling to establish themselves within the value chain. While retail focused flexible payment options like ‘Buy Now Pay Later’ or BNPL (offered by companies like Klarna, AfterPay and PayPal) have already skyrocketed in popularity, this is just the tip of the iceberg.
BigTech giants like Amazon, Google, Uber and Tencent have already rolled out payment functionality on their platforms and this BigTech/FinTech crossover looks likely to ramp up in the coming years with the ability to pay, and potentially even invest, expected to be rolled out across a variety of social apps. Traditional banks have also begun to edge into this B2B space by offering BaaS (Banking-as-a-Service) and acting as the licence holder within the model.
As confidence in the technology grows, companies from all industries are likely to begin partnering with banks and FinTechs to embed financial products into the customer experience so that they can help monetise their brand and cultivate a more loyal customer base.
3. Competition to Collaboration
With reduced opening times and many physical branches forced to close, 2021 saw consumers turn towards online banking – a welcomed occurrence for the digital only or ‘Neobank’ (e.g. Chime, Monzo, Revolut). With no network of branches to operate and low administration costs, Neobanks generally focus on offering a more customer centric solution with low to no rates making them an attractive option to the modern, empowered consumer. To combat this, incumbent banks have started looking towards strategic partnership with FinTechs to retain customers and enhance their own product offerings. Collaboration gives the established bank an opportunity to curate a better digital experience and offer a broader range of services, while the FinTechs will benefit from increased stability, cash flow and financial compliance, allowing them further scope to innovate.
4. Intelligent Automation
Uncertainty experienced over the past two years has caused companies to reevaluate their expenditures. Automation allows businesses to optimise costs and put more focus on value creation and innovation, making it an important trend across all industries. ‘Intelligent Automation’ is a term used to describe a combination of next-gen technologies including Artificial Intelligence (AI), Robotic Process Automation (RPA) and Machine Learning (ML).
From healthcare and insurance to government and banking, businesses worldwide have started to look at these technologies to accelerate digital transformation, improve customer experience and increase operational efficiency. The technology is used today for everything from data analytics, risk monitoring, fraud detection and AML screening to investment predictions and lending approvals in the banking industry, but the use case scenarios are endless and the technology itself constantly evolving.
5. Cybersecurity and RegTech
With digital technologies advancing, so too are the efforts of the people trying to exploit them. RegTech or Regulatory Compliance is the tech that helps financial institutions and other FinTech companies to comply with the resulting regulations and this sector is predicted to flourish in 2022. Over the next few years, we are likely to see developments in advanced authentication, hybrid cloud computing, cryptography, and biometrics.
While the pandemic has in many ways changed the way we live and do business, it has also helped us to appreciate the value and potential of technology, and driven FinTech organisations across the industry to find new and modern solutions to unprecedented challenges.
As the world begins to look optimistically (albeit cautiously) towards the future, this adaptability and innovative thinking demonstrated over the past two years will continue to play a critical role, and it seems likely that 2022 will be an exciting and pivotal year for the FinTech sector.
For more information, get in touch and make sure to stay tuned to Fexco Women In Payments Network’s ‘What the Heck is FinTech?’ series to keep up to date with the insights and trends shaping the industry.
