As we enter the new year, businesses will now be considering their priorities for 2021. The impact of the global health crisis since the beginning of 2020 will be at the forefront of their minds, but so too will the trends that have been taking shape away
from the media headlines.
While it is difficult to predict the future, particularly in uncertain times like these, there are undoubtedly a number of important fintech trends that are likely to become more and more prominent in the coming 12 months.
The Covid effect
We can start with the most obvious one: COVID-19 is sure to have an ongoing effect on the fintech landscape.
After all, we are constantly told that people will not go back to old ways of living after the virus abates. This is certainly true when it comes to the ways in which they manage their money.
Businesses must prepare – if they haven’t already – for the “new normal”. This raises important questions for the finance sector, where companies must assess how they best deliver services that meet the needs of their customers. For the majority of people,
fintech will remain a crucial part of their day-to-day, so banks that offer a poor user experience via their apps or online platforms will quickly fall out of favour.
It has become clear that some bank branches will never re-open, either because they are not needed or not financially viable. There will be people across the UK – and, indeed, around the world – who are suddenly left behind without easy access to a bricks
and mortar bank. As a result, they will need to transition into the fintech world.
Fintech providers will have a key role to play in improving the availability and accessibility of financial services, and more generally helping people and companies navigate the aftermath of the crisis. From getting advice and checking one’s finances, through
to accessing new products and making payments, banks must lower the obstacles their customers face when performing routine financial tasks digitally.
Competition is increasing
The path to profitability will be a key consideration for fintechs in 2021. The sector has gained considerable traction in recent years, both in terms of support and investment. For instance, a recent global
study revealed that 12 out of 13 fintech sectors grew during the first half of 2020 compared with the same period in 2019. Amid the pandemic, 60% of fintech firms either launched new products or revamped existing ones.
Going forward, the clarity and validation of business models will become much more important as the industry becomes more established. Competition is fierce; and it’s growing by the day.
Not all existing banks, lenders and fintech vendors will survive in their current form. There have been a number of launches recently, and now we will begin seeing which players boast a valuable product and good feel for the market.
Players entering and establishing themselves in the field must pay credence to the importance of having a solid value proposition, which is clearly differentiated from their competitors.
As part of this, fintech vendors will need to demonstrate that their products work at scale. Two key considerations will determine if they do: if the company’s target groups are large enough, and if the technology architecture can handle large scale growth.
A balance must be struck between finding a niche – a specific, clearly-defined problem to solve – while also validating that the niche can become a springboard for scaling up and making the investment justified.
Unlocking the promise of Open Banking
A mere concept some two years ago, Open Banking has steadily been gaining traction in recent months. Indeed, it has had a transformational impact on how people access financial products and manage their financial wellbeing.
But Open Banking is still relatively new: only
18% of consumers are currently aware of what it means. Now comes the time for solutions that use Open Banking to go beyond simple use cases. In the near future, the apps we will be building on top of it will become increasingly more sophisticated.
The ability to let information flow between applications will enable new products or iterations of existing offerings to be built, integrated and modified much quicker than before.
The impact of data sharing will also soon extend into all financial markets. It will unlock a host of new financial products – particularly within markets like mortgages, pensions and insurance. In the coming 12 months, we will likely see Open Banking moving
further down the line to Open Finance, whereby it will offer a full picture of a person’s financial status, and a host of truly sophisticated financial services.
Breaking down international boundaries
Another fintech trend to watch: the breaking down of international boundaries. New methods for people to pay their bills and make purchases cross-border will be among the key priorities in the coming year, and many banks or fintechs will likely focus their
efforts on this.
We are already seeing this trend taking shape, with the recent rise in mobile banking highlighting the need to help people manage their money more efficiently online, wherever they are in the world. The ability to transfer funds easily, without the requirement
to switch accounts in order to do so, is one example of the kind of innovations that we will see in the coming months.
The past several months have been very difficult for many people and industries, as societies around the world navigated the unexpected obstacles thrown in their path. But despite the challenges encountered in 2020, or perhaps because of them, we are entering
2021 from a position of strength. The coming year will no doubt be an exciting one for fintech, with trends established and accelerated in recent months coming to the forefront.