Fintech in 2021 - What trends will shape the fintech market this year?
As with most industries, fintech had a very eventful 2020. The last year brought unprecedented challenges and disruption that shook the sector, but there were also significant advances, indicating further promises for the future. With the continued expansion of Open banking measures, the UK exiting the EU and rising customer demands for new products, 2021 is likely to be another transformative year for the fintech industry.
So what are the 8 predictions/challenges that will shape the industry in 2021?
1. Making a profit in 2021.
Unlike traditional banks, Fintechs have the capabilities and agility to develop new and innovative products far easier. Industry analysts suggest that it is a challenge when facing established, traditional banks and believe battle with larger institutions will continue into 2021. However, experts suggest that things are beginning to change, with early signs of convergence, with fintech representing the front-end for customers and banks supplying the capital.
2. Enhanced Security and Fraud Controls.
Regulations have continued to force the development of more sophisticated identity solutions to reduce potential cases of fraud. The challenge will continue to focus on ramping up security controls, while at the same time, ensure these measures don’t impact the user experience. With this in mind, we are likely to see AI and Machine Learning becoming more established in measuring risk and meeting the necessary regulations.
3. Embedded Finance.
Challenger banks are transforming the consumer landscape, but many analysts believe this is the beginning of the fintech revolution. Embedded finance is a vital part of the future of financial services. Last year, we witnessed a surge in embedded finance, and the potential of this industry became quite apparent. During the next few years, we will likely see this market continue to expand and experience the launching of new products that enable businesses to reach their goals. Fintech experts believe the success in BaaS will be determined by those that shift away from broad product offering to more targeted services capable of supporting specific requirements.
4. Reshaping financial models post-Covid.
Access to finance has become a priority for so many people. Many credit businesses utilise automated models, but no system was capable of predicting the events of 2020. The current models require reshaping and changing to reflect the existing economic environment and enable more realistic and sustainable finance offerings for customers.
5. AI-focused solutions becoming more popular.
Data-focused insights and decision making during the pandemic gained more support from customers. As larger banks continue to implement AI-driven solutions, they generate defined and measurable improvement to the overall customer experience.
6. Open Banking and App-Based Payments.
Industry experts believe that open banking will continue to have more impact on app-based payments. There is an expectation that these services will drive further innovation and competition between other organisations to meet customer expectations.
7. Collaboration in the fintech world.
2021 is forecast to be another big year for fintech, supporting SMEs and the global economy rebuild. 2021 will see a rise in consolidation between fintech businesses and the acquisition of smaller financial firms. Analysts believe this will be the case in more established markets such as loaning and developing industries like cryptocurrency.
8. An increase in digital corporate banking.
Industry experts predict a rise in digital corporate banking, essentially a digital version of their current operations. With online banking becoming a more recognised service, and online communication platforms like Zoom and Microsoft Teams becoming very familiar, we are likely to experience more banking interactions moving online. This shift will enable relationship managers to manage products, transactions and relationships predominantly online.
We all hope that this year will generate more positivity and offer an opportunity to rebuild and move forward from the disruption experienced in 2020. This year is likely to be another exciting one for the fintech industry.