According to Deep Tech Knowledge, the global financial sector in 2022 is expected to reach US$26.5 trillion with a compound annual growth rate of 6%. Meanwhile, digital payments, which hold 25% of the fintech market, will remain one of the biggest products. With this in mind, fintech will play a critical role in terms of offerings and earnings over the next year and more. The way the niche is navigated will depend a lot on some of the fintech trends in 2021 and others next year. This is why we’ve prepared a short list of anticipated trends for 2021 and 2022, as this space develops, expands, and calls for increased regulation.
7 most prominent fintech trends developing in 2021
- Biometric identification – identification through fingerprints, voice or other biometric data are likely to continue into the future as fintechs seek safer ways to offer their customers protection of their privacy and data.
- Contactless payments – the Covid-19 pandemic only confirmed that cash isn’t hygienic and as people resorted to contactless payments, it became understood that contactless payments are here to stay and they will continue growing in use.
- Sustainability – with environment-conscious consumers, customers are increasingly asking their fintech providers to offer environmentally friendly solutions such as debit or credit cards made from recyclable materials and a genuine effort towards reducing the use of paper.
- Microservices – microservices tend to offer more agility than traditional banks or financial institutions because of their adaptable nature.
- Customer-centric apps – apps that have the customer’s needs and wants in mind with easy user interfaces and easy to navigate menus will continue to gain traction.
Trends that emerged because of the pandemic that seem to be continuing
Research shows that the e-commerce space boomed during the pandemic as consumers sought safer and more hygienic ways to pay. This trend, which offers ease and convenience, is likely to continue even after the pandemic heads towards an ending point due to fast delivery, affordable shipping rates, and a general variety of products that can be purchased online.
Trends that emerged from the pandemic that seem to be stopping
With the onset of the coronavirus pandemic, many fintechs found themselves struggling financially in terms of lower service provision to their customers as there was decreased demand for such services, many people were laid off and there was less disposable income to shop with. Therefore, fintechs in 2021 will be looking to make up for losses made during 2020, and once such losses are recovered, the space is likely to rebound and continue operating forward guided by some of the trends mentioned above.
Fintech forecast for 2022
Some anticipated fintech trends for 2022 are:
- Smart contracts – using cryptographic keys as digital signatures, instead of paper, contracts of the future are expected to be encoded in computer language. The codes are practically tamper-proof and it means a much safer way of entering into agreements for both parties.
- Mobile payments on the rise – The expected value of the global digital payments industry by the end of 2021 is US$6.6 trillion, while the expected value of mobile payments by 2025 is anticipated to reach US$4.6 trillion, driven by increased mobile penetration and the provision of mobile-driven services.
- Digital-only banks – also known as neobanks, these are described as banks or financial services providers without a physical branch or location. These providers are set to increase in size and scope, offering customers much more convenient ways of banking. However, one challenge that remains here is the settlement of disputes in the absence of a physical location. We should observe this situation as we move forward.
- Increased collaboration – competition among fintechs is rife, but in a case where some offer some benefits and lack in others, others can make up for shortfalls through increased collaboration instead of through competition.
- Careful treading by venture capital providers – tempting as going into fintech might seem, venture capital providers are going to want to see a solid case for investing in your offering, and younger start-ups are not likely to see as much investment as their predecessors did over the last few years.
- The need for improved regulation – with increasing cybersecurity risks, there will be a need for improved regulation, especially as blockchain makes a powerful impact on the sector. Countries will need to regulate such risks in order to mitigate them.
- China’s leading role – China is home to over 800 million internet users, 98.6% of which are using mobile. In addition, China is leading the world in ecommerce, with its market valued at US$1.9 trillion, which is significantly higher than the US US$343.15 billion. It’s therefore going to continue leading the way.
Lending through e-commerce could become the next big thing in the e-commerce space as more and more people flock there to do their shopping online, but will require additional credit for their purchases. Those e-commerce players who offer such types of credit will be some of the trailblazers in the field and are likely to see a jump in sales and credit issuing. How this will pan out with regulators, on the other hand, remains to be seen.