2021 fintech predictions
2020 has been a year like no other. The way we live, work, socialise and more has completely changed as we found ourselves in a new world. Of course, the fintech industry was no exception and had a challenging year that resulted in great successes and accelerated growth. Certain elements such as mobile payments have been implemented far quicker than anticipated at the start of the year fast tracking past projections by in some cases years.
So, what can we expect in 2021? With better virus management, treatments and vaccine programmes rolling out worldwide, we can start to cautiously anticipate a slow return to normal but what does this mean for fintech? Björn Goß, CEO and founder of European mobile wallet, Stocard, looks at what we could see over the course of the year from the industry.
A change in how we pay
The pandemic has accelerated the digital services industry as people were forced to integrate COVID-19 friendly payments. We have thus seen an increasing amount of solutions offered by fintechs such as for trading or peer-to-peer (P2) payments. This openness for digital solutions has allowed fintechs to pass the initial phase of growth.
We fully anticipate that now people have seen the benefits of digital payments and services that there is no looking back. In 2021 investment in mobile and contactless services won’t just be limited to major players but also for smaller businesses who are expected to facilitate digital payments by consumers.
In addition, we are also already starting to see indications that the upper limits of payments will increase from £40 to £100 in the UK making contactless even more appealing for organisations and consumers alike, after the suggestion was made to the Treasury by UK Finance, a City lobby group. We can also expect more focus on value added services such as mobile loyalty cards integrated into a smooth payment experience.
The rise of the super app
As more of the services we use to lead our lives move over to our phones we anticipate more of the so called “super apps”, like we’ve seen in Asia. Consumers search for simplicity and typically favour one app that has an intuitive and easy to use interface that allows them to do everything they need in one place. We expect that these super apps will have an accelerated growth in 2021 following the pandemic as users seek to streamline their digital services and use trusted, simplified apps.
We therefore expect a merging of shopping, payment and financial services in one wallet app. The advantage here is that the consumer can choose which elements are the most important to them based on their individual needs. It can therefore provide the user with an attractive proposition as they know they can access all key services in one place.
More regulation, more choice
In 2021, Payment Service Directive 2 (PSD2) will come into play ending the decades long lock in effects of banks that has dominated the industry and allowing fintechs access to customers’ bank accounts. For years financial institutions have sought ways to work around the PSD2 regulation and lock in consumers and provide them no choice.
This mandatory change will enable consumers better access to fintech services that are more convenient and effective for individual needs. This will drive the next wave of growth and 2021 will see consumers have the power back in their hands when it comes to financial services.
As more providers enter the market to offer financial services, we expect lots more debate and discussion around regulation in 2021. For example there has been talk of legislation where banks are incentivised to increase the wealth of their customers and get sanctions imposed when they sell products that are not in the best interest of the customer; through this, providers would need to focus more on offering and selling relevant, beneficial products instead of the ones that bring them the highest margin.
Is buy now, pay later here to stay?
Over the last year we saw a rise in buy now, pay later (BNPL) services as consumers turned to online shopping. Recent research by Finaria found a 168% increase in buy now pay later apps this year. Many consumers saw this option of purchasing as less of a risk and will have enjoyed the convenience of it during lockdowns.
That being said: the high growth statistics are only an acceleration of this trend caused by the COVID-19 pandemic, and despite its recent popularity the overall share of wallet of BNPL remains very low.
In 2021, we will see whether the shift towards this new way of payment is a short-term trend, or a long term change. BNPL options both instore and online will become increasingly accessible for consumers due to all the investment made by retailers and payment providers. However, at the same time there has been much discussion around regulation for these services which may slow down the growth they are currently experiencing, according to market participants.
Europe’s hidden success stories
2021 will be a growth year for European fintech companies. Having already had a strong year the continent will build on this as it continues to innovate in the sector. Maybe surprisingly, big and really successful companies are already substantially coming from outside of the big hubs of London, Paris and Berlin. What we can expect is greater offerings from outside of these big hubs from less expected places across Europe.
So, as you can see 2021 is set to be an exciting time for fintech. More regulation leading to greater choice, a permanent change in consumer behaviour driving digital services and new hubs of innovation all combine to make fintech a very exciting industry over the next year.