2020 was a revolutionary year in many industries, but it will almost certainly go down in history as the year Fintech stepped up to the plate for the wider population. The restrictions and unforeseen societal changes saw Fintech industry trends explode out of the bubble and into the everyday world, as the majority of the world’s population was forced to accept a norm that revolved around digital solutions and a reliance on banking software to control finances. Fintech truly arrived in 2020, but 2021 promises to be an even more eventful year.
What are the Fintech industry trends of 2021? 2020 saw a revolution in the way we pay for everything from luxury items to bus tickets, and 2021 promises more of the same if ‘revolution’ can ever be described as ‘the same’. Klarna’s ‘buy now, pay later’ approach might be the tip of the iceberg when it comes to novel takes on consumerism, but the form in which payments take is just one of a number of trends that will define the year ahead in Fintech.
Digital currencies regain momentum
Whenever Fintech is discussed in earnest, the ups and downs of digital currencies are never far behind. Arguably the sexiest of all Fintech trends, cryptocurrencies experienced a decidedly tumultuous 2020, with prices fluctuating and faith in the future of the technology proving just as unstable. The latter half of 2020 saw something of a resurgence, however, with industry leader Bitcoin reaching an all-time high, and investor interest and confidence seem to be as vibrant as ever. The sector will continue to evolve in 2020 with stablecoins (usually pegged to a fiat currency or exchange-traded commodities) likely to make more of a mark as a new form of defense against potential decline.
2021 will also see more central banks continue to flirt with the idea of issuing digital currencies. Japan is the latest to join a list that already includes Canada, the Eurozone, United Kingdom, United States, and others, most notably China, who began work on the digital yuan way back in 2014. The new centralized digital currencies will likely be issued to banks who would then move them on to users, but it remains to be seen whether this centralized form of Fintech can prove as popular as more personalized money management. By the time 2021 is done, the world will know more about the long-term potential of central bank-issued digital currencies.
E-Commerce continues to grow
The disruption caused by the COVID-19 pandemic may have caused chaos in most industries around the world, but e-Commerce experienced a boom like few others in 2020. The industry grew by 30% as previously unforeseen societal circumstances led to unprecedented consumer demand, and those demographics who may have been wary of shopping online were brought into the online shopping ecosystem. 2020 was a boom year, but what will happen in 2021?
Experts are predicting more of the same, in short, although there are plenty of fascinating variables that have been thrown up by that record year. There has never been more competition for space and content, and innovation in advertising has never been more important. Consumer niches that previously made little noise on the online stage (home goods, sanitation) are newly-explored territory for digital companies, and the world finds itself in a modern arms race for digital content and efficiency. As the driving force behind the nuts and bolts of E-Commerce, expect this to play a huge role in how Fintech develops in 2021.
RegTech becomes more connected
Regulatory technology has long been a key aspect of Fintech but we can expect the RegTech world to become ever more interconnected throughout 2021. COVID-19 may well have obliterated many concerns that some had about the security and efficiency of the Cloud and renewed focus will make its way to the digital sphere, as companies look to team with others to fill holes and plug gaps. This is already happening, and the increasing demand for a point of difference will lead to a laser-focus on de-muddying the waters of ambiguous regulations and security. There may well be strength in numbers on this front.
Artificial Intelligence becomes more intelligent
Expect AI to create an increasingly personalized financial world in 2021. This trend isn’t new, it has been a trend since the beginning of Fintech’s existence, but longevity doesn’t necessarily mean irrelevance. AI gets more intricate with every passing year, offering better accuracy and extra efficiency all the time.
What does that mean for the people? We can expect AI to be used more broadly across the financial sphere in 2021, as more powerful analytics engines sift through ever-larger mountains of data in search of a most personalized banking experience, as chatbots take care of any quandaries and queries. The latter may well encounter a few bumps this year as user patience runs out with restricted responses and an inability to intricately understand every unique situation, but AI has proven time and time again that when it encounters an obstacle, more often than not it finds a way to get around it.
AI is becoming more and more intelligent all the time. The future of Fintech is tied to the development of AI and its impact and influence on banking software. The demand for process automation is growing all the time. A focus on AI in Fintech is going to be a factor for a long while yet. Read more about AI here.
Digital banking becomes the norm
2020 will go down in history as a landmark year for banking as much as it did consumerism. Visits to brick and mortar banks had been declining for years but the lockdowns and societal restrictions imposed in the wake of the pandemic may have replaced the writing on the wall with permanent ink. Throw in the improvements made in cyber-security, AI, biometrics, and more, and you have a perfect storm for the transposing of the banking industry from physical to digital.
We are far from out of the woods as far as COVID-19 is concerned and this is a cat that simply will not go back to the bag. Digital banking has proven itself as a hyper-convenient form of financial management for the overwhelming majority of people, a number that is increasing all the time. A Boston Consulting Group study published in May of last year claimed that 44% of 18 to 34-year-olds had enrolled in online banking for the first time during the COVID-19 crisis, and it is more than acceptable to assume the age range will grow along with the percentage as paper-based banking becomes more and more obsolete. The more comfortable and confident people are about Fintech, the greater share of the market that digital banking will possess.
All steam ahead to a cashless society
It is reasonable to assume that consumer trends and habits that were created by the COVID-19 pandemic will continue in 2021, and none will continue to grow as quickly as the cashless payment revolution. The treat of a communicable virus saw cash payments significantly decline in 2020 and that number will only continue to plummet further as people become more aware of both the dangers of paper money and the convenience of digital payments. There has been a major global shift from cash to contactless, a shift that won’t be slowing down any time soon. The proliferation of PayPal, Apple Pay, and others have been an integral aspect of past Fintech trends, and 2021 may see their numbers rise exponentially.
It isn’t just consumer products that are being paid for through Fintech, as HTEC’s work with Telexis in the Netherlands has shown. Several years ago, the Dutch government passed a law that obligated all public transport companies in the country to become cash-free by the end of 2017, and the expertise of HTEC has been integral to the implementation of this pledge. The Netherlands is not unique in this move but it was certainly a trailblazer, and public transport users around the world can expect the days of scrambling for change to board a bus to come to an end. The future of Fintech is in every day and it doesn’t come more every day than boarding the local bus. Find out more about HTEC's transformation towards a cashless society, here.
In 2021, cashless payments will continue to rise, be they in shops or on public transport. With an increasing number of banks offering contactless payment cards as the name and the seemingly unstoppable coverage of smartphones and built-in Fintech, the dream of a cashless society is well and truly within reach.