It's been a busy year in the world of fintech – so busy, we didn't know how best to sum up the highs and lows that the past 12 months have offered us. So, in the spirit of advent calendars and stockings-hanging-by-the-fire, we've compiled an A-Z of the past year in fintech. All the biggest trends and talking points – 26 of them to be precise – to have dominated headlines this year.
A is for account-to-account, or A2A. As digital consumers seek increasingly seamless ways to pay, spend and transfer money, account-to-account solutions are gaining traction. Instead of relying on a payment method in the middle, funds are deposited directly into a merchant’s bank account. In September, we spoke to the CEO of Brite Payments to find out what's behind the rise of A2A payments.
B is for BNPL, which has had a rotten year. The darling of the European buy-now-pay-later space, Klarna has laid off 10% of its workforce with US$40bn wiped off Klarna’s valuation. Other players have had their troubles too, as the prospective launch of Apple Pay Later proves to be the proverbial shark in the water. Still, some innovative challengers have emerged – including Australian neobank Up, which is pioneering save-now-pay-later.
C is for CBDCs – or Central Bank Digital Currencies. At the risk of overloading you with acronyms, these are cryptocurrencies that are issued by a central bank. More than half of central banks are rumoured to be experimenting with these programmable digital currencies, which come with inherent rules regarding their use, like vouchers. There are, however, privacy concerns surrounding access to the transaction ledger on which they’re based.
D is for democratisation, the trend driving change in retail investment. Investing has become infinitely more accessible in recent years due to mobile apps and online platforms. Now, some apps are taking that to the next level. These include ‘social investing’ app Shares, commission-free platform Lightyear and Arta, which is lifting the lid on alternative assets like private equity.
E is for embedded everything, which is set to be the future of finance. We have seen a real surge in companies developing embedded solutions – the concept where, instead of forcing consumers to come to you, you bring your products directly to consumers by embedding them in an existing channel (like an ecommerce checkout) where they need them most. Embedded lending, embedded finance and embedded insurance have all taken flight in the last 12 months.
F is for FTX, naturally. The fallout from the collapse of cryptocurrency exchange FTX has rocked the crypto world and prompted a wave of damaging recriminations. The crypto space was already enduring a bad year when crypto holders, spooked by rumours of FTX’s financial position, began withdrawing deposits. This left the exchange with a liquidity black hole and, after a potential bailout by Binance fell through, the firm – once valued at US$32bn – went bust.
G is for the great resignation, which is leading to a skills gap right across the fintech sector. This grandiose term refers to the portion of the workforce that has not returned to employment, particularly after COVID-19. Fintech’s runaway growth was partly responsible, making it difficult for companies to recruit as quickly as they grew, but a difficult year has tempered that. Now it’s estimated that the tech industry could be 4mn workers short by the year 2030.
H is for hybrid working models, another knock-on effect of the pandemic but one that has largely been seen as positive. More employers than ever understand the value of flexibility, particularly in terms of attracting talent, and are realising that hybrid working is here to stay. But there are also downsides: hybrid working models have been cited as one of the reasons why the number of cyber attacks and incidents is growing.
I is for inflation, one of the defining themes of 2022. High inflation, prompted by rising food and energy prices, is just one of the underlying factors putting a squeeze on household and corporate budgets. Inflation has entered double figures in both the UK (11.1%) and Germany (10.1%), while other countries are also experiencing higher-than-usual rates of inflation, including the US at 8.2%. In October, we took a look at how fintechs were dealing with the high rate of inflation.
J is for ‘just wait and see’, which seems to be what every large company that was previously planning for an IPO is now saying. Payments giant Stripe, digital bank Zopa and South Korean app Toss are among those whose public listings appear to have been deferred, while Klarna’s annus horribilis makes the prospect of an IPO less likely. Following bruising layoffs, many firms seem to be focused on rebuilding rather than listing.
K is for kids, the fintech consumers of the future. Fostering financial literacy has always been an important step in building the next generation of savers and investors, but 2022 has been another strong year for teen money apps. In July, GoHenry expanded into Europe with the acquisition of Pixpay; then, in October, Greenlight’s Timothy Sheehan was named on our list of the Top 100 FinTech Leaders.
L is for layoffs, the inevitable reaction from many of our largest fintechs to rising inflation and the spiralling cost of doing business. According to the redundancy tracker Layoffs.fyi, more than 21,000 people have lost their jobs in finance this calendar year, with an additional 8,000 layoffs in crypto. Some of the high-profile culls include Stripe’s axing of 1,000 staff as well as the roughly 700 layoffs each at Klarna and Robinhood.
M is for the metaverse, which is emerging as the single biggest disruptor within fintech. In a few years, we could all be banking and transacting in the metaverse – a generic term used to describe a virtual environment, which is accessed through various different technologies including VR headsets. It has prompted banks and traditional FIs to invest in virtual real estate in the metaverse and orient their businesses towards its potential mainstreaming.
N is for net-zero, the coveted goal of all responsible businesses in the fight against climate change. In fintech, the largest source of emissions comes from so-called ‘financed emissions’ – or emissions related to capital like loans, investments and underwriting. Financial institutions are adapting to this by targeting net zero, but too many organisations are using carbon offsetting as a convenient way to not have to deal with polluting behaviours.
O is for open banking. This refers to the practice of using APIs to give consumers the choice to share transactional data between banks, fintechs and trusted third parties. Open banking has unleashed new opportunities within fintech and in the last year it has gone from strength to strength. At FinTech LIVE London in November, a panel of guests from Yapily, Nordigen and OBIE discussed the seismic effect that open banking has had.
P is for partnerships, particularly in crypto. Dented by fluctuating valuations and high-profile controversies, the crypto space has sought to regain retail trust by engaging a number of celebrity endorsements. These include racing driver Daniel Ricciardo, who in May was named an ambassador for OKCoin; and Cristiano Ronaldo, whose November NFT launch with Binance saw an explosion of search traffic.
Q is for quiet quitting, the practice of only doing the essentials of your job without going above and beyond, which found prominence this year. But quiet quitting speaks to a wider sense of general discontent, which has taken hold amid the cost-of-living challenges that many face. The UK alone has seen railway workers, criminal barristers, ambulance drivers, nurses and postal workers all walk out or threaten to walk out over pay and conditions.
R is for regulation, which is coming to crypto. The fallout from the FTX affair raises the prospect of greater oversight from regulators. This may take the form of greater protection for consumers, some of whom lost savings in FTX’s demise. But it may also take the form of antitrust measures as weaker players are shaken out of the volatile crypto landscape.
S is for SMEs, the lifeblood of most economies. Despite the challenging macroeconomic environment that they face themselves in, many small and medium-sized businesses have demonstrated resilience to battle adversity. In return, this underserved demographic is now being recognised by a new wave of fintech entrepreneurs who are developing solutions tailored for SMEs – from cyber insurance and the blockchain to credit and payroll.
T is for the Merge, which, despite how it sounds, is not a chart-topping indie boy band. The process saw Ethereum transition from its original ‘proof-of-work’ blockchain to the more sustainable ‘proof-of-stake’ blockchain. The result, Ethereum developers say, has the potential to be a defining moment in the evolution of blockchain technology and could lower Ethereum’s energy requirements by 99.9%!
U is for unicorns, which continue to sprout horns despite the headwinds in front of them. According to Pitchbook, there have been no fewer than 77 new fintech unicorns since the beginning of 2022. Among those to reach prestigious unicorn status this year were Vesttoo, TransferMate, Kushki, Stori, GoCardless, Clear Street, and Younited.
V is for valuations tumbling, another defining characteristic of a poor year for fintech. The most significant was the US$40bn wiped from the value of Klarna. But it’s a trend that affects every area of the fintech landscape, with payments giant Stripe admitting that they “did not know” whether the firm still justifies its lofty valuation. Many investors have pointed out that, rather than a devaluing, this is merely a rationalisation of company valuations after several heady years of overinflated figures.
W is for women. For every year that goes by, it feels like another year where we say we are getting close to gender parity in the boardroom. Progress is slow if not steady, but that doesn’t mean we shouldn’t celebrate victories where they fall. A new report this year found that perceptions of diversity vary wildly between men and women, with men more likely to believe the sector is gender diverse. To discover some of the women that are helping to reshape these perceptions, check out our inspiring Women in FinTech series.
X is for extensions, kind of. As the investment landscape becomes more barren, an increasing number of fintechs are turning to series extensions to help them increase their funding runway. Indeed, we have seen a disproportionately large number of fintech players announce series extensions in the past year. This can be beneficial, because it allows a fundraiser to secure extra backing over a longer period of time – but crucially at the same share price as it initially offered.
Y is for you – yes, you. You have the power, through the apps that you use and the behaviours that you exhibit, to completely transform the fintech industry even without being a part of it. In a saturated market, your uptake of a new platform or loyalty to an existing one can help to define the future of money. And, with the rise of biometric technologies, you could literally become the key in years to come to unlocking devices, paying for goods, and helping to keep the finance industry more secure.
Z is for Zelenskyy, the Ukrainian president who was this month named Time Person of the Year for his efforts in overcoming Russian aggression. In March, the whole business community rallied around Ukraine and expressed their shock at Russia’s invasion. The war has played a central role in many of the themes on this list – including inflation – but it has had a more direct impact too. For example, European insurers are now prevented from insuring vessels carrying Russian oil as part of a raft of sanctions announced in June.