What does 2021 have in store for fintech?
Like all industries, the fintech sector has experienced its fair share of challenges in 2020. Although there were many obstacles to overcome, COVID-19 has also triggered (or accelerated) new opportunities.
While it is never easy to predict the future, particularly in uncertain times like these, there are undoubtedly a number of important trends that are likely to become more prominent in the coming 12 months.
Fintech's unavoidable 'new normal'
Starting with the most obvious one: COVID-19 will continue to have a significant effect on fintech. Important questions must be answered as finance companies consider their priorities for 2021. Most notably, given fintech will remain a crucial part of consumers’ and businesses’ day-to-day lives, how are firms going to deliver services that meet the evolving needs of their customers?
An unprecedented reliance on technology means that banks offering a poor user experience and services via their apps or online platforms will quickly fall out of favour. This point will only become more pronounced in 2021. The sad reality is that many bank branches may never reopen, and fintech solutions will have a key role to play in improving the availability and accessibility of financial services.
Eyeing up the competition
The path to profitability will be a key consideration for fintechs in 2021. The sector has gained considerable traction in recent years, both in terms of public support and investment, and new players are entering the market on a regular basis.
As the industry becomes yet more established, the clarity and validation of business models will become much more important. After all, not all existing banks, lenders and fintech vendors will survive in their current form.
Players that are looking to enter and establish themselves in the field must acknowledge the importance of having a solid value proposition – one which is clearly differentiated from their competitors. To do so, fintech vendors will need to demonstrate that their products work at scale. Key determinants of success will be whether their target groups are large enough, and whether the technology architecture can handle large scale growth.
Unlocking the promise of Open Banking
Despite its attention, Open Banking is still very much in its infancy, particularly when it comes to consumer awareness. In fact, at present only 18% of UK banking customers know what it means.
Now comes the time for Open Banking solutions to go beyond simple use cases. In the coming months and years, the apps we will build on top of it will become increasingly more sophisticated.
Furthermore, the impact of data sharing will soon extend into all financial markets and unlock a host of new financial products. In the coming 12 months, we will see the mortgage, pension and insurance markets all joining the Open Banking revolution to create a truly sophisticated financial ecosystem. It ought to pave the way for more personalised, responsive banking experiences.
Breaking down international barriers
Last but certainly not least, 2021 will see a further dissolution of international barriers. New methods for people to pay their bills and make purchases cross-border will be among the key priorities for banks and fintech vendors. The ability to transfer funds easily, without the requirement to switch accounts in order to do so, is one example of the kind of innovations that we are sure to see more of. Such solutions will serve to significantly reduce the fees and the time it takes to make cross-border payments.
2020 has been very difficult for many people and businesses. Despite the challenges, however, the fintech sector is looking to enter 2021 in a position of strength as developments are accelerated and new trends come to the fore. No doubt, the coming months will require a lot of thoughtful responsibility from fintech, as it will be one of the key factors to bringing stability into the “new normal” and setting the economy back on track.
Ammar Akhtar is the co-founder and CEO of Yobota, a London-based technology company. Founded in 2016, Yobota has built a fast, flexible, cloud-native core banking platform, which allows clients to create and run innovative financial products.
