What a challenging yet extraordinary year 2020 has been. We started the year full of high hopes and expectations for the new decade, with the concepts of “pandemic”, “lockdowns” and “remote working” being far beyond our imagination. How has digital banking been affected?
The global business impact following the pandemic has been significant to say the least. Businesses in the travel and hospitality industries took a hard hit, while others in the digital space, like gaming, e-learning and e-commerce, saw a rise in volume. For the Fintech industry, the situation has also dynamically encouraged financial institutions to shift their offerings from offline to online channels to meet the accelerated shift in consumer behaviour to digital. Even the most change-averse, conservative consumers are embracing the digital approach to fulfil their banking needs due to strict social distancing measures worldwide.
Here are six Fintech trends that are anticipated to flourish in 2021 and beyond, as we consider new opportunities and challenges in a post-pandemic era:
1. Stronger collaboration with new players
Given the ‘borderless’ nature of Fintech and the acceleration of industry convergence across several previously siloed verticals, we expect more collaborative efforts to strike the right balance between continuous innovation and healthy competition. As the field of competitors quickly expands, lines are blurring between different categories of new players in the ecosystem and partnerships are becoming more common around the world.
We see this with banks, insurers and asset management companies – many of which have started partnering with Fintech companies to undergo major digital transformation and become more agile. Nium, for instance, has worked with many existing players to quicken their go-to-market as well, including KasikornBank in Thailand and Teledolar in Costa Rica. Even central banks are embracing Fintech in hopes of progressing economies forward.
2. Digital banks soon to be the norm
With such blurred lines, the Fintech industry is at a crucial inflection point – and digital banks are at the centre of this. The demand for virtual and contactless interactions has given rise to financial services that are more secure, convenient, traceable and, ultimately, more attractive to both end consumers and businesses.
In Singapore, the Monetary Authority of Singapore (MAS) recently announced the recipients granted the four digital full bank licences in a highly anticipated move that aims to liberalise the financial industry. For the first time in Singapore, non-banks will be allowed to provide banking services. Businesses can now tap into new ways of reaching and transacting with home-bound consumers who now prefer digital payments over the use of cash.
3. Banking-as-a-Service no longer just a buzzword
Banking-as-a-Service (BaaS) is an end-to-end process that enables third parties to directly connect with banks’ systems so they can build products on top of the banks’ regulated infrastructure. The reason BaaS is a big deal today is that it makes it far easier for anyone to create seamless, scalable payment experiences across and within borders. It enables simpler working solutions, removes the need to obtain regulatory licenses, reduces operational costs and provides a new and improved customer experience.
Undoubtedly, what will distinguish the future of BaaS hinges on what financial technology solution providers can offer to support banks, financial institutions, and businesses in the frontiers of the new global economy. Partnering with a third-party BaaS provider can allow businesses to bypass much of these developmental complications. Nium’s existing tech stack, for instance, is highly modular and scalable. We offer myriad services that can be tailored to meet specific needs – from customers who simply wish to plug in and rapidly deploy our service, to those who wish to create an entire digital bank from scratch.
4. Micropayments meet personalisation
In all industries, we see a growing trend towards personalisation. Micropayments, or the transaction involving a very small sum of money, has seen an upward tick. It can even be said that micropayments are the cornerstone in bringing widespread accessibility for new payment methods such as digital wallets and platforms that trade bitcoin and other cryptocurrencies. On that note, it is quite refreshing to see the development of easy-to-use platforms, given that cryptocurrencies can still be a complex subject matter for many people.
5. Global acceptance of cryptocurrency
The increasing popularity – and unpopularity – of cryptocurrency has been observed around the world for some time. The European Central bank has recently announced that it is one step closer to the creation of a digital euro, as they plan to conduct a public consultation around this possibility.
One issue remains: the lack of cryptocurrency-related regulations worldwide due to government entities’ highly cautious nature. Authorities in the United States, for instance, remain divided on whether to treat cryptocurrencies as a commodity, currency, property or security.
6. Fintech meets Regtech meets Wealthtech
With access to banking services becoming more widely available through new players in the ecosystem, there is a sheer amount of data and time taken to not only onboard new customers but also to ensure compliance is adhered to. This requires solutions on the backend capable of bridging the gap between what is required for regulatory purposes and what is needed to provide end-users with a seamless, frictionless financial journey.
As such, the future of the industry may very well be in the combination of technology with the key pillars of finance, wealth management, insurance, legal and compliance services of the global economy. Three words will be crucial to this future: ‘Fintech’ for financial technology, ‘Regtech’ for regulatory technology and ‘Wealthtech’ for wealth management technology. We anticipate legislators, technology and financial players to work closely to launch new innovations within these three pillars, but this will require resources, investment as well as collective effort to nurture talent growth in these areas for the long run.
The way forward will always be close collaboration, yet healthy competition. Let us see the past year as a reminder that we are in this together, and that we will come out stronger in the new year only when we embrace innovation, disruption and transformation for good. I, for one, am excited to see what has yet to come for our dynamic global financial ecosystem.
