The global fintech industry has continued to grow in 2020 despite the Covid-19 pandemic. But with the continued rollout of Open Banking regulations, the UK’s imminent exit from the EU and ever-growing customer demand for innovative financial products, what will the next 12 months mean for the industry? Verdict spoke to seven industry experts to hear their 2021 fintech predictions.

2021 Fintech Predictions

Fintechs will still struggle to reach profitability

“From money management tools to saving incentives, fintechs have the agility to create new, attractive products with a speed and creativity that traditional banks simply cannot match. However, true success stories of fintechs paving the way to long term profitability are rare. Established, traditional banks still hold all the capital and most of the main checking accounts, making it harder for fintechs to really get ahead. This is likely to continue into 2021, but we are seeing signs of convergence, with fintechs acting as the front-end for customers while banks provide capital in the background.”

– Ian Johnson, managing director for Europe at Marqeta

Identity controls will increasingly focus on frictionless experiences

“’Nature finds a way’ and so will merchants. PSD2 and SCA regulations in EMEA have forced the creation of stronger identity controls to help prevent fraud. But in a world where the amount of friction determines whether a user makes a transaction or walks away, we’ll see artificial intelligence and machine learning advance to the point where they can adequately assess transaction risk and meet regulatory requirements.”

– Jim Ducharme, general manager at RSA Anti-Fraud

 

Financial models will have to be rethought post-pandemic

“The pandemic has had a catastrophic effect on many businesses and individuals. Now, more than ever, access to finance is vital for so many. The viability of credit firms depends on the ability to lend. Many today employ models that automate decisions, but no financial model could have predicted the black swan event brought about by the Covid-19 pandemic. Existing models will require retraining and updating to reflect the current economic context, thereby ensuring sustainable lending.”

– Adam Lieberman, head of artificial intelligence and machine learning at Finastra

 

Larger banks will benefit from AI-driven optimisation

“Efforts for maturing their AI and analytical journey have revived the sentiment towards traditional large public organisations like government agencies and customer-oriented businesses such banks and posts. Data-driven decision making and proactive public policy design during Covid-19 has greater support and appreciation from citizens recently. When the large banks are implementing various AI-driven optimisation and design of business processes, they are bringing measurable improvement in customer service and other areas.”

– Dwijendra Dwivedi, EMEA AI and IoT practice lead at SAS

Open banking will impact app-based payments

“Open banking will start to have more of an impact on app-based payments. It will bring organisations together for the betterment of the user by sharing innovative ideas through open APIs and also drive competition to meet constantly evolving consumer needs.”

– Sarah Earl, head of product at RingGo

 

The year will see consolidation between fintech companies

“With major fintech developments on the horizon, 2021 promises to be another big year, helping SMEs and the global economy rebuild. Perfectly placed to take advantage of an economic recession, private equity and venture capital will be on the rise in 2021. For those experienced enough to act on the dry powder in the market, we expect a top buying opportunity for reasonably priced corporations next year. Especially as there is a substantial quantity of institutional capital sitting in the wings right now. 2021 will bring an upsurge in consolidation between fintech companies, with small financial leaders being acquired by bigger players. Particularly in more established areas, such as loaning, and developing areas of the financial market like cryptocurrency.”

– Scott Donnelly, CEO at CapitalBox

 

2021 will bring the rise of the digital corporate bank

“In 2021, we will see the rise of the digital corporate bank – a digital twin of their existing operations. This is something that has already been done successfully in retail banking. With online banking well established, and platforms like Zoom and Microsoft Teams proving themselves effective channels for communication during the pandemic, we can expect to see a lot more of the banking interactions for the SME clients moving online. This will mean the relationship manager will be able to initiate new relationships, open up new accounts, advise on suitable financial products and fulfil transactions remotely, predominantly via online platforms.

“Particularly for SMEs, access to their relationship bankers will become far easier than before. Additionally, digital corporate banking will help banks to deal with emerging competition on the provision of working capital facilities to SME clients from big tech giants and new entrants such as Amazon and Ant Group.”

– Jayakumar Venkataraman, partner, banking, financial services and insurance at Infosys Consulting

 

This feature is originally appeared in Verdict.

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