Exciting Fintech Market Trends to Watch in 2021: What Progress Do We Have So Far and What to Expect?
Last year, we predicted the most vivid trends for 2020. Now when 2020 comes to an end, it’s time for another forecast. Have the events of the passing year altered the future of fintech the way we expected? What comes next? Armada Labs is here to answer these questions!
Trends to Set the Pace for Fintech in 2021
- Picking Crypto over Blockchain
- P2P Financial Services Lead to Digital Banking
- “Investment” Apps are the New Black?
- Regulatory Landscape Evolves as Regulators Cooperate and Contribute
- Faster Shift to Cloud Banking
Picking Crypto over Blockchain
Well-established financial institutions, banks, and fintech startups all continue implementing blockchain to get better security of data and operations. For them, crypto is the name of the game here.
The widespread use of cryptocurrencies and their further adoption feels like one of the most significant fintech trends for the years to come. 2021 should become a “leap year” for crypto, when bitcoin is expected to reach new breakneck heights and eventually surpass the $20K mark. Actively supported by such industry giants as JP Morgan, Facebook, Square, PayPal, and others, crypto can’t fail this time.
The coronavirus pandemic accelerated the integration of digital assets into traditional monetary systems. Cryptocurrencies are safe, more convenient in circulation, decentralized at the international level, and have good potential for growth. Perhaps, now, we are witnessing the crucial point at which the global economic shifts to digital.
P2P Financial Services Lead to Digital Banking
Big technology companies such as Facebook, Google, Amazon, Apple, and others continue sharpening their focus on financial services, in particular banking ones. Although Facebook factually failed with its Libra venture, it succeeded in another initiative — Facebook Pay, a service designed to consolidate Facebook’s payment products. Meanwhile, the domain has already become fiercely competitive, and there, Facebook faces off with Google Pay, Apple Pay, and, of course, Chinese Alipay and WeChat Pay.
While some companies adopt fintech services to be on a roll, others are already on it. These are digital-only banks, such as Revolut, that reap more revenues each year. Yet don’t think they will oust traditional banks anytime soon since they have certain issues.
Yes, digital banks may be cheaper and, in some aspects, more convenient than traditional ones. But not everything can be settled online, and that’s why many fintechs now seek not to confine themselves to digital services but partner with incumbents in the banking sector instead.
“Investment” Apps are the New Black?
Decentralized finance systems (DeFi) are another distinct trend among p2p financial applications, with services such as lending, asset trading, interest earning, and others. At times of the pandemic, the demand for additional sources of passive income and wealth soared as people began investing more money online.
Meanwhile, even more retail investors and traders barge into the fintech space. Forced to spend more time at home, they actively search for new ways to generate income and more willingly register on various investment platforms.
As a result, online trading platforms, such as Robinhood and others, had viral growth of new investors during the year. On Robinhood, for instance, Dodgecoin became a real hype after the famous video on TikTok. Soon, we will likely see a whole new class of investors bringing money through social platforms.
Regulatory Landscape Evolves as Regulators Cooperate and Contribute
On the eve of 2021, the fintech regulatory landscape lives its own life, yet, it is also affected by the pandemic and a couple of trends continue to prevail.
First, governments review analog regulations, particularly those requiring personal contact, seeking to remove the obligations of parties’ physical presence. For now, these updates seem temporary, but everything may change soon, as the continuing severity of the situation may result in their addition to banks’ rule books.
Second, individual regulators join together to unify fragmentary yet similar in nature regulations that have different requirements regarding firms’ obligations to adhere to the financial law.
Although the United States confronts game-changing Open Banking regulations (in contrast with countries such as the U.K., Japan, Brazil, Australia, and others), some positive dynamics occur already. Last year, the U.S. Treasury Department outlined the need to promote innovation in payments, loans, and wealth management in its report.
Meanwhile, the market persists. The Treasury is now seeking to create a new regulatory environment that encourages innovation and excludes regulatory fragmentation by updating legislations for various activities and products, such as loans, payments, financial planning, and others. With its initiative, the Treasury aims to facilitate the entrance of fintechs in the sector.
Faster Shift to Cloud Banking
Banks and insurance companies go through sea changes, and one of these is cloud-based SaaS applications. It seems like this is only the beginning since the cloud has much potential and opportunities yet to discover. More than 20% of fintech apps run on the cloud, and their part keeps growing.
And this is where banks should keep up with fintechs, and they will likely be at some point. With data input volumes continually growing, they need an infrastructure to adapt promptly and seamlessly. Though the latter were always hesitant about adopting new technologies, aware of security and regulatory risks, the market intensively demands them to do so as consumers themselves look for new ways of interacting with banks.
Cloud banking allows banks to stay in touch with their clientele 24/7; more, it introduces a more flexible and cost-effective business model to cut operational costs. The shift is already taking place, but it’s gradual; for example, Bank of America provides digital banking solutions, including the Erica chatbot. BBVA, a financial services company, leverages API in banking with its Banking-as-a-Service BBVA Open Platform.
Finding an Opportunity
Undoubtedly, fintech still has much growth potential for businesses that adopt it. Those who haven’t done it already still have a chance to do so if they know what is trendy at the moment. Let’s briefly revise what we’ve learned so far.
- As we predicted last year, blockchain continues conquering the fintech sector, as cryptocurrencies’ usage increases with likely ambitions to integrate into the global economy.
- Although digital financing seems a “golden mile” due to their high demand, they can’t supersede traditional services. Aware of that, banks and fintechs collaborate.
- Due to the pandemic, individuals and investors look for additonal source of income online, actively investing in lending, asset trading, and other relatively reliable and profitable activities.
- Governments are generally optimistic about fintech regulations, updating these to adapt to the “new normal” and facilitate entrance for newcomers. Meanwhile, regulators cooperate to contribute to law unification.
- Cloud banking is still a mostly undiscovered “land of opportunity,” guaranteeing banks, fintechs, and consumers less costly and always available service.
Make up your mind about the future course and keep up with ever-changing technology trends! Yes, compared to last year, most of these continue evolving, while only RPA seems to be falling behind. At the same time, individual “old-time” trends “gave birth” to the others, such as investment apps and p2p financial services, undeniably becoming highly sought-after fintech topics.
