Fintech opportunities for 2021

As we are getting closer to calling this year ‘done,’ we are also in a time of retrospectives, calculus, forecasting, and planning. And that is exactly what we, at Salt & Pepper, are doing too.

We are set to take a closer look at how 2020, a year of change and adaptation, looked like for the Fintech sector and make our predictions for next year’s challenges. We are going to discuss implementations that, according to studies, will start in 2021 and last until 2022 to completely finish. Let’s go on with what we call Fintech in numbers.

Financial domains impacted by technology

Let’s start by going through the domains impacted by Fintech once more:

• Banking;
• Insurance;
• Loans;
• Personal Finance;
• Electronic Payments;
• Venture Capital;
• Wealth Management.

With that being said, it is clear that Fintech has impacted multiple sectors, more companies than we can imagine, and last but not least, our personal lives𑁋how we manage our finances. The most important thing to keep in mind is that this is only the beginning.

Stats so far

If we talk numbers, this is what’s going on in this mesmerizing sector.

• The global financial sector is expected to be worth $26.5 trillion by 2022.
• The fintech market share across 48 fintech unicorns is now worth over $187 billion (as of the first half of 2019).
• 60% of credit unions and 49% of banks in the U.S. believe that fintech partnership is important.

One of the biggest fintech products is digital payment, which holds 25% of the fintech market.

Customer experience

On a different note, it’s not only the big companies like Apple or JP Morgan that set the tone. But more of a combination between what can be done by said companies and people’s expectations of what they could do. A lot of what we have going around now is partly due to the demanding public that expects fast, almost instant, easy to use, user-friendly, intuitive applications for their everyday financial needs.

• E-commerce is one of the biggest growth drivers of fintech, with a CAGR of 10–12% thanks to consumer behavior.
• 64% of consumers worldwide have used one or more fintech platforms, up from 33% in 2017.
• 60% of consumers want to transact with financial institutions that provide a single platform, such as social media or mobile banking apps.
• 96% of global consumers are aware of at least one fintech service or company.

Blockchain technology

A lot of this is because blockchain is a catalyst with great potential for the even faster growth of fintech companies

• Approximately 24% of people around the world are already familiar with blockchain technology.
• By 2024, blockchain tech is set to hit $20 billion.
• Peer-to-peer (P2P) (digital lending) was worth $43.16 billion in 2018 and is expected to rise to $567.3 billion in 2026 with a CAGR of 26.6%.

With these being said, what can we expect? Well, after a disruptive show Fintech has done for the whole world to see, it is clear that it is not going anywhere. Moreover, it’s important that others understand why collaboration, instead of rejection, is more vital now than ever before.

If by now, we have seen a somewhat show of forces, new data shows that 82% of entities plan to increase collaboration with Fintech companies in the next few years. Their initial fears, though, have not been eradicated, not at all. 88% of incumbent financial institutions believe a part of their business will be lost to fintech companies but managed to understand that going with the wave, instead of trying to fight natural evolution, is better.

Opportunities for entrepreneurs in 2021

Having all of these statistics in mind, it’s time to jump to the opportunities section. This year has disrupted life as we know it, businesses, institutions, and almost all activity imagined. Banks and other financial institutions were not excused. These changes demanded technological innovation to keep pace with our global population moving online. As a result of this shift, there’s now a bigger than ever door to opportunity for investors.

Digital payment services

Starting off this list of opportunities with one that is, maybe, the biggest demand of people worldwide. It’s a first response to the shift mentioned above𑁋the e-movement. School, classes, work, meetings, conferences, events, everything is online, and now more than ever, shopping is online too. Is it really a surprise that e-commerce has got a massive boost? It’s been a year since we’ve avoided crowded places, paying with cash, and really touching surfaces or getting close to other people. Online shopping, by card, naturally seemed like the best option to do the majority of people. Italy, for example, has witnessed an increase of 81% after the first months of lockdown.

Amazing statistics show that without the pandemic, e-commerce would have probably taken five more years to get to this point. In-store experiences are losing more terrain than ever predicted.

Digital investing

With the world population being at home and generally having more time to waste at their disposal, some entities have decided to make available different activities, otherwise reserved for experts. Revolut is just one of the examples that changed how ‘normal people’ use their financial apps𑁋by adding in-app stock trading. This is just one of the many examples of how investing has become more accessible than ever.

Apart from that, on the opposite pole of investing, COVID-19 could be a catalyst for ESG investments, too, according to a study by JP Morgan. “Over the long run, COVID-19 could prove to be a major turning point for ESG investing, or strategies that consider a company’s environmental, social and governance performance alongside traditional financial metrics,” said Jean-Xavier Hecker and Hugo Dubourg, Co-Heads of ESG & Sustainability within J.P. Morgan EMEA Equity Research.

Digital lending

From a financial point of view, probably the most heartbreaking effect of the pandemic was the lay-off of so many people. Millions of individuals, their families, and households now suffer the effect of being laid off, looking for a job in what are now, areas that no longer engage. Some governments have shown empathy and gave some stimuli to the ones affected. While these stimuli have been seen in some parts of the world, it’s not applicable to the rest of the global population. Banks have played an important role in giving financial support to people, but it is also a time for Fintechs to show a competitive spirit when it comes to this area too. Many Fintech companies have demonstrated great agility and adaptability in responding to the crisis with options much needed by the population.

Final thoughts

If at first, we hoped that the pandemic crisis would pass faster and the effects won’t be that devastating, we’re now facing a harder time to admit the truth. More than ever, agility, adaptability, and teamwork will be rewarded in the long run.