What does 2022 have in store for fintech?

The fin­tech indus­try moved at break-neck speed in 2021, with pre-pan­dem­ic days feel­ing like ancient his­to­ry. Expect an even faster pace of change in 2022, accord­ing to indus­try experts. 

Covid sparked a whirl­wind of chaos for fin­tech firms and prompt­ed a range of respons­es, like the £45 con­tact­less lim­it intro­duced in March 2020. Today, even such recent devel­op­ments seem to belong to anoth­er era. 

2021 was a record-break­ing year for fin­tech growth, notes Dorel Blitz, vice pres­i­dent strat­e­gy and busi­ness devel­op­ment at arti­fi­cial intel­li­gence (AI) spe­cial­ist Per­so­n­et­ics. In the UK, fin­tech invest­ment hit £17.7bn in the first half of the year, he notes, while 33% of all new uni­corns – pri­vate com­pa­nies val­ued at more than $1 bil­lion – around the world have been fin­tech-focused over the past three months. “We’ve also seen a huge num­ber of fin­tech IPOs as well as influ­en­tial M&A,” Blitz adds. 

The com­ing year is like­ly to see advances in new ideas, along with refine­ments to old ones. Crit­i­cal areas like mobile pay­ments and user secu­ri­ty will be honed, while issues such as sus­tain­abil­i­ty and diver­si­ty will be giv­en some over­due focus.

“The growth oppor­tu­ni­ty for fin­techs is greater than ever,” notes Blitz. “But this is mak­ing mar­ket com­pe­ti­tion hot­ter. The chal­lenge for fin­techs in 2022 will be stand­ing out and pri­ori­tis­ing cus­tomers — oth­er­wise they’ll fall into a death zone.”

Kalifa questions

The impact of the Kali­fa Review will also be a major focus for fin­tech firms in 2022. The report into UK fin­tech needs was com­mis­sioned by the chan­cel­lor at the 2020 Bud­get and led by Ron Kali­fa, chair­man of pay­ments com­pa­ny Net­work Inter­na­tion­al. 

The report’s rec­om­men­da­tions includ­ed improv­ing tech visas to appeal to glob­al tal­ent, amend­ing list­ing rules to encour­age UK IPOs, and intro­duc­ing a Cen­tre for Finance, Inno­va­tion and Tech­nol­o­gy, allow­ing for improved indus­try-wide cohe­sion across the nation. 

“The review deliv­ered an ambi­tious roadmap for UK Fin­tech,” says Chris­t­ian Faes, co-founder and exec­u­tive chair­man of Lend­In­vest, as well as chair of the indus­try group Fin­tech Founders. “How­ev­er, unfor­tu­nate­ly not many rec­om­men­da­tions have been actioned yet. Those at the coal­face of build­ing the UK fin­tech indus­try are hope­ful that the gov­ern­ment will final­ly turn the talk into real action for our sec­tor.”

The ben­e­fits of faster trans­ac­tions and a more per­son­alised expe­ri­ence … are two key pos­i­tives that we can expect

While deb­it and cred­it cards have effort­less­ly flipped over to the dig­i­tal wal­let world, that’s not been true of Buy Now Pay Lat­er (BNPL). But the oppor­tu­ni­ty is firm­ly there in 2022, pre­dicts Chris­ter Hol­lo­man, a fin­tech entre­pre­neur and author of How Banks Inno­vate. He says that in 2022, BNPL providers – who last year account­ed for around $97bn (about £70bn) of all glob­al e‑commerce trans­ac­tions, accord­ing to World­pay – should look for ways to incor­po­rate their cur­rent process­es into dig­i­tal wal­lets. 

“BNPL is arguably the fastest-grow­ing, most pop­u­lar form of pay­ment,” says Hol­lo­man. “Yet it’s stuck in the pre-wal­let era, and this is the first threat to its long-term sur­vival. Dig­i­tal wal­lets are cre­at­ed to hold pre-exist­ing deb­it and cred­it cards, tick­ets and so on. By def­i­n­i­tion, BNPL is not a pre-exist­ing facil­i­ty – the cus­tomer has to com­plete an appli­ca­tion form, with dig­i­tal wal­lets not designed to sup­port that type of user jour­ney.” 

Unlock­ing this poten­tial will essen­tial­ly be an arms race for BNPL providers in 2022. “They have to fol­low their cus­tomers to stay rel­e­vant,” says Hol­lo­man. “If they can spot this oppor­tu­ni­ty and make the most of it, it could be a very excit­ing time for BNPL.”

Payment progress

Pay­roll process­es will also take a step for­ward in 2022, pre­dicts Myles Stephen­son, founder and CEO of Mod­ulr, a pay­ments plat­form for dig­i­tal busi­ness­es.  Pay­roll-synced pay­ments, a move to Faster Pay­ments over Bacs, and the increas­ing trend for SMEs to out­source pay­roll to their accoun­tants and pay­roll bureaus will all dom­i­nate in the new year.

“Join­ing up two tra­di­tion­al­ly sep­a­rate process­es – pay­roll and pay­ments – will have huge effi­cien­cy-gain­ing con­se­quences on how busi­ness­es think about pay­ing salaries,” Stephen­son says. “The abil­i­ty to hold on to cash moments up to the pay­roll run will give the busi­ness more finan­cial flex­i­bil­i­ty, while also giv­ing their finance team more time to work on oth­er busi­ness crit­i­cal activ­i­ties. But the key to the suc­cess of pay­roll-synced pay­ments is con­trol.”

Most pay­roll and pay­ments inte­gra­tions come with robust authen­ti­ca­tion approval process­es if required, Stephen­son adds. Busi­ness­es that opt to out­source their pay­roll to their accoun­tant or pay­roll bureau can request to be set as the final approver, he adds, “and receive a noti­fi­ca­tion to check all is well before hit­ting ‘pay’.”

A clear approach when pro­mot­ing and sell­ing the busi­ness will help fin­techs remain com­pet­i­tive

With the UK already a recog­nised leader in the field, the inno­va­tion sur­round­ing open bank­ing will also con­tin­ue to evolve in 2022. This is part­ly due to the Covid-dri­ven accel­er­a­tion in the adop­tion of dig­i­tal bank­ing ser­vices.

“Banks will con­tin­ue to offer more com­pre­hen­sive embed­ded ser­vices to their cus­tomers, with a focus on increas­ing use of ana­lyt­ics and automa­tion,” notes Faes. “The ben­e­fits of faster trans­ac­tions and a more per­son­alised expe­ri­ence across all areas of finan­cial ser­vices are two key pos­i­tives that we can expect with­in the next year or so.”

A personal touch

Tai­lored cus­tomer jour­neys will be more promi­nent in 2022, with fin­tech com­pa­nies embrac­ing a Net­flix-type approach, offer­ing clients per­son­alised rec­om­men­da­tions. 

“Mod­ern con­sumers want an expe­ri­ence where banks and fin­techs can think on their behalf,” explains Blitz. “The bur­den of finance is increas­ing­ly mov­ing away from the cus­tomer to the lat­est tech, which can auto­mate man­ag­ing per­son­al finances and actu­al­ly help cus­tomers with their over­all finan­cial well­be­ing.”

As well as help­ing clients to tack­le their finan­cial stress­es head-on, this will allow fin­tech com­pa­nies and banks to analyse client activ­i­ty. It will par­tic­u­lar­ly help small busi­ness own­ers. 

“Busi­ness own­ers have a lot on their minds and tend to think about their busi­ness oper­a­tions in terms of work­flows: order-to-cash, pro­cure-to-pay, record to report,” notes Blitz. “If fin­techs and banks can think on behalf of busi­ness­es in this way, it will ben­e­fit both par­ties.”

Hol­lo­man antic­i­pates that niche ‘neobanks’ will enter the are­na, cre­at­ed for peo­ple who are unit­ed by a com­mon cause or inter­est, be it sex­u­al­i­ty, career, or hob­by. This desire for a tai­lored over a gener­ic bank­ing expe­ri­ence could have deep roots, he says, stretch­ing back to our cave­man past. 

 “When we evolved from soli­tary hunters to liv­ing in com­mu­ni­ties, the need to express our­selves and be under­stood became a neces­si­ty to sur­vive,” he says. “Over time we have embraced the tools avail­able to help us achieve that. It can be through our choice of cloth­ing or the music we lis­ten to, and increas­ing­ly we will be able to also sig­nal who we are and what we stand for through our choice of bank.”

The chal­lenge for fin­techs will be stand­ing out and pri­ori­tis­ing cus­tomers — oth­er­wise they’ll fall into a death zone

The indus­try is arguably sat­u­rat­ed, so stand­ing out from the crowd will be vital in 2022. Hir­ing the right peo­ple for the right roles will be key. Alya Dik­ou­ch­ine is peo­ple lead at 3S Mon­ey, a UK bank chal­lenger. She expects to see more design­ers and devel­op­ers in demand in 2022, with the roles being cru­cial to automa­tion and aes­thet­ics. 

“Sales and mar­ket­ing can also add huge val­ue and fin­techs shouldn’t rule out cre­ativ­i­ty when hir­ing for these roles,” she says. “Hav­ing a clear approach when it comes to pro­mot­ing and sell­ing the busi­ness will help fin­techs remain com­pet­i­tive.”

Dik­ou­ch­ine pre­dicts that roles with­in finan­cial crime, com­pli­ance and anti-mon­ey laun­der­ing will also see sig­nif­i­cant growth, “par­tic­u­lar­ly with finan­cial insti­tu­tions soon being expect­ed to mon­i­tor fos­sil fuel activ­i­ty in line with the UK’s gov­ern­ment announce­ment at COP26. This is a func­tion that will only get more com­plex.”

Fintech gives back

The oppor­tu­ni­ty for fin­tech firms to give back is just as excit­ing as the expand­ing job mar­ket. It adds a per­son­al ele­ment to an indus­try that might be viewed as soul­less. 

Green tech­nolo­gies and sus­tain­able invest­ing will be anoth­er key indus­try trend, sug­gests Devie Mohan, co-founder and CEO of fin­tech research com­pa­ny Burn­mark. 

“Whether we look at chal­lenger banks, tra­di­tion­al banks, wealth man­age­ment firms or insur­ance firms, this is a clear emerg­ing trend, with prod­ucts and process­es heav­i­ly aligned towards glob­al sus­tain­abil­i­ty goals,” she explains. “There are sev­er­al ESG funds and robo-investors that are cur­rent­ly out­per­form­ing tra­di­tion­al funds; there are also sev­er­al chal­lenger banks that have launched car­bon emis­sion track­ing or reduc­tion tools. This will be an inter­est­ing devel­op­ment to watch out for.”

After the incred­i­ble chal­lenges pre­sent­ed by the pan­dem­ic, the char­i­ty sec­tor will also feel the ben­e­fit of fin­tech. 

“The more we can pro­mote ‘fin­tech for good,’ the bet­ter,” says Matt Crate, CEO of char­i­ty dona­tion plat­form Tou­can. “It’s not nec­es­sar­i­ly about dis­pens­ing with the old ways of doing things but sup­ple­ment­ing them with mod­ern dig­i­tal solu­tions, and to mobilise a com­mu­ni­ty of peo­ple col­lec­tive­ly doing good.”

An esti­mat­ed 91% of char­i­ties were neg­a­tive­ly impact­ed by the pan­dem­ic, accord­ing to recent research from the Char­i­ty Com­mis­sion. Fin­tech providers that focus on giv­ing will be crit­i­cal to help­ing such organ­i­sa­tions get back on their feet.

“Dig­i­tal trans­for­ma­tion is long over­due in the char­i­ta­ble sec­tor,” Crate notes, adding that there’s still too much reliance on “old school forms of giv­ing: buck­et rat­tling, super­mar­ket token box­es or web-based sin­gle trans­ac­tions. Instead, 2022 will be about mod­ernising the giv­ing expe­ri­ence for dig­i­tal-savvy donors, who want to make a dif­fer­ence to the caus­es they care about the most.”

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