The year 2021 squared up with great prospects for the fintech industry triggering the procedures that many fintech companies were attempting to adopt previously, as well as revealing some new industry challenges. Businesses across the industry have seen a series of technology innovations that opened up new avenues and propelled them to greater heights. However, several obstacles forced many players to improve their operations rapidly, reduce costs, and introduce new solutions.
With the end of 2021, now is a good time to get ready for what’s to arrive in 2022. Here’s the list of key fintech trends to keep an eye for in 2022:
According to UK Finance, cash payments currently account for less than one in every six payments. The spread of pandemic has escalated the already significant move to cashless payments, with cash payments falling by 35% in 2020. This trend is only expected to grow in 2022, as the expansion of cashless business transactions is linked with an upsurge in global digitalization across industries, including digital accounting and financial management processes. Paying simply with mobile phone apps, or other electronic payment methods will soon become the new normal.
2. Embedded Finance
Businesses and consumers require a frictionless payment experience. Embedded finance is created to simplify the overall financial ecosystem for customers while also increasing operational efficiency for businesses. Businesses may offer a holistic experience for the end-users by leveraging embedded finance, and customers can seamlessly pay and accept funds in almost real-time without compromising on the user experience. It's no wonder that many experts predict that embedded finance will continue to thrive in 2022.
3. Open Banking
In 2021, open banking was a popular trend, but banks are still trying to capitalize on it. Although still in nascent stage, what was once considered a danger to a bank's market position is now viewed as a once-in-a-lifetime marketing opportunity. Considering their extensive customer base, conventional financial institutions must capitalize on this development over fintech companies, especially digital competitors, in 2022 and ahead.
Emerging wealthtech players have disrupted the generally conventional market of banks and wealth management organizations. Wealthtech advancements include robo-advisors, digital brokers, innovative investment tools, and, most recently, Non-fungible Tokens (NFTs). Online banking can also be considered a part of wealthtech. As a result of the pandemic, financing in wealthtech reached a new high of USD 20 billion in 2021. It also became more mainstream as youngsters adopted new banking and investing apps. The vast democratization of trade also had a significant influence on the business and is expected to further grow in 2022.
Insurtech is a new jargon and a bit more challenging as it's an extension of Fintech and Regtech in a new market scenario. It is a new Fintech application that has a significant impact on user convenience and experience. Insurtech is polarized among incumbents using technology to optimize their present service offerings to an evolving market and innovative startups vying for market share. The customer is the common connection as they select between experienced players and disruptors, or a combination of both. Insurance businesses are investing in innovative startups to assist them in driving the technology they seek, recognizing this as an opportunity, instead of a risk.
6. Data Aggregation
Data aggregators will gradually be in charge of enabling the exchange of data between financial organizations and their consumers. Data aggregators build alliances with banks because they demand direct access to consumers' financial data. When a customer uses a fintech app, it needs to be linked to the customer's bank account using the appropriate user credentials. Irrespective of the methods utilized, the acquired data is classified and kept at a central location to use in a variety of applications. Stored data includes account balance information, cash flows, purchasing behavior, budgeting, and so on. Access to these data sets enables a variety of financial solutions such as real-time transactions, financial counseling, and loans and credit.
7. Crypto Banking
As digital currencies are not monitored by a central body, the phrase ‘crypto banking’ is often deemed misleading. Exchange businesses that provide digital currency management services are not essentially banks. Cryptocurrency banking primarily allows consumers to store their money in a digital wallet or use them in the same way they would use conventional money. These exchange systems allow users to manage their crypto balances. The key advantage of crypto banking is that the exchange platform enables users to use the digital currency balance exactly like any other currency to perform daily transactions and payments, just like cash.
8. Banking as a Service (BaaS)
Banking-as-a-Service (BaaS) has grown to prominence in recent times as a cost-effective and convenient means of offering financial services based on open banking ideas. In order to create new and creative digital services, banks must use a service-oriented and configurable architecture approach. Conventional banks and financial institutions must include BaaS as part of their digital transformation strategy. Many more traditional financial institutions are expected to engage with fintech companies by utilizing BaaS services to bring innovative technology in-house and improve their own capabilities.
9. Payroll Fintech
Salaries, which account for the majority of a company's costs, remain slow and cumbersome. However, payroll fintech companies are on their way to catching up to businesses in the new year. Salary advances, real-time payments, and crypto payments are among the most important advantages of using a payroll fintech system. The typical HR dynamics of businesses that are incapable to close the payroll sheet daily will be freed with the help of Payroll Fintech companies, who can accomplish this task almost in real-time. This potential is eventually offered as a corporate advantage for the company's employees, who place a high value on getting wages on-demand.
The Fintech Arc of 2022
Fintech trends have undoubtedly evolved in 2021. The market scenarios broadened the vision of what digital financial solutions and the fintech economy would mean for the future in 2022. Maintain a competitive edge by influencing the future of your business operations by keeping these latest fintech ideas on your radar.
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