Digital technologies are causing disruption across banking and online payments. GlobalData predicts that super apps, openness in customer data ownership, and Generation Hashtag will be key topics in fintech in 2022.
Growing herd of fintech unicorns
“Fintech unicorns have now climbed to 116 in number, with an aggregate valuation of $529 billion,” estimated Amrit Dhami, thematic analyst at GlobalData. “The sheer volume of highly valued start-ups operating in fintech demonstrates the extensive ongoing disruption of the financial services sector by digital technologies.
“Disruptors and incumbent institutions will continue to form dynamic partnerships to capitalize on the innovation of start-ups and large user bases of traditional financial institutions. Goldman Sachs and Visa are among those building an extensive fintech network.”
Openness in data ownership – critical to fintech partnerships
“Open banking has encouraged partnerships between disruptors and incumbents by allowing accounts and data to be linked across institutions, important for services like smart budgeting, automated onboarding, and credit risk assessment. PSD2 (the amended Payment Services Directive) has facilitated openness by giving third parties access to banks’ infrastructure.
Open banking has been a key driver of partnerships between unicorns and banks and has been delivered top-down in Europe through PSD2.
A more open model of data ownership, where data can be moved across different institutions, increases transparency in banking services, and is an important step in shifting the ownership of customer data from banks to the customer. Institutions will be battling to win our trust and confidence.
“Openness in data ownership will continue to be a key theme in the financial services sector, so discussions around PSD3 will continue in order to instigate the more aggressive measures needed for further networking across financial institutions,” she connected.
Generation Hashtag to drive fintech innovation
Generation Hashtag refers to Fintech cohort born between 1991 and 2005. Having experienced the uncertainty of both the Global Financial Crisis and COVID-19 recession, this generation will continue to redirect their savings towards commission-free stock trading and investment apps such as Robinhood and Freetrade. These apps target young investors with a firm grasp of technology, but limited wealth —Robinhood’s average user is aged 27.
Generation Hashtag is also wary of credit card fees, so is driving innovation in interest free, buy now pay later (BNPL) services. BNPL is convenient for consumers and lucrative for retailers, reducing cart abandonment.
Dhami opined that more transparency around BNPL services is urgently needed to ensure consumers understand that they are accruing debt through BNPL, which can negatively affect their credit scores.
“Regulators will pay more attention to BNPL following its rapid growth in 2021, with the Financial Conduct Authority (FCA) already recommending rigorous affordability checks before consumers can use such services,” she concluded.
