Fintech has seen a massive year of growth while delivering efficiency gains across crypto, global supply chain backlogs, and embedded finance options for consumers. We discuss 4 key trends for the year to watch for as the fintech playground grows and shifts.
Despite a backdrop of economic uncertainty & pandemic instability, the global fintech ecosystem experienced unprecedented growth in 2020. Then, in 2021, the space reached new heights of innovation, with fintechs raising more than $140 billion - three times higher than that of 2020, which set an all-time record.
However, with growing demand for decentralized financial services and the appearance of Web3.0, the financial services landscape appears to be on the verge of another major shift. In the coming years, it’s quite likely we’ll see a fresh wave of fintech innovation usher in a new era of greater financial autonomy, customer-centricity, and empowerment for individuals.
1. Embedded solutions: the key to unlocking fintech’s future
Within the financial services landscape, the center of gravity has shifted over time, largely in response to consumers looking for solutions that cater to their needs outside the clutches of big incumbents. In recent years, neobanks have attempted to answer this call, challenging the pricing and complexity of traditional banks, while earning customers’ trust through simplified, digital-only experiences and low-to-no fees. Neobanks have enjoyed a modicum of success, particularly in niche verticals where they offer dedicated products for specific use cases. Overall, however, they have had a difficult time with mainstream customer acquisition.
It can be argued that the current trend of democratizing financial services holds even bigger potential for disruption. Embedded banking solutions, aided by open banking initiatives, are uniquely positioned to overcome customer acquisition challenges, with the clear benefits of providing financial services where there is already a captive audience of customers. Doing so enables any company – financial or non-financial – to expand their native offering, create new revenue streams, and better serve customers across their ecosystem. Banking-as-a-service offerings are just the beginning. There is far more room for growth within the embedded finance movement.
While embedded payments and lending solutions are already available in the market, embedded insurance offerings are now beginning to establish a foothold. Shopify is a great example of a company that has adopted an embedded finance go-to-market strategy, and it’s paying off.
When it comes to the big picture outlook on the future of the fintech landscape, we can expect to see more companies embrace an embedded finance business model and also the expansion of embedded finance in more verticals like investments and taxes. Contact us if you want to learn more about embedded finance and lending options from Liberis.
2. Supply chains are at a tipping point
The COVID-19 pandemic has exacerbated pressures within the global logistics space. Intermittent periods of forced closure, travel restrictions, and pandemic–induced bursts of consumption, alongside a limited capacity of ports, container ships, and truck drivers, caused havoc for supply chain operators. Due to the current supply chain chokehold, only about 34% of container ships arrived on time in September 2021, compared to 56% the year before. This unprecedented congestion makes fleet management nearly impossible. In addition, rising consumer demand, limited supply, and uncertainty around delivery times are causing volatile price increases. And moving a single shipment usually involves about 20 companies between carriers, freight forwarders, ports/airports & customs brokers. With so many players in the process, connectivity is low and there isn't a centralized flow of data to help diagnose bottlenecks.
However, we expect to see digitalization and fintechs play a big role in the right-sizing of the global supply chain, from inventory management to payments, lending, and insurance.
3. Mainstream use cases for NFTs
NFTs (Non-Fungible Tokens) have become commonplace in modern-day vernacular thanks to bizarre images of bored apes fetching for jaw-dropping prices. Beyond the often-comical news flashes, there is considerable space for innovation and use-cases for NFTs. In the music industry, many musicians and other entertainers are using NFTs to strengthen their earning power with digital representations of their content. As powerful new tools for creator empowerment, NFTs can help democratize content distribution globally.
And in the live music scene, NFTs may play a role in ticket sales; profiteering by scalpers who buy up tickets exclusively for re-selling at higher rates on the secondary market has always been a major issue, and NFTs can be used as a royalty mechanism to ensure that venues and artists receive a fair share of commission on tickets - even when sold on the secondary market.
4. The role of Super-Apps
2021 was a record-breaking year for VC investments and capital markets in fintech. We’ve even seen fintech companies acquiring other fintech companies – PayPal recently acquired Paidly for $2.7 billion – which demonstrates the ongoing maturity of the space. With growing competition and high customer acquisition costs, mature fintech players (Block, Klarna, Stripe) are focusing on selling new services to widen their appeal and drive revenue. By acquiring other fintech companies themselves, and gradually offering more services, they are on the path of becoming Super-Apps - platforms that provide seamless access to a comprehensive range of tools and services that can accommodate everything a customer needs, without having to leave their ecosystem. Fintech platforms are also advancing their all-in-one ambitions by embedding third-party services that lie beyond their core offering - solutions for taxes, accounting, commerce, crypto, and more.
API as a Service has made it easier than ever before for platforms to integrate new services. The Super-App concept isn’t just being embraced exclusively by financial players, but also by non-financial companies that are keen to better serve customers within their ecosystem - which is where we will likely see major acquisition movement or deep partnerships.
Instead of educating customers to download a new service or change their habits, we will see the financial services industry continue making its products available where users are already - such as on social media and e-commerce platforms.
It’s clear that fintech-led innovations may very well drive another year of unprecedented growth while delivering a diverse set of efficiency gains across verticals, from NFTs to global supply chains and beyond. In parallel, the Super-App and embedded finance trends will continue to redefine the fintech playground, powering a shift in how financial incumbents, fintech startups, and non-financial players approach customer acquisition and retention.
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