7 Fintech Predictions for 2021
The pandemic clearly triggered the acceleration of several fintech trends, making 2020 a busy year for innovation. So, where will 2021 take us? Payveris sits in a unique position within the financial services ecosystem, with direct optics into consumer money movement activity on the MoveMoney Platform, enabling us to identify consumer payment trends and fintech solutions to match them.
More and more, financial institutions are ditching legacy product-based business models for the platform-based solution, thereby enabling them to consolidate siloed fintech products into a common infrastructure that’s less costly to maintain and less vulnerable to fraud. Here are a few of our top predictions for trends that we’ll see accelerate further this year.
Fintech Prediction 1.
Partnerships to Address Cyber Threats to Digital Wallets
Digital banking tools in 2021 will grow even more sophisticated to address the surge of fraudulent activity that occurred last year in peer-to-peer payment apps. Consumers have come to expect and rely on the convenience of fast digital payment tools, but if scams on the non-bank P2P services (such as Sqaure’s Cash App, or PayPal’s Venmo) persist, we could see consumers shift to using traditional bank P2P services because of the historically stronger fraud mitigation systems that FIs are known for. Coupled with the more local, personalized approach to customer support systems that FIs are also known to offer, we expect non-bank P2P services to begin offering improved customer support systems to boost their retention efforts.
We can also expect more collaboration between fintechs and traditional FIs for this reason, with likely new developments in P2P payment apps that provide more legal protections, and development of more robust authentication for new users, and integrated customer service chat rooms.
Fintech Prediction 2.
Record year for Fintech IPOs
The market has bid up pure play fintech valuations more than 20% in the past year, due in large part to the digitization catalyst of social distancing requirement during the ongoing pandemic. Accordingly, 2021 may prove to be a record year for fintech IPOs. As consumers have experienced the speed, simplicity and cost benefits of the digitization of everyday tasks such as electronic billpay and other traditional banking activities, ongoing usage of these more efficient & secure processes will be lasting.
We have seen this demand for additional fintech innovations first hand as Payveris serves approximately 300 banks and credit unions. While demand for additional innovations within our MoveMoney Platform was strong even at the end of 2019, our sales more than doubled in 2020 as financial institutions signed deals for new Payveris products being introduced in 2021 and 2022, such as our indirect loan payments solution.
Fintech Prediction 3.
Less Emphasis on Credit Scores
We may see more P2P leaders break from convention when it comes to assessing credit-worthiness and granting approvals. There’s been an ongoing debate on how relevant the FICO scoring system is today when so much real-time data is available to lenders. In 2021, we may see a new model emerge that leverages digital histories (such as consumer’s paychecks, electronic bill payments, etc.) to grant credit.
Fintech Prediction 4.
UX-Driven Customer Retention Strategies
There’s a surplus of financial services offerings to consumers today. With so many choices, delivering a seamless user experience and journey through the digital banking channels (online account opening, onboarding, lending, digital banking, digital payments and money movement) will make or break new customer account acquisition and retention levels. Neobanks have been so disruptive, and partly because they prioritized delivering a seamless low friction UX before expanding financial services offerings. On the other hand, most traditional financial institutions started out with and still operate a set of decoupled financial services via a disconnected and disparate UX. Now that it’s changing, we predict in 2021, that we’ll see a seamless low friction user journey as a major lever in customer acquisition and retention efforts. Based on the trends, it’s clear that banks and credit unions must adapt or they will be left behind.
Fintech Prediction 5.
Ramping up Capital Expense Projects
Financial institutions are tightening belts to weather the storm through Covid-19’s impact on consumer and small business’ financial capacity as result of the pandemic. FIs will look to reduce operating expenses to increase efficiency ratios. They must prepare to compete against the top tier FIs, who have the reserves to operate during this time, and the Neobanks, who don’t have all of the overhead to contend with.
So, an increased focus on capital expense projects and technologies that drive operational efficiencies and operational expense improvements will be imperative to doing business in the coming year.
Fintech Prediction 6.
Increased Demand for Financial Health Tools
In 2021, we expect to see continued demand for personal and small business finance tools that will help people better manage their finances, budgets and cash flow. There will be a heightened awareness of finhealth as a topic and this is an area that fintechs can deliver on. Leveraging big data, fintechs will create tools to help people manage their finances as they navigate the financial storm that many are in today, and to prepare for the future, including planning for unexpected events that could cause financial stress.
Fintech Prediction 7.
More Fintech Partnerships to Expand Consumer Services
Beyond the traditional products and services that fintechs already provide to financial institutions, we’re seeing new collaborations between fintechs in the space, delivering solutions which will enable banks and even CUs to provide new innovations to their customers, such as robo advisors, discount clubs, plus bill and subscription management technology. Due to the growing consumer demand for faster, more intuitive digital money movement experiences, FIs must continue to invest in fintech solutions to maintain necessary growth and retention of their customer base.