5 Leading FinTech Trends to Watch in 2022
FinTech is booming. What’s next? We see 5 core trends driving that change as we move into 2022. With a special focus on LatAm FinTech market opportunities.
The last two years, especially with the ongoing pandemic, have been dominated by the challenges of digital transformation. In this framework, fintech companies have seen a boom. For example, in the US, 59% of Americans use more fintech apps now than they did prior to the Covid-19 outbreak. Today consumers are asking for new ways to access and provide financial services, they are driving a change on an unprecedented scale because of new technologies and social trends. With all these transformations happening, Ishin.co - a Japan-based analysis company - and Hundsun Tech - a China-based finance software provider - in their latest report highlighted 5 finch trends that will shape the fintech sector in 2022.
1. Autonomous finance
2022 will be the year of Machine Learning (ML) applications. ML, by using its algorithms, can drive effectiveness and provide efficiencies, including time-saving opportunities. It analyzes patterns in real-time, enabling quick decisioning. Many financial services applications already use AI/ML today for everything from fraud detection, lending approvals, and AML screening to risk monitoring and investment predictions.
Thus, without any ‘human touch’, Autonomous Finance uses automation to provide personalized, optimized experiences tailored to specific financial processes. Machine Learning is constantly evolving, and FinTech will continue to be one of the leading industries to benefit from the power of AI/ML where Autonomous financing apps will guide consumers on where to make investments and manage risks.
2. Embedded finance
Embedded finance differs from Banking as a Service (BaaS) because it is offered through consumer-facing businesses which offer the access to financial services with their primary business. As more people grow comfortable with digital services, brands are expected to weave financial services into their business models. “A lot of companies do FX payments as a service,” said Ben Robinson, co-founder of Aperture. And it was right. Tesla, for example, has developed an in-house insurance programme offering customised coverage and a convenient monthly payments service to its customers. E-commerce platform Shopify has partnered with payments provider Stripe to allow consumers to open bank accounts directly on its platform, letting consumers enjoy a fully in-app experience for their shopping.
3. Expand contactless payment
As a result of the COVID-19 outbreak, consumers are increasingly shifting from cash to electronic mode of payments, especially contactless payments. According to data, in the pre-pandemic era, chip and pin was still the most popular way to pay, accounting for 37% of all transactions in the UK, while contactless only accounted for 17% of all payments. Japan, for example, has been traditionally a cash-based country, with cash accounting for 73.3% of the overall payment volume in 2019. However, the fear to catch Covid-19 through cash handling, consumers asking for smarter payment solutions.
Last year, popular retailer Seven-Eleven Japan made contactless card acceptance available at all its stores in the country. In July 2020, Sumitomo Mitsui Card introduced a faster payment cycle for its merchants, allowing them to receive the proceeds from their sales made via credit cards within just five days compared to a month or more in the past. Thus, analysts expected this trend to continue in the future. There are several types to look out for in the months ahead, including QR code, peer-to-peer, and NFC payments.
Experts say the year 2022 might be dominated by blockchain technology. By the way, blockchain is not just about cryptocurrencies. It is basically about decentralization in finance. Decentralised finance (DeFi) and non-fungible tokens (NFTs) are only two examples of how blockchain might change the world of finance and experts agree when arguing that the potential of blockchain technology has not even been remotely touched yet. Some new groundbreaking developments could emerge within this field over the next few years. According to a Cision PR Newswire report, the size of the global blockchain market is forecasted to increase from $3 billion in 2020 to $39.7 billion by 2025.
5. Open Banking
Open banking has the potential to reshape the entire financial sector, but, according to experts, it still has a long way to go. With the aim to make open banking a success, traditional banks and innovative fintechs need to embrace the technology and future use cases to support increased customer expectations. In the year ahead, digital-only banks have recently increased in popularity and that trend is not stopping soon. This is also partly due to the trend towards a cashless society. Open Banking has pledged to deliver more competitive financial services that are tailored to the individual or business, connecting banks, third parties and technology providers. It shares customer spending data and habits, with consent, to authorised providers.
Let’s go to Latin America
Samba - or salsa or tango - and digital finance? Yes it is. Latin America is moving towards an interesting digital revolution. know, is not a finch trend, but, we are talking about the market size. Latin America is where to invest in the upcoming year. Why? Because Latin America’s fintech scene is booming. The region is today is home to a population of roughly 450 million mobile phone users, which is expected to reach 484 million by 2025.
Countries such Brazil or Mexico are leading the fintech sector where users, rather than moving from cash to credit cards and electronic payments over the span of several decades, will typically go straight from cash to digital wallets, as many of them will get a smartphone before they even open a bank account. According to Statista, Latin America hosted more than 2,300 of these initiatives, mostly working in segments such as payment and remittances, and lending.
Since 2016, US-based venture capital firms have invested more than $7 billion into Latin American financial services companies Annual investment dollars have also grown since 2018, rising to $2 billion in the pandemic year. Japanese and Chinese tech giants such as SoftBank or Tencent are making their moves here too.