2021 was the year of recovery and opportunity for many, following months of disruption caused by the pandemic. But whilst many industries have struggled to bounce back from the disruption, many Fintechs have managed to thrive in a somewhat hostile economic climate as a result of innovation, digital disruption, lucrative funding and a vision for how products can change the lives of consumers whilst helping businesses grow.
From a personal perspective, it’s been wonderful to see that as an industry we have shown our continued resilience and ability to pivot to customer needs which has seen the likes of open banking and contactless payments boom in the wake of the pandemic. The agility and disruptive mindset of both established players and emerging disruptors meant that competition has only become fiercer, making everyone work harder and smarter which ultimately pushes the boundaries of what is possible.
Its therefore no surprise that UK FinTech funding more than doubled to $11.4 billion in H1 of 2021 alone, indicating investor confidence in the industry. This will pave way for further opportunities to innovate and disrupt financial services for the better.
2021 for IFX was one of the best years to date since our inception in 2015. We’ve expanded our capabilities, worked with new partners and bolstered our team with great success. All of which we aim to amplify even further this coming year.
As we look forward into 2022 it’s important to consider the new emerging trends and movements set to shake up the industry and how as a business we can play our part in what is set to be another trailblazing year.
1. Embracing Fintech Partnerships
In 2022 we’ll see greater collaborations between services providers across a host of industries. Being a collaborator, rather than a competitor, is key to being successful in this sector as we all look to identify a means of fitting into a modular ecosystem. As a starting point, every business has to recognise that success comes from leveraging the strengths of others to amplify their own. Businesses must admit that they can’t be best at everything and counter that by creating strategic partnerships that will reign supreme. Ultimately, collaborating with and embracing other specialists within the sector allows fintechs to expand their capabilities and set themselves apart from competitors. As the industry grows, to be the best in the field, means not offering the cheapest cost or the tightest margin, but integrating value-add propositions that make the product more appealing to its customer base. For instance, this year IFX have successfully partnered with Volt connecting IFX’s virtual IBANs with Volt Connect allowing UK and EU-based merchants to realise the full potential of open payments.
2. Changing Consumer Payment Habits via Open Banking
Open Banking has been a hot topic in 2021 and we know the work will continue in the space this year. Whilst the majority of the work in the last year around Open Banking was rather conceptual, it paved the way for some innovative ideas and an enhanced customer experience. Without doubt, there are many benefits of Open Banking, settlement is faster, and rails are cheaper and arguably safer for customers but now it faces the challenge of encouraging customer adoption by competing with the convenient and simple UX of card payments afforded by smart phones and computers. As such, I expect that changing the mould of how people make payments will dominate the majority of the conversation and work we do as an industry in the coming year.
3. Elevating Regulation
At IFX we always aim to set industry best practises through our regulatory expertise, and ultimately break the mould of malpractice that has blemished the FX industry historically. Whilst regulation has definitely taken centre stage, and took over most senior level discussions, I anticipate a greater focus on PSPs and EMIs with both safeguarding and operational resilience being tested to ensure customer funds are adequately protected. Being stringent in terms of regulation is a way for payments and fintech companies to separate themselves from the pack. The FCA is also sure to take further regulatory action as they start to clear the covid backlogs, which in my opinion will be a welcome move to help combat some of the issues we have seen this year. Firms need to be sophisticated when it comes to making sure they’re compliant with regulations. Safeguarding client money correctly is a challenge which requires consistent attention so we’re likely to see this being an obligation that firms invest in significantly.
4. Introduction of the UK Central Bank Digital Currency
This is likely to be the door for many banks to embrace crypto-related technology. Blockchain infrastructure is an incredibly powerful tool that can revolutionise the industry through a host of features not limited to instant global settlement and transaction monitoring capabilities. The hesitancy to embrace this infrastructure, alongside a number of crypto assets, appears to come from the dark web usage of old, where assets were used for illicit purposes and money laundering; but then again, so is cash. Ultimately, we shouldn’t be afraid of the capabilities that this revolutionary development can carry due to the negative connotations. Instead the focus in 2022 should be on education and equipping our industry on understanding the power of the blockchain so that everyone can understand the good that it can do, the risks it carries and how to mitigate those.
So What Now?
2021 saw great innovative strides taken in the payments and fintech industry, but as we look ahead into 2022 it doesn’t look as if this cadence is likely to plateau. The industry will continue to adapt and grow to cater to the changes in consumer and business habits, and we’ll see Partnerships, Open Banking, Regulation and Digital Currency as key strategic milestones across the board. At IFX, we are constantly striving to be the best in our fields and through partnering with other brands, tightening our regulation processes, and constantly educating ourselves and others on developments in the industry, we look forward to experiencing even greater growth in 2022 and beyond.