Fintech is poised for a big year in 2022 – here are three reasons why

It is fair to say that today, fintech is firmly entrenched in society and in our economy. I like to say she “crossed the chasm”: as founders, we spent the early days explaining to people what fintech was, what our product was, and why it was worth listening to.

This chasm in the understanding of fintechs, other companies and the public was crossed some time ago. But that doesn’t mean the industry is done evolving. Last year we saw extraordinary levels of investment in UK fintech companies breaking records. Here are three key trends that indicate 2022 will be another big year for fintech.

Integrated finance will be everywhere

2022 will be a big year for integrated finance, a term used to describe the act of companies (often non-financial) integrating financial products or services into their existing business. A bicycle retailer, for example, may consider bicycle sales as its main source of income, but it can supplement this by also offering bicycle insurance products.

But why will 2022 be such an important year? Two converging trends point in this direction.

First, we’ve seen fintech companies increasingly focus on developing services made available through APIs. An API is code that allows two applications to talk to each other and, in practice, this allows businesses to easily integrate features such as payments, credit and insurance into existing applications or services that their customers are already using. like paying bills through accounting software. , or trade stocks in your banking app.

The second is the unprecedented digitalization that we have seen over the past two years. This means that there are now many other companies with a solid digital platform on which they can integrate financial products or services.

If you also factor in the need for businesses to identify new sources of revenue in the wake of economic disruption, it’s easy to see why integrated finance is so attractive.

“The great unbundling” is reversed

Over the past few years, companies from fintech sub-sectors like insurtech and wealthtech have burst into what might be called the great unbundling – niche providers offering a single, specialized service in insurance or wealth management, and not doing much else.

More and more, we see this logic turned upside down. Indeed, the great unbundling has become the great regrouping. Today, these same specialists are beginning to expand their offerings, as legacy technologies have won over customers with a core proposition that now provides other banking services.

Some forward-thinking industry commentators believe that the future of financial services rests with the companies best able to offer a selection of very high-quality services and APIs and deliver them to customers – not necessarily companies that develop proprietary proposals.

This means that many businesses that were once happy to sit alongside other niche vendors are now vying for the same customers. The winner will play an important role in shaping the future of the fintech industry.

Real-world DeFi apps emerge from crypto-mania

Few will be surprised if crypto continues to be red hot this year, despite the inevitable continued volatility. Perhaps the most exciting aspect of this will be businesses, governments, and other groups introducing more practical use cases for crypto and other forms of decentralized finance, or DeFi.

We have already seen growing support for Bitcoin as legal tender in Latin America after it was adopted by El Salvador, a move derided by some but ultimately carried out as a game to combat import-induced domestic price swings.

We have also seen the UK government continue to make noise around the development of a UK CBDC – a “Britcoin”. A relatively unproven concept, CBDCs are nonetheless a tantalizing prospect for many: central banks could get a razor-sharp monetary policy tool, quite unlike anything they have today, with the potential to charge different interest rates in different parts of the economy.

Of course, cryptocurrency is just one application of DeFi. By removing intermediaries and allowing finance to become an action taken directly between two individuals, or even sole proprietorships, DeFi could have massive implications for banks and other financial institutions, while potentially revolutionizing everything from music royalties to law. contracts.

When fintech is doing well, so is society

Looking back on the past 24 months, I feel a bit cheeky making any bold predictions for the next 12 – you never know what might happen next.

But if the past has taught us anything, it’s that the fintech sector has managed to impose itself and even rise to the challenges. This year we are going to have another big year. And that’s something we should all celebrate. When the fintech industry does well – whether it’s a company that helps money flow more easily around the world or a company that helps prevent financial crime – society benefits. often too.

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