EXCLUSIVE: 6 Fintech trends for 2022

2021 was a pivotal year for the fintech industry and with the world still feeling the effects of the COVID-19 pandemic, consumers’ access to finance anywhere and at any time is as essential as ever.

It was also the year that fintech became mainstream and open banking provider Plaid, in their ‘The Fintech Effect’ annual report, discovered that as of 2021 fintech has now reached mass adoption with 88% of Americans and 86% of Britons using at least one fintech app in the last year. This means that, in terms of consumer consumption, fintech apps now have the same consumer usage share as social media (78%) and video streaming subscriptions (72%).

Mastercard also found that since the initial COVID-19 lockdown in March 2020, contactless payments are showing their staying power and effectiveness as in the first quarter of 2021 alone, 1 billion more contactless transactions took place compared to the same period in 2020.

Now to the crystal ball moment when we reveal what topics and trends will be key to the fintech industry in 2022. The race to innovate is on!

Cross Border Payments

Cross-border payments are rarely mentioned without COVID-19 in the same sentence due to the rise and rise of e-commerce and other global transactions and its unsurprising for us to say that cross-border payments will be a key fintech trend in 2022.

While the pandemic has certainly accelerated the use of cross-border payments, The Bank of England predicts that by 2027 the total value of cross-border payments will reach a total of US$250 trillion equating to a US$100 trillion rise in just 10 years; with B2B payments taking the largest share.

Furthermore, based on a study by Accenture, the total global cross-border payments value has risen rapidly from $1.95 trillion U.S dollars in 2016 to $3.56 trillion U.S. dollars in 2022 – an increase of 82.56% in only six years.

Work on the multi-year, global cross-border payments programme by the G20 in support of faster, cheaper and more transparent cross-border payments got under way in 2020-2021. The work in the last two years had the primary focus on laying the foundations and targets for future actions in the Roadmap, however in 2022 these targets will be made fully operational. The FSB, who published the first consolidated ‘G20 Roadmap for Enhancing Cross-Border Payments’ report in October 2021, will be reporting on the progress of the project throughout the year.

Banks on the Blockchain

The Blockchain isn’t just about Bitcoin as it is predicted that legacy banks will invest heavily in Blockchain and accelerate their end-to-end digital transformation in 2022 to compete and ultimately survive in a competitive and increasingly unpredictable new normal. The adoption of this technology for large financial institutions is in the early stages, the result of the adoption of decentralised finance products is that of faster transactions, the increased use of biometric digital identity authentication; the ability to process transactions 24/7 without being interrupted by banking hours which enables consumers to carry out seamless transactions anywhere and at any time.

According to Deloitte’s 2021 Global Blockchain Survey, 76% of executives they surveyed globally “believe digital assets will serve as a strong alternative to, or outright replacement for, fiat currencies in the next 5–10 years.”

Fintech takes the payroll

Fintech has traditionally been focused upon payment from the consumer, but the payroll infrastructure battle is ready to commence. For the majority of businesses both large and small, employee salaries account for most of a companies monthly cost.

While the open banking war continues to be fought, slowly we are watching Fintechs take over payroll as it moves to digitise every incumbent part of an organisation’s process. Although payroll fintech certainly isn’t anything new due to salaries being paid a day in advance being introduced to the UK market by Monzo in 2019 and in 2021 Revolut launched ‘Payday’ an earned wage product, recent advancements in cryptocurrency adoption means that organisations are in the early stages of offering digital currencies as full or partial salary payments

The Race to Net Zero

No prediction piece would be complete without a mention of Environmental, Social and Governance (ESG) and 2021 saw numerous fintechs come together with larger organisations for the greater good. Rolled out left, right and centre solutions and products designed to track your carbon footprint with each transaction as well as tree-planting initiatives and financial institutions issuing recyclable debit cards. This comes as 94% of Gen Z and 84% of Milennial users, who are the most digitally native, expect companies to address pressing social and environmental issues as a matter of urgency; and as a result of this the number of sustainable and inclusive financial products is set to rocket for fintechs in 2022.

Buy Now, Pay Later

It goes without saying that Buy Now, Pay Later will continue to be a big trend for fintech in 2022 and will continue to expand rapidly in the industry. The greatest appeal for the BNPL market is the Gen Z and Milennials demographic, who make up 75% of total BNPL users in the US, and as competition hots up in the market Forrester predicts there could be a chance of a large, traditional bank acquiring a smaller BNPL organisation to offer their customers flexible payment options.

Collaboration, not competition

Another fintech trend in 2022 from the previous year is the concept of key partnerships and collaborations within open banking. As the industry diversifies and broadens even further, the need for taking advantage of new opportunities becomes more apparent to serve those who are underserved by traditional finance. Since the pandemic began, the mindset towards open banking with more traditional financial institutions is changing too, due to the opportunities that these can generate for fintechs in 2022.

As with all predictions for the year ahead and the rapid-changing nature of the fintech industry, everything discussed above is of course just the tip of the iceberg of what could be on the cards in terms of fintech trends in 2022. We can say for certain, however, that continuing on 2021’s progress, building and maintaining close alliances with fintechs, talent or building cutting-edge technologies to serve new demographics and emerging sectors is the key – the future is looking bright for fintech.