2021 has been a great year so far for fintech companies and consumers in the payments industry in Europe. SMEs and customers are enjoying the great opportunities that have taken place in financial services as a result of the post-pandemic transformation.
Technology that people thought would take decades to be adopted en masse suddenly became the new normal in the tech industry.
Many people now live in a contactless society where social distancing is prevalent, which has forced many enterprises and startups to move online.
This will continue as the rate of online payments, and business transactions keep increasing. Customers will continue to expect cashless payment methods to be offered by businesses they transact with.
Fintech is expected to play a significant role in the post-pandemic outbreak in finance, meaning that fintech organizations will need to adapt to the new normal to play an essential role in the post-pandemic transformation.
Fintech has shaped aspects of finance in investments, financial services, insurance, financial planning, and more. So what does the future of fintech in Europe look like in 2022 and beyond?
Embracing New Ways To Pay
The idea of online business transactions and how individuals perceive the act of payment has been rapidly changing over the past few years. Sometimes this has gone unnoticed due to the seamless integration of new payment technology such as buying things on the internet with your mobile device.
Companies such as Joom have led the charge for the European online marketplace. Joom is the fastest-growing online shopping application in Europe that connects buyers with sellers, bloggers, and influencers to offer a personalised shopping experience and reliable logistics.
Also, another example is Paynetics. Paynetics is an e-money institution that provides end-to-end payment services across the European Union. Paynetics is a regulated fintech that aims to close the bridge between startups and established businesses in the financial services industry.
Paynetics is a principal member of VISA, SEPA, and Mastercard and can serve all payment needs to all its customers, including account management and bank transfers, e-wallet solutions, and card acceptance and issuance.
However, fintech is driving solutions rapidly in technology that regulators are struggling to keep up. As innovative startups simplify and streamline financial services, increased competition leads the old guard of industry incumbents to tighten up their defenses.
Thus, fintech organizations are rapidly improving in finance.
New Challenges Create New Opportunities For Innovation
Different challenges springing up from pandemic outbreaks like a shift to remote working are driving the fintech industry, sharing understanding and resources for innovations.
However, the COVID-19 challenges have created more opportunities for fintech organizations to help startup companies and SMEs navigate this new landscape, which includes assisting in the recovery of many startup companies and businesses who struggled through the pandemic outbreak.
While the fintech industry is rapidly improving with new technologies, SaaS startups should not be deterred from entering an increasingly competitive arena.
With robust contingency plans, such as becoming a regulated entity in a European country, creating a solid and knowledgeable network around your business, and comprehensive legal advice, startup founders will be in a stable position to develop new businesses and succeed, regardless of the future holds.
Fintech Trends to Watch In 2022 and Beyond
In this digital age, the fintech sector can look forward to several technologies to rule financial services in 2021 and even beyond. The following are the top fintech trends you should expect in the future of fintech in Europe:
Trend #1: Facts and Figures
Before discussing the new technologies, let’s look at some facts and figures by Dealroom research. The research shows that before the first half of 2021, European fintech companies accumulated over 10 billion Euros in investments, settling a new historical record in financial services.
However, according to the report, mobile finance apps were downloaded more than 4.6B times worldwide, an increase of 15% from 2019.
Also, users spent more than 15 hours on apps, a 40% increase in 2020. This shows that the fintech sector directly influences the way individuals interact with money. However, the development of fintech services made a massive difference in the banking sector, insurance, capital management, and consumer service.
Traditional banks must compete with new and startup fintech companies in their right,
joining the reliability of financial institutions with startups’ flexibility.
Trend #2: Financial Inclusion As a Necessary Part of the Sector
COVID-19 affected almost every aspect of society, but individuals from poor economic backgrounds were the most affected. In 2021, some significant innovations led the way for financial inclusion to help those most affected.
For example, in Germany, the company auxmoney raised €150m in funding in September 2020 – the fourth largest funding round that year. Auxmoney was developed as a peer-to-peer lending marketplace, making all-digital loans accessible to more people
This initiative was particularly important for people across Europe that were impacted by the effects of Covid-19. Since its founding, the company has approved more than 250,000 loan requests equating to the tune of more than €700 million. With a unique risk model and extensive knowledge and experience in underwriting, the company has the capability to offer more loans to more people.
Trend #3: Customer-centricity and ecosystems
Customer-centricity is a top technological trend used to describe the future of fintech now and beyond. These days, none other than consumers influence financial products and services development like big organizations.
However, along with new technology trends, fintech companies create departments that deal with demand research and customer experience design.
Also, financial institutions create ecosystems to meet their customer needs, which are now extended beyond economic sectors. Traditional banks must compete with new and startup fintech companies in their own right, joining the reliability of financial institutions with startups’’ flexibility.
Thus, as the world moves towards complicated systems, so the bridges between the industries become thinner. The fact is that it’s not just the fintech sector that is advancing far beyond. For instance, retail is actively expanding its industry by developing its financial products.
Trend #4: Newer collaborations
The future of fintech in Europe will experience a rise in collaborative efforts to ensure a standard competitive landscape while emphasizing innovations. The fintech industry is going to expand as new companies enter the landscape through collaborations.
Insurance and asset management companies and banks are looking to collaborate with fintech companies to make digitalization faster and easier.
Trend #5: Traditional banks vs. Neobanks
Traditional financial services providers are trying to adapt to new technological trends in the financial services industry. Meanwhile, fintech startups’ market share is rapidly improving. Traditional financial service providers can adjust to the new reality faster, and their financial products are easier to integrate and customize to different business goals and objectives.
This is why it is easier for young players to get more attention from capital investors. You can see different collaborations between traditional banks and startups, and however, fintech companies are gaining more access to leverage in the market.
A few years ago, there was speculation that traditional banks would fall into obscurity, and neobanks would take over in the marketplace with their effective and flexible business models. But traditional banks are adapting well to new technologies.
They have added more options to their apps, built up collaborations with other market participants, and provided new services to bank users in cooperation with them.
Trend #6: More Online Transactions
Online transactions are not new, but the pandemic outbreak has drastically accelerated growth in this market. This is true when talking about mobile money providers like Revolut, Belfius, KBC, among others.
During the COVID-19 pandemic, many took up amateur investing, leading to an increase in Internet Information Services (IIS) and brokerage accounts opened through banks. There was also an increase in consumer loans, letters of credit issued online, and more.
Blockchain technology solutions would be more beneficial for money transfer than using traditional financial services providers.
Trend #7: Firms Move into Banking
Technology firms such as Ayden, ASML, Amadeus, Infineon, and others have been offering payment services for years, and now many have begun to accelerate their financial services movement. The primary purpose is decreasing financial brand loyalty due to open banking, which has loosened the banks’ rope on their consumer data.
Most significantly, banks have limited access to retain their users compared to what they are already used to. At the same time, tech companies have always had more success in building in a closed ecosystem, and they are now, however, looking to bring finance under their banner.
Trend #8: Blockchain Will Disrupt International Money Transfer
Due to the slow money transfer and high charges, traditional money transfer solutions have been problematic in business-to-business (B2B) and peer-to-peer (P2P) areas.
Traditionally, companies offering money transfers will keep their copy of a given transaction, making it more stringent. This shows the lack of standardization between the two parties and correspondent banks which means that transaction costs are high, and business periods are longer.
But thanks to blockchain technology, these issues can be solved by providing faster transaction periods, transparency, low charges, changing money transfer equations, and other technological innovations.
Blockchain technology solutions would be more beneficial for money transfer than using traditional financial services providers. Money transfer operators will be able to use blockchain solutions to enhance services and retain their shares. Thus, consumers will benefit from improved settlement times and easier processes.
Trend #9: Improved Artificial Intelligence and Machine Learning
Machine learning and artificial intelligence will improve beyond human reasoning in the years to come. Artificial intelligence and machine learning are used in detecting patterns, perform analysis, and find solutions to particular problems.
According to the World Economic Forum, artificial intelligence will be of strategic significance to the fintech and banking industry over the coming years. There are plans to integrate artificial intelligence across other fields such as customer service, risk management, process automation, and other significant functions.
Trend #10: Cybersecurity Will Be An Utmost Priority
Cybersecurity has always been banks’ top priority due to their enormous cash stores and clients’ data, making them the first target for internet hackers. The threat of financial losses, regulatory consequences, reputational damage, and clients’ data has spurred banks to innovate and accelerate the cybersecurity field.
Cybersecurity has been of great benefit to the financial sector. Cybersecurity has increasingly become necessary to banks since the pillar of banking systems lies in nurturing trust and credibility. However, the economy and banks now use biometrics, restricted access, and intruder’s rapid isolation to protect digital platforms.
Trend #11: Cryptocurrency Acceptance
Another popular technology expected to take hold in the future is the global acceptance of digital currency. The European bank is working on innovation towards the designing of a digital currency. Public opinion regarding the innovation is being planned, and very soon, individuals will see how Europe will begin accepting digital currencies and even developing digital currencies of their own.
Trend #12: A Collaboration Between Fintech, Regtech, and Wealth Tech
As technology advances, fintech will see the evolution of regulatory technology (regtech) and wealth management technology (wealth tech), meaning that financial regulators and technology companies will partner to facilitate innovations. SaaS startups, SMEs, companies, and individuals should expect these three sectors to work as a solid pillar for bringing about progressive change in the industry collaboratively in the future.
As the fintech sector keeps rapidly developing, disruption in financial services will become inevitable. This is the best time for traditional financial institutions to sit up and work on their services to meet clients’ expectations by partnering with fintech companies in Europe since they are competent and trusted partners.
European SMEs are focused on developing finance software to help financial institutions and other sectors improve their digital journey using business intelligence, data sciences, machine learning, artificial intelligence, and analytics.
About Kromnix: Based in Paris, Kromnix, a One-Stop Platform of Tech Providers, is reinventing the way Tech Providers communicate on their innovative solutions. Kromnix enhances their visibility on the market, and promote their unique technologies in Europe. For more info: https://kromnix.com.