Fintech is financial institutions using technology to be more accessible to the general public. This includes online banks, cryptocurrency and simplifying the process of buying stocks and shares with apps, among many other things.
Three-quarters of companies will increase their spending on fintech, according to a report by PwC, and over 90% are confident of seeing their fintech revenue grow.
These are the top fintech developments and growing trends for 2021:
Fintech like Revolut, Venmo and Zelle have become increasingly more popular ways to pay instead of cash. In certain markets and some developed countries, these electronic wallets (or eWallets) are now the norm. On London buses, for instance, it’s no longer possible to pay with coins and notes – you need a credit card, Oyster card or one of these fintech apps.
Where these fintech companies are headed now is towards using QR code payments. QR is short for Quick Response code. Although they have a sketchy history of use, you will almost certainly recognise these types of black and white squares that are used to transfer information.
Example of a QR code
The advantage of using QR code to pay on a fintech app is that it is contactless, yet adaptable enough to be able to pay people without needing their phone number, bank account number, email address or other fiddly information. This means you can use it anywhere from the supermarket to at home to pay for delivery items that you have bought online (particularly useful at a time when we worry about the spread of COVID-19 from handling cash).
We can also lump YNAB in this group. You Need A Budget is a fintech startup providing a budgeting tool. While technically you can’t use it to pay for things, it helps to organise finances online, and can be used to boost digital wallets. Another alternative digital payment method on many eCommerce sites is Buy now, pay later, which integrates digital wallets with loan services.
Learn more about Point of Sale (POS) technology
We’ve all heard of Bitcoin, and have maybe even been a little bit afraid of it. News stories spread fear about how fluctuations of this currency could mean the economy crashes or it creates a bubble, could be dangerous for government security or facilitate crime, but the basic idea is very simple.
Cryptocurrencies are money just like dollars, pounds and yen. You can’t spend them everywhere, but they can be useful for paying for things on the internet, if the vendor is willing to accept them. It’s possible for eCommerce stores to accept Bitcoin and other cryptocurrencies by using apps on their eCommerce platform’s marketplace, like CoinGate on Magento and XCentium on Sitecore.
The difference between blockchain and cryptocurrency is that Bitcoin, Litecoin, Monero and others work the same as currencies and can be used to make payments, but they rely on blockchain technology to work, which provides a secure, untraceable but verifiable way for the money to be moved around.
This blockchain fintech and the new currencies it has given rise to, unlinked from capital controlled at the nation state level, will continue to grow in power and evolve in their uses as they challenge traditional power structures and combat financial corruption.
Digital banks don’t have a physical location, no bank branches or ATMs of their own. They are an alternative to traditional banks in an era when almost everything is done online, and that’s why they’re also known as “challenger banks”.
Most digital banks, like Triodos, Monzo and Starling, just require you to download their app to track your finances, apply for loans, make transfers and more. Upcoming developments for digital banks in the near future include offering business accounts to really rival established banks.
Fintech apps like Acorns and Robinhood are democratising trading stocks and shares by allowing people to buy and sell stocks in real-time on their mobiles. They have little to no minimum spend, and so are perfect to manage a stock portfolio of any size.
Meanwhile, financial advice has also been digitised with the introduction of robo-advising apps like Ellevest and Betterment. These services provide help to people with their online investments, and are helping to do good in the world at the same time – Ellevest’s mission statement is specifically to promote feminist ideals and help women control more of the world’s financial assets.
Technological advances continue to revolutionise the world of insurance, for example by calculating insurance premiums automatically with the aid of computers and by allowing people to compare and buy insurance online. Fintech for insurance even includes installing telematics hardware in cars to monitor how safely (or not) people drive, influencing the car insurance premiums.
Research from McKinsey & Company suggests that most insurtech innovations will come from established insurance companies using tech to empower their business processes, and that insurtech startups will mostly work with existing industry players.
As well as each of these specific areas where fintech will develop in 2021, the whole sector is set to continue to benefit from advances in Artificial Intelligence (AI). Over the next few years, machine learning will make fintech more powerful and more accessible to a greater number of people than ever before.
Customers and individuals will not be the only beneficiaries of fintech. B2B services will also benefit from the technological capabilities of financial instruments, as businesses can get loans and financial services online and on the cloud, and alternative payments change eCommerce.