OPINION

Fintech: trends, expectations and what’s next

Explore the dynamic world of fintech with insights from our expert, as we navigate through emerging trends, rising expectations, and an attempt to predict the future.

Just like many other industries, fintech is cyclical, experiencing regular ups and downs. Recent news outlets have been inundated with grim forecasts, citing alarmingly decreased volumes of fintech investments, and making bold statements about the demise of fintech.

However, this year we might witness several interesting IPOs (like Klarna or Stripe, as rumors suggest); Monzo has recently raised a significant round led by Alphabet (USD 450M) and has become the 7th largest UK bank, while Nubank boasts close to 100M customers (primarily in Brasil), posting a $1 billion net profit in 2023.

Additionally, Revolut has just reached 40 million customers across almost as many countries. Forbes reported that 47% of new checking accounts are opened at a digital bank or fintech company. Smaller, yet more geographically focused fintechs in Asia, the US and the EU are also busy innovating and attracting new clients. Finally, the crypto scene is resurging after a long winter, dispelling any premature rumours about the death of fintech.

On the trends side, the digital euro is preparing for its EU launch, presenting an intriguing playing field for fintechs. Banking-as-a-service offered by fintech players of various sizes will continue to complement traditional banks’ offerings, as traditional banks are often too slow to react to market needs for embedded finance.

Buy Now, Pay Later (BNPL), despite initial doubts, seems to be becoming profitable (although BNPL itself is indeed a hype – kids, in the past the similar product was called credit card).

On the AI front, large language and similar AI models have yet to reveal their full potential in fintech, leaving us to question whether they will live up to the hype – in other words, LLMs may not suited to the use cases they advertise.

We shouldn’t underestimate a silent trend that’s slowly getting traction – Account-to-Account (A2A) payments. Conceived as a viable solution to challenge the VISA/Mastercard duopoly (and their accompanying complex fee structure), A2A payments are becoming increasingly appealing to merchants (e.g. in Singapore, where many merchants are swiftly adopting local QR-code-based A2A scheme that is becoming interoperable with A2A schemes and national wallets of neighbouring Southeast Asian countries). This trend is closely linked to the rise of financial super-apps (digital wallets) like Wechat, Alipay or (again) Revolut. Initially tied to VISA/Mastercard payment schemes, these apps aim to enable A2A payments to expedite transactions, avoid fees and reduce customer app friction. Incumbents are indeed fighting back – for instance, VISA was paying back 29% of its gross revenue through client incentives.

illustration of fintech genius making predictions

What lies ahead

As for the future – it’s always risky to try to predict it, crystal balls these days are hard to find, but at least I’ll try to share a few insights, risking the laughter and mocking in a few years from now.

Crypto hype will subside, most coins (if not a precious few) will be forgotten, NFTs even more (en-eff-WHAT? Unless turned into loyalty program 2.0), and the only crypto thingie that will survive (besides the technology itself and the BTC that will become a digital equivalent of gold: not of much use really, but its shininess will appeal to some people who will keep storing it in their mattresses) will be CBDC in some form, as a stablecoin or as a digital euro, dollar or yen.
Tokenization of real-world assets will become more common, so the passwords, IDs, passports, stocks, bonds, securities, collaterals…will become tokenized. Banking as we know it will become less “in-your-face”, it will get embedded and more frictionless (especially with the rise of Open banking) to the various digital services we will keep consuming.
Big neobanks and fintechs (like Revolut, SoFI, Adyen, Klarna, Nubank, Monzo…) will become even more powerful, some will become proper banks (which will ultimately slow them down), and the younger generation will still be hating the traditional banks.
Digital wallets and superapps will continue to grow, because of the ubiquity of smartphones even in the least developed markets in Africa and Asia – and the financial inclusion should be a basic human right.
Apple will officially become a bank.
However, traditional banks and lenders will not disappear, but their market share will significantly erode.
AI will replace developers and customer service.

In conclusion, fintech (and insurtech, as its subset) as we know it today remains a dynamic part of the startup ecosystem. While fintech is undeniably complex, there are numerous niches to explore, potentially enabling the provision of services much faster, cheaper, and more efficiently than traditional banks or insurance providers.

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