FinTech Trends Report: Edition 1

Perspectives from Boyden’s FinTech Experts

Lopez: What do you think will be the biggest drivers of growth within fintech? How can companies adapt to stay competitive?

Hernandez (U.S.): The growth of the fintech space will be driven by increased customer demand for digital financial services, regulatory advancements, and technological innovations. Companies should prioritize customer-centricity, enhance cybersecurity measures, foster collaboration with traditional financial institutions, and invest in AI and ML technologies for personalized financial solutions and operational efficiency.

Furthermore, companies will need to innovate, prioritize convenience and user experience, comply with regulations, and build a suite of products for additional revenue streams to stay competitive. They should also prioritize data privacy, offer solutions to small businesses' pain points, integrate effective fraud controls, leverage data for customer trust and loyalty, and explore opportunities for embedded finance.

Landgrebe (Austria): To stay competitive, companies will need to adapt by embracing embedded finance. This approach involves becoming integral partners in various B2C sectors like e-commerce, fitness, healthcare, and mobility. By optimizing communication and procedures, embedded finance can boost low-margin businesses with traditionally high costs, transforming them into profitable ventures. Additionally, embedded finance can address the complex financial transactions associated with mobility solutions, leveraging swift and seamless handling of highly intricate localization and transport data. This evolution towards embedded finance opens up opportunities for fintech to support businesses worth trillions of euros.

Friederich (Germany): Firstly, the rapid expansion of eCommerce presents vast opportunities for fintech companies as more consumers rely on online shopping. Additionally, the increasing number of mobile devices globally fuels the demand for digital financial services, as people seek convenient and accessible ways to manage their finances on the go. The evolution of digital payment methods and systems offers faster, easier, and more cost-effective alternatives to traditional banking processes.

Companies must focus on attracting the best young talents in the fields of technology and finance. Moreover, investing in technological advancements and infrastructure will enable companies to deliver cutting-edge solutions and stay ahead in the rapidly evolving fintech landscape.

Lopez: What are the biggest opportunities for fintech companies?

Soden (U.K.): The UK and Europe have seen unprecedented growth in the fintech market over the last 3 years prompting recent concerns that valuations are too high, however, this space will continue to grow in many different areas fuelled by emerging technologies such as Blockchain, Quantum Computing and Artificial Intelligence.

Mobile payments and open banking are set to see the fastest growth as M&A activity continues to thrive in these areas. Consumers and businesses are embracing the faster, more efficient banking platforms but there are threats that continue to plague the fintech sector.

Fraud and identity theft are still a major concern for the regulators despite the huge investment in cyber security; unless this is addressed consumers may lose confidence and revert to more traditional banking methods.

Friederich (Germany): Fintech companies need to sharpen focus on digitalization, data protection, security control, and compliance systems. As the world becomes increasingly digital, fintechs have the chance to leverage technology to streamline processes, enhance user experiences, and deliver innovative financial solutions. Ensuring robust data protection measures and implementing stringent security controls are crucial for building trust with customers and safeguarding sensitive information. Moreover, compliance with evolving regulations is paramount to operate within legal frameworks and maintain credibility.

Hernandez (U.S.): The opportunities for fintech companies are abundant, particularly in the realms of open banking, blockchain technology, and embedded finance. Open banking facilitates collaboration and data sharing between financial institutions and third-party providers, fostering innovation and improving customer experiences. Blockchain technology offers secure and transparent transactional systems, reducing costs and enabling faster cross-border payments. Embedded finance allows fintechs to seamlessly integrate financial services into non-financial platforms, expanding their reach to a wider customer base.

Additionally, there are opportunities within the payments landscape, providing solutions for small business access to credit, integrating effective fraud controls, building consumer trust and loyalty, generating Al for customer service and product recommendations, introducing vertical software solutions, orchestration, and AP/AR.

Landgrebe (Austria): In the future, the biggest drivers of fintech growth will be expanding services beyond traditional finance. Fintechs now offer insurance, compliance (KYC), and payroll services alongside digital banking and flexible lending. Checkr, for instance, provides compliance and KYC audits for new Uber drivers, a task overwhelming for traditional banks due to limited applicant data.

Lopez: What new technologies or business models do you see emerging in the next few years, and how will these impact the fintech landscape?

Friederich (Germany): Two emerging technologies are artificial intelligence (AI) and new payment methods. AI has the potential to revolutionize various aspects of financial services, from personalized customer experiences and risk assessment to fraud detection and compliance. It can enable more efficient processes and decision-making, leading to enhanced operational efficiency and improved customer satisfaction.

With respect to payment methods, the shift towards cashless transactions is set to continue, with mobile payment options gaining momentum. We can expect to see further advancements in contactless payments, mobile wallets, and digital currencies. For instance, cashless payments via mobile devices at gas stations offer convenience and speed for customers, eliminating the need for physical cash or cards.

Hernandez (U.S.): In the coming years, the fintech landscape is poised to undergo significant transformation driven by emerging technologies and business models. Key trends on the horizon include decentralized finance (DeFi), central bank digital currencies (CBDCs), and the rise of neobanks. DeFi utilizes blockchain technology to offer decentralized lending, trading, and other financial services, potentially challenging traditional intermediaries. CBDCs, digital forms of national currencies issued by central banks, aim to facilitate faster and more efficient transactions. Neobanks, fully digital banks without physical branches, are gaining traction due to their convenience and competitive product offerings. These trends reflect the evolving landscape of the fintech industry and present exciting opportunities for innovation and disruption.

Lopez: As the sector continues to grow and mature, how do you see traditional financial institutions responding? Are they more likely to view fintech companies as competitors, or are they embracing partnerships and collaborations with fintechs?

Hernandez (U.S.): As the fintech sector continues its growth and maturation, traditional financial institutions are implementing various strategies to respond. Instead of perceiving fintech companies as competitors, many are embracing partnerships and collaborations. Traditional banks recognize the importance of leveraging fintech innovations to enhance their digital capabilities and deliver superior customer experiences, especially those related to RegTech and data access solutions. Partnerships offer incumbents access to new technologies and agile operating models, enabling them to maintain competitiveness in the evolving financial landscape.

By embracing emerging technologies, fostering strategic partnerships, and adapting to changing customer needs, both fintech companies and traditional financial institutions can unlock the vast potential of the digital financial services ecosystem.

Soden (U.K.): Most traditional financial institutions are embracing fintech and digital payments with a sense of desperation. The options are blurred, but in principle, they can either start building their digital platform themselves or partner with pure-play fintech/digital payments companies. Most banks have opted for a combination of both, but what has become obvious is that doing nothing is not an option.

This partnership approach is leading to some interesting alliances between the ivory tower bankers in their skyscrapers and the start-up VC-backed fintechs in their casual WeWork offices. Two very different cultures coming together, but it seems to be working because currently they both need each other.

Friederich (Germany): Two critical factors will remain essential: the need for top management in the fintech industry and the recruitment of top young talents. Effective leadership and a talented workforce are vital for navigating the complex and dynamic landscape of fintech, driving strategic decision-making, fostering innovation, and ensuring long-term success in this competitive space.