By: Jed Rose, GM EMEA at Airwallex

Despite the highs and lows of the past year, the fintech sector has continued to grow and innovate. In 2021, we saw fintech funding and valuations soar to new heights, as well as the rise of ecommerce and digital payments. While these trends will continue to be a key part of 2022, I believe frictionless payments, embedded finance and open banking will be just a few of the hottest topics in the year ahead.

2021 Fintech Trends:

• Fintech Funding: 2021 had some of the biggest fintech valuations to-date. From the likes of Klarna ($45.6b) to N26 ($9b) and even Airwallex ($5.5b), investment continued to pour into the space. According to Boston Consulting Group’s “State of FinTech” Q3 report, majority of investment can be segmented into two categories, payments and accounts products. These two categories each received more than $7.5b in investments and accounted for 45% of all investments in Q3.
• The rise of ecommerce and digital payments: The events of the pandemic have accelerated trends that were already in motion – with the way businesses interact and sell to consumers, cementing the ongoing demand for ecommerce and digital payments. Since e-commerce has gone more digital, the need for fast and reliable cross-border payments has become top of mind for merchant’s who are considering or already have a global presence. The pandemic really demonstrated the adaptability of some merchant’s who reacted quickly and shifted their business model to a digital-first approach that has allowed them to do business faster and improve their overall operational efficiency.

2022 Fintech Predictions:

• Removing payment friction without compromising compliance and regulation: The consumerisation of B2B payments has not only sparked a conversation around the use of innovative tech to facilitate frictionless, real-time payments, but has also emphasized the important role compliance and regulation will play. The challenge for businesses will be around removing unnecessary friction – poor user experience, slow transfers, high FX fees, etc – and making it easier for businesses to grow without borders through deploying further innovation and new technologies, such as machine learning, to speed up B2B payments without compromising security or breaching regulatory guidelines. This will be a necessity for the long-term sustainability of both traditional players and disruptive fintech companies.
• The year of embedded finance: Just like today’s consumers, businesses want (and need) a seamless payment experience. Embedded finance was designed to streamline the entire financial process for consumers, while also creating operational efficiency for businesses. By using embedded finance, businesses can create a holistic experience for the end-user and customers can easily send and receive money in near real-time, without having to sacrifice a poor user experience.
• Open Banking, if not now, when?: Open banking has the potential to reshape the entire financial sector, but it still has a long way to go. In order to make open banking a success, traditional banks and innovative fintechs need to embrace the technology and future use cases to support higher customer expectations. In the year ahead, I think more fintechs, banks and regulators will be discussing how to use open banking to better address customer needs and how to make its promise of a more connected future even more of a reality.