Analysis of changes in the financial technology market and start-ups and forecasts of prospects is a wide and varied topic. We have already introduced our esteemed readers to the materials on FinTech analytics. These are the articles titled “Five Trends from Forbes…” and “FinTech 2020…” that disclosed various aspects of the topic.
Today we are publishing a material in which we will present another perspective on the prospects for the fintech market.
The last year 2020 was not an easy year for all spheres and sectors of business. Expert studies show that the epidemic and the restrictions and changes associated with it have not only exposed the problems that exist in fintech companies. But this period also became a catalyst for transformations that began in the financial technology market long before 2020, but circumstances accelerated these changes. An analysis of systemic problems and notable changes allowed experts to predict the main trends that will continue to drive the fintech market’s development and change in 2021.
Embedded finance, scoring products, hybrids
Embedded finance instruments will become more and more widespread, which will cause banks to noticeably distance themselves from their clients. Embedded finance allows the integration of cards, payments, insurance, loans, etc. into virtually any non-financial product.
For example, by leafing through the catalog of an online store, a person saw the product he wanted, for which he didn’t have enough money to buy right now. And he applied for a loan directly on the store’s website, without filling out any bank forms. Or – the possibility to send money without using special applications, through any application that, at first glance, has nothing to do with finances.
The introduction of embedded finance tools will be beneficial and convenient for everyone, both for users and for fintech companies and startups.
In the financial markets of Russia and European countries, there is a growth of scoring and analytical products. Using “big data”, they not only calculate retro-scoring but are also able to predict.
Traditional financial products such as loans and insurance increasingly form hybrid models. Such new products combine both insurance and credit components.
Online payments and banking apps
If before 2020 someone still doubted that the main life and business takes place on the Internet, then after the pandemic, with its remote work and the increasingly deep withdrawal “online” there are far fewer of these lefts. Accordingly, alternative ways of making online payments have become even more relevant.
Moreover, payments are increasingly required not only from card to card but also with the use of electronic purses and cryptocurrencies. The use of QR codes for payments is becoming more and more relevant, in addition to payments by traditional requisites.
Ordinary bank applications satisfy the growing demands less and less. Their limited capabilities require banks to build ecosystems, otherwise, customers will move away from such a bank.
FinTech startups and companies are increasingly competing with traditional financial institutions. This means that banks will look for and implement more and more new ways and points of contact with customers, using third-party services and products. This is where embedded finance comes in, allowing financial products to be embedded anywhere, in any digital space.
These innovations cannot be too fast and will happen gradually. Nevertheless, even the initial steps of banks in this direction will allow them to serve a huge number of transactions while reducing the cost of maintaining the banking infrastructure and attracting customers.
Over time, such systemic changes will turn traditional banks into regulated SaaS companies.
Steady growth in the financial technology market
The average annual growth of the fintech market is 12%, which makes it the most dynamically growing market. At the moment more than 400 fintech startups are operating in Russia. Their most popular activities include platform solutions. These are low-code platforms, omnichannel front-office solutions, and analytical platforms.
Many areas received an impetus to development just due to epidemiological constraints. The demand for unmanned running, “unmanned technologies” – AI-based virtual assistants for applications and call centers; document recognition and image digitization systems; credit scoring systems – has increased.
Users are increasingly moving into the digital space to communicate with banks and companies. To become a customer of a company or bank, it is no longer necessary to visit an office and talk to a live employee. All you have to do is download an application and register. Virtual bank cards are increasingly replacing physical “plastic”.
In the future users will choose not the bank itself as an organization, but the application that best meets their expectations and requirements.
The development of the Russian financial technology market is also facilitated by the trend of import substitution in this industry. Russian government directive that obliges state companies to use only domestic software, the law on the tax maneuver in IT, and other legislative regulations in the future will lead to the fact that the owners of the information infrastructure will use only Russian software. This cannot but have a beneficial effect on the development of domestic companies and startups.