2021 was the year for fintech growth. After hitting $17.7bn in fintech investments in just the first half of the year, experts predict that 2022 profits could double as the industry continues to evolve.
In fact, the Global Financial Services (GFS) market is predicted to reach a whopping $26.5 trillion by the end of 2022, making this year the most successful to date as a huge number of fintech IPOs, M&A’s, and all new unicorns continue to take centre stage.
VP of strategy and business development at Personetics, Dorel Blitz described 2022 as a potentially record-breaking year to come, but not one without its challenges for the industry.
“The growth opportunity for fintechs is greater than ever,” claims Blitz. “But this is making market competition hotter. The challenge for fintechs in 2022 will be standing out and prioritising customers, otherwise, they’ll fall into a death zone.”
As Fintech continues to revolutionise a digital future, let’s see what 2022 has in store for the industry.
Decentralised Finance Growth (DeFi)
Decentralised finance, otherwise known as DeFi, is quickly becoming a topic of widespread discussion as we head into 2022. After a recent Harvard Business Review article predicted that “the current economic situation caused by the COVID-19 pandemic will hasten the progress to more decentralised value chains,” there has been more attention surrounding peer-to-peer blockchain technology.
DeFi is a blockchain-powered system that improves both buyer, seller and lender experience during money movement by cutting out the middleman and allowing transactions to process without the intervention of a central authority.
Improving both the speed and spend of the transaction process in a multi-currency and borderless setting, industry analysts predict that it will sit at the forefront of fintech development in the next decade.
2022 looks to be the year that banking giants and financial institutions begin to fully embrace this crypto-enhancing tech that is reshaping financial operations as we know it.
It’s Blockchain’s Time To Shine
The rising demand for Blockchain-as-a-service products is also set to increase in 2022 as fintechs continue to find new ways to streamline the financial industry.
Banking will be at the heart of this development after 13 of the world’s leading banking giants invested a combined sum of $3 billion within blockchain-based cryptocurrency development by the end of 2021.
Quoting Deloitte’s Global Blockchain Survey from 2021, 76% of global financial experts claim that “digital assets will serve as a strong alternative to, or outright replacement for, fiat currencies in the next 5–10 years.”
In response, investors can expect a sizable increase in cryptocurrency interest from institutional banking giants as we move into the new year.
The Kalifa Review is also on everyone’s mind as we step into 2022. Posing as a major influencer for fintech development in 2022, the 2021 Kalifa report’s recommendations will drive innovative action for developers.
The report that explored priority areas for the fintech sector revealed that introducing a Centre For Finance, encouraging UK-based IPOs, and improving tech visas were just some of the points that Kalifa wanted developers to work on in the coming year in order to improve country-wide cohesion across the sector.
Co-founder of LendInvest, Christian Faes stated that “the review delivered an ambitious roadmap for UK Fintech,” however, he suggested that many of the crucial development points have still not been actioned. “Those at the coalface of building the UK fintech industry are hopeful that the government will finally turn the talk into real action for our sector.”
The pandemic has shifted global spending and expanded the retail sector into a worldwide accessible platform. As we see an exponential rise in global e-commerce, 2022 will see a spike in cross-border transactions.
A recent study by Accenture revealed that the cross-border payment flow is predicted to reach a global $156 trillion by the end of 2022, increasing at a speedy 5% CAGR per annum.
Along with the growth of e-commerce, cybercrime is flourishing. Efficient fraud prevention is becoming a harder goal to achieve for rule-based solutions using manual analysis.
In response, we will see payment institutions offer adjusted AI-based solutions to combat fraud for cross-border money movement. Connectum, for example, provides an advanced anti-fraud system leveraging AI, which helps making cross-border transfers a simple, yet secure process. Specialising in card-to-card transactions and multi-currency processing, Connectum allows merchants’ customers to complete cross-border transfers in just one click.
More Fintech Mergers
2021 gave us more fintech based M&A than any previous year and 2022 looks to be no different.
After a recent report from CB Insights revealed that 43 fintechs transitioned into unicorns by Q3 2021, 2022 will see unicorn fintech companies flash their cash and continue to expand via M&A.
As smaller, regional banks continue to rival larger fintech mergers, we predict that 2022 will see community-based banking institutions looking to merge in order to adopt a stronger digital presence that provides new services for their demanding customers.