Fintech Trends to Expect in 2022
Global venture funding for fintech is booming. Last year VC investment in fintech soared to $131.5 billion, which is 21% of total global VC funding and 177% year-over-year growth. This trend is driven by the pandemic, which heightened the need to be able to make transactions and manage finances digitally.
The following are the top 3 fintech startups that received the most venture capital last year.
C6 Bank: Founded in 2019, a Brazil-based neobank raised $2B, which valued the company at $5B.
Klarna: Founded in 2005, a Sweden-based Buy Now Pay Later platform raised $1.6B, which valued the company at $45.5B
NYDIG: Founded in 2017, a New York-based white-label Bitcoin platform raised $1.3B, which valued the company at $7B.
These companies embody the innovations that are driving excitement in the fintech industry: emerging markets, lending, payments and blockchain. Here are the 3 fintech trends I predict will gain momentum in 2022.
(1) Legacy firms across varying industries will increasingly incorporate some form of blockchain into their business models.
From blockchain-powered platforms to digital assets such as cryptocurrency and non-fungible tokens (NFT), legacy firms are considering ways to leverage advanced technology to modernize their infrastructure and offer new products and services. The increasingly common business use case is to provide additional payment options to customers through cryptocurrencies. Companies such as Facebook, Paypal, Visa and Rakuten are enabling this feature for their customers.
Another trend in blockchain that will gain traction is financial institutions recognizing cryptocurrency as a relevant form of asset ownership. Firms such as Fidelity are partnering with companies such as BlockFI to allow clients to pledge crypto assets as collateral. Blackrock announced last year that they will offer this service. Additionally, major banks, including U.S. Bank, BNY Mellon and State Street are becoming custodians of digital assets. This trend will trickle down to consumers with the ability to start leveraging crypto for loans.
(2) Neobanks will increase in popularity across more emerging markets.
Nubank, a Brazil-based neobank founded in 2013 went public in December 2021. Nubank is considered the largest digital bank in the world, having over 40 million users across Brazil, Mexico and Colombia. They were able to capture a large customer segment that's often overlooked - the unbanked and underbanked - by offering relevant products at a lower rate than the legacy firms in these regions. C6 Bank is another Brazil-based neobank that is growing quickly, with a recent investment of $2 billion led by JPMorgan with 40% stake.
We will see more neobanks accelerating growth across the globe. Particularly in African countries, where the financial infrastructure is digitally transforming led by companies such as Flutterwave, Bankly and Bamboo. The key for the up-and-coming neobanks is to incorporate cultural nuances into the business strategy. I’m excited to see the next wave of companies that will drastically impact the financial lives of people in emerging markets.
(3) Personal finance management solutions will be more tailored for consumers to plan for their long-term goals.
Mint is one of the original personal finance management (PFM) apps, focused on budget planning, credit monitoring and tracking spending. Truebill, which was acquired last year by Rocket for $1.3B, added a concierge spin to PFM with the offer to cancel subscriptions and negotiate bills on behalf of customers. Then there are companies like Albert, which added the option for instant loans in their PFM tool. Nonetheless, as there are specific financial milestones that are critical, particularly for millennials, such as buying a house, planning for a family, and retirement, there is an opportunity for PFM tools to offer more modular automatic features. Solutions that are able to ease the stress of thinking about these goals or even those that encourage folks to start to think about it will begin to emerge. Additionally, as retail investing becomes more common for younger customer segments, driven by the attention Robinhood received last year, I think PFM solutions that incorporate investment portfolios into the financial planning process will become more important.
Additionally I think the 4 trends I identified last year still stands. So much was done but so much is still left to do with innovating embedded finance, payments, small business tech and ESG. Now that firms are adopting hybrid work models and people are being encouraged to continue life as usual (to some degree), I think trends in these fintech categories will be geared towards everyday in-person interaction.
Embedded finance: Having seamless access to meaningful financial products during day-to-day activities like shopping or pumping gas.
Payments: Being able to pay how you want when you want.
Small Businesses: Having access to tools to recover from the downturn and accelerate growth
ESG: Protecting the environment as more people resume outdoor activity and preserving newly found values.
2022, Here we go!
-Kiswana