By Stan Cole, Head of Financial Institutions, Inpay.

The last couple of years have been eventful to say the least for fintech businesses. But despite the struggles faced by some during the pandemic, fintechs across the world reported massive growth during 2021, raising more funds in the first half of the year than the whole of 2020. This was after the total transaction value of digital payments rose from $4.1 trillion in 2019 to $5.2 trillion in 2020 as social distancing measures pushed people towards online banking, something that had already invigorated the fintech sector.

Going from strength to strength, fintechs are now perfectly placed to really innovate in the new year. With that in mind, we’ve looked at the top ten fintech trends we believe will take off in 2022.

1.     Real-time cross border payments

A big shortcoming that many financial institutions (FIs) still need to address is slow and costly cross-border payments. With no access to domestic clearing channels, they must indirectly liaise with multiple intermediaries in order to process such transactions, who undertake tasks like verifying a party’s identity and creditworthiness. However, as more fintechs with access to these domestic clearing channels emerge, expect a greater number of FI’s to adopt their solutions in 2022 and enjoy near instantaneous cross-border payments.

2.     Neobanks

While banking has long been a monopoly that’s extremely hard for outsiders to break into, the easing of regulations across the globe has made it simpler for neobanks to forge their way. Referring to exclusively digital banks without physical stores, many offer benefits like reduced fees and higher interest rates on deposits due to lower overheads, as well as greater convenience. Consequently, it’s no surprise that the global neobank market was worth $31.37 billion in 2020, and is expected to skyrocket in value to $377.94 billion by 2027.

3.     Cryptocurrency

More people and businesses continue to adopt cryptocurrency owing to the number of benefits it offers, from decentralisation to lower transaction fees and enhanced confidentiality. While many FIs have been reluctant to integrate into their services, the tide appears to be turning. For example, Mastercard announced in October that it was to work with digital assets payments platform Bakkt to enable any bank or merchant on its network to provide crypto services. With crypto becoming more ubiquitous by the day, our money is on other FIs following in Mastercard’s footsteps in 2022.

4. Open banking

In the face of competition from neobanks and growing digitalisation generally, the onus is on traditional banks to adapt their services. Key to this in 2022 will be open banking, which, using API (application programming interface)-enabled technology, gives “third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions.”

FIs can then work with these providers to more quickly and seamlessly offer financial services using aggregated customer data. For instance, it allows them to easily switch a customer’s bank account and suggest new financial products or services to them after viewing their transaction history.

5. RegTech

As banking services increasingly migrate to the cloud, the need for better data confidentiality grows. This has led to the rise of Regulatory Technology (RegTech), in which regulatory monitoring, compliance and reporting are being taken care of by software that uses machine learning algorithms and innovative data analysis technology. RegTech not only bolsters compliance through more accurate data but speeds up these processes and helps to cut costs by saving manpower.

6. Buy-Now-Pay-Later

One payment method we’re expecting big things from in 2022 is Buy-Now, Pay-Later (BNPL). As the name suggests, this allows consumers to easily pay for  purchases in instalments at the checkout, with companies like Klarna and Afterpay driving huge innovations in this payment method. With the BNPL market worth $60 billion at the start of 2019 and predicted to rise in value to $166 billion by 2023, 2022 could be the year it goes mainstream.

7. Voice-enabled payments

Another payment method set to gain traction in the new year is voice-enabled transactions. We all know how useful the likes of Siri and Alexa can be generally, and this technology can be just as beneficial when it comes to making payments. Described by PwC as having the ability to “transform banking”, the number of voice assistants on devices is predicted to double between 2020 and 2024, which should naturally lead to more of us banking this way too. Bank of America, Capital One and PayPal have all introduced this in recent years, and 2022 could be the year that voice-enabled payments hit the big time.

8. Virtual payment cards

A virtual payment card is exactly what it sounds like: a debit or credit card that doesn’t sit in your wallet or purse, but entirely online. Issued by Mastercard, Visa, or American Express, and accepted anywhere credit cards are usually accepted, benefits of virtual cards include ease of use, added security and ease of reconciliation. The market for this payment method is estimated to be worth $1 trillion in 2022, an increase of $568 million from back in 2019.

9. Financial inclusion

The pandemic and its economic fallout  have only highlighted the importance of financial inclusion. This is where “individuals and businesses have access to useful and affordable financial products and services that meet their needs.” Unfortunately though, financial inclusion growth isn’t as high as it should be, with almost a third of the world’s population not even owning a bank account.

However, fintech is increasingly helping to facilitate this. For instance, companies like Kiva provide services to borrowers from underprivileged locations worldwide, while digital-only banks remove barriers to entry with zero fees, better interest rates and ease of use. Expect more people to benefit from this in a post-pandemic world.

10. Real-time payrolls

Payrolls traditionally work by employees only getting their wages or salary on one set payday, which is usually at the end of the month. While they earn their money throughout the month, they don’t get access to it until this point, which can make any unexpected expenses difficult to manage. This is another area where fintech is driving innovation, via real-time push payments platforms. Take Visa Direct, for example, where wages can be instantaneously sent to a bank account or Visa card at the end of each work day. As more and more people demand instant payment, it’s easy to see real-time payrolls taking off in 2022.