We all know that 2020 has been a complete paradigm shift yr for the fintech world (to not point out the remainder of the world.)
Our monetary infrastructure of the globe has been pushed to its limits. As a outcome, fintech firms have both stepped as much as the plate or hit the street for good.
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As the tip of the yr seems on the horizon, a glimmer of the nice past that’s 2021 has begun to take form.
Finance Magnates requested the specialists what’s on the menu for the fintech world. Here is what they mentioned.
#1: A Change in Perception
Jackson Mueller, director of coverage and authorities relations at Securrency, instructed Finance Magnates that one of crucial developments in fintech has to do with the best way that folks see their very own monetary lives.
Mueller defined that the pandemic and the ensuing shutdowns throughout the globe “led to more people asking the question ‘what is my financial alternative’?” In different phrases, when jobs are misplaced, when the financial system crashes, when the idea of ‘money’ as most of us know it’s basically modified – what then?
“The longer this pandemic continues, the more comfortable people will become with it, and the more adjusted they will be towards new or alternative forms of finance (lending, payments, wealth management, digital assets, et cetera),” Mueller mentioned.
“We’ve already seen an escalation in the use of and comfort level with alternative forms of payments that are not cash-driven or even fiat-based, and the pandemic has sped up this shift even further,” he added.
After all, the wild fluctuations which have rocked the worldwide financial system all year long have triggered an enormous change in the notion of the steadiness of the worldwide monetary system.
Indeed, Mueller mentioned that one ‘casualty’ of the pandemic has been “the view that our current financial system is more than capable of addressing and responding to abrupt economic shocks driven by the pandemic.”
“In the post-Covid world, it is my hope that lawmakers will take a closer look at how already-stressed payments infrastructures and inadequate means of delivery negatively impacted the economic situation for millions of Americans, further exacerbating the harmful side-effects of Covid-19 beyond just healthcare to economic welfare.”
“Any post-Covid review needs to consider how technological advancements and innovative platforms can play an outsized role in the global response to the next economic shock.”
#2: Is the Increasing Popularity of Cryptocurrencies 2021’s ‘Most Important’ Fintech Trend?
One of the beneficiaries of this alteration in the notion of the normal monetary ecosystem is the cryptocurrency area.
Ian Ballina, founder and chief govt of Token Metrics, instructed Finance Magnates that he sees the adoption and recognition of cryptocurrencies as crucial growth in fintech in the yr forward. Token Metrics is an AI-driven cryptocurrency analysis firm that makes use of synthetic intelligence to construct crypto indices, rankings, and value predictions.
“The most important fintech trends in 2021 will be cryptocurrencies,” Ballina mentioned. “We anticipate bitcoin to surpass its prior all-time high and go over $20k per Bitcoin. This will bring on mainstream media attention bitcoin has not received since December 2017.”
Ballina pointed to a number of latest high-profile crypto investments from institutional buyers as proof that crypto is poised for a strong yr: “the crypto landscape is a lot more mature, with strong endorsements from prestigious companies like PayPal, Square, Facebook, JP Morgan, and Samsung,” he mentioned.
Gregory Keough, Founder of the DMM Foundation, the group behind the DeFi Money Market (DMM), additionally believes that crypto will proceed to play an more and more vital position in the yr forward.
Keough additionally pointed to latest institutional investments by well-known firms as “including mainstream market validation.
“After the pandemic has handed, digital belongings might be rather more built-in into our financial programs, even perhaps forming the idea for the worldwide financial system with the adoption of central financial institution digital currencies (CBDCs) and growing use of stablecoins like USDC in decentralized finance (DeFi) programs,” Keough mentioned.
Anti Danilevski, chief govt and founder of Kick Ecosystem and KickEX trade, additional commented that
“cryptocurrencies will also continue to spread and gain mass penetration, as these assets are easy to buy and sell, are internationally decentralized, are a great way to hedge risks, and have huge growth potential.”
#3: P2P-Based Financial Services Will Play a More Important Role Than Ever
Both in and outdoors of cryptocurrency, a quantity of analysts have recognized the rising reputation and significance of peer-to-peer (p2p) monetary companies.
Beni Hakak, chief govt and co-founder of LiquidApps, instructed Finance Magnates that “the growth of peer-to-peer technologies is driving opportunities and empowerment for customers all over the world.”
Hakak particularly pointed to the position of p2p monetary companies platforms ‘developing countries’, as a result of of their capability to “give them a path to take part in capital markets and upward social mobility.
“From P2P lending platforms to automated belongings trade, distributed ledger know-how has enabled a bunch of novel functions and enterprise fashions to flourish,” Hakak mentioned.
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“Driving this emergence is an industry-wide shift towards ‘lean’ distributed systems that don’t consume substantial resources and can enable enterprise-scale applications such as high-frequency trading.”
Within the cryptocurrency ecosystem, the rise of p2p programs largely refers back to the rising prominence of decentralized finance (DeFi) programs for offering companies akin to asset buying and selling, lending, and incomes curiosity.
“DeFi ease-of-use is constantly improving, and it’s only a matter of time before volume and user base could double or even triple in size,” Keough mentioned.
#4: Investment Apps Continue to Onboard More and More New Users
DeFi-based cryptocurrency belongings additionally gained big quantities of reputation through the pandemic as an element of one other vital development: Keough identified that “online investments have skyrocketed as more people seek out additional sources of passive income and wealth generation.”
Token Metrics’ Ian Ballina pointed to the “influx of new retail investors and traders” that has crashed into fintech as a result of of the pandemic. As Keough mentioned, new retail buyers are trying to find new methods to generate earnings; for some, the mixture of stimulus money and additional time at residence led to first-time signal ups on funding platforms.
For instance, “Robinhood experienced viral growth with new investors trading Dogecoin, a meme cryptocurrency, based on content created on TikTok,” Ian Ballina mentioned. “This audience of new investors will become the future of investing. Post pandemic, we expect this new class of investors to lean on investment research through social media platforms strongly.”
#5: The Institutionalization of Bitcoin as a ‘Corporate Treasury Tool’
In addition to the widely elevated stage of curiosity in cryptocurrencies that appears to be rising into 2021, the position of Bitcoin in institutional investing additionally appears to be changing into more and more vital as we method the brand new yr.
Seamus Donoghue, vp of gross sales and enterprise growth at METACO, instructed Finance Magnates that “the biggest fintech trend will be the development of Bitcoin as the world’s most sought-after collateral,” in addition to “its deepening integration with the mainstream financial system.”
“Whether the pandemic has passed or not, institutional decision processes have adapted to this ‘new normal’ following the first pandemic shock in the spring.” Indeed, “enterprise planning in banks is essentially again on observe and we see that the institutionalization of crypto is at a major inflection level.
“Broadening adoption of Bitcoin as a company treasury software, in addition to an acceleration in retail and institutional investor curiosity and secure cash, is rising as a disruptive pressure in the cost area will transfer Bitcoin and extra broadly crypto as an asset class into the mainstream in 2021.
“This will drive demand for options to securely combine this new asset class into monetary corporations’ core infrastructure to allow them to securely retailer and handle it as they do every other asset class,” Donoghue mentioned.
Indeed, the combination of cryptocurrencies like Bitcoin into conventional banking programs has been a very sizzling matter in the United States. Earlier this yr, the US Office of the Comptroller of the Currency (OCC) printed a letter clarifying that nationwide banks and federal financial savings associations are legally permitted to have custody of cryptocurrency belongings.
#6: More Collaboration by Fintech Regulators; The Death of ‘Analog Regulations’
In addition to the OCC’s July announcement, Securrency’s Jackson Mueller additionally sees additional vital regulatory developments on the fintech horizon in 2021.
“Heading into 2021, and whether or not the pandemic is still around, I think you see a continuation of two trends at the regulatory level that will further enable FinTech development and proliferation,” he mentioned.
“First, a continued focus and effort on the part of state and federal regulators to review analog regulations, particularly regulations that require in-person contact, and incorporating digital alternatives to streamline these requirements.” In different phrases, regulators will seemingly proceed to evaluate and replace necessities that at present oblige sure events to be bodily current.
“Several of these changes currently are temporary in nature, but I anticipate these alternatives will be formally adopted and incorporated into the rulebooks of banking and securities regulators moving forward,” he mentioned.
The second development that Mueller sees is “a continued effort on the part of regulators to join together to harmonize regulations that are similar in nature, but disparate in the way regulators require firms to adhere to the rule(s).”
This implies that the ‘patchwork’ of fintech laws that at present exists throughout fragmented jurisdictions (just like the United States) will proceed to turn into extra unified, and subsequently, it’s simpler to navigate.
“The past several months have evidenced a willingness by financial services regulators at the state or federal level to come together to clarify or harmonize regulatory frameworks or guidance covering issues pertinent to the FinTech space,” Mueller mentioned.
“Given the ‘borderless nature’ of FinTech and the acceleration of industry convergence across several previously siloed verticals, I anticipate seeing more collaborative efforts initiated by regulatory agencies that seek to strike the right balance between responsible innovation and safety and soundness.”
#7: The Continuing ‘Fintechization’ of Everything
KickEX trade’s Anti Danilevski pointed to the persevering with “fintechization” of “everything and everyone — deliveries, cloud storage services, and so on,” he mentioned.
Indeed, this ‘fintechization’ has been in progress for a number of years now. Financial companies are in all places: transportation apps, food-ordering apps, company membership accounts, the record goes on and on.
And this development will not be slated to cease anytime quickly, because the starvation for information grows ever stronger, having a direct line of entry to customers’ private funds has the potential to offer huge new streams of income, together with extremely delicate (and extremely priceless) private information.
However, as Daniel P. Simon, chairman of the Museum of American Finance communications board, identified to Finance Magnates earlier this yr, firms have to b extraordinarily cautious earlier than they make the leap into the fintech world.
“Tech wants to move fast and break things, but this mindset doesn’t translate well to finance,” Simon mentioned.