5 Roaring Fintech Predictions and Trends of 2022, by MoneyLion

The fintech industry is experiencing a rapid growth period, thanks to the contactless culture accelerated by the pandemic. An encouraging figure from CB Insights[1] reported that, as of Q3 2021, the fintech market garnered a record USD91.5 billion in global funding – that’s almost twice the total funding in 2020. With that being said, the future of fintech is bright.

We’ve seen the rise of more disruptive technologies across the fintech spectrum, from contactless payment to Buy Now, Pay Later (BNPL) and NFT. With all that afoot, what can the highly anticipated fintech space expect in the coming year?

Trend #1 – The rise of embedded finance and digital marketplace

The coined term – embedded finance – refers to the integration of a suite of financial services into a marketplace. It brings benefits to both consumers and businesses. For customers, embedded finance means increased convenience and faster transactions, as they can make a purchase without stopping by the bank to access their money (Buy Now Pay Later is a good example here). Meanwhile, it offers businesses additional sources of income, more customer data, and better competitiveness of their products/services.

The marriage between the digital marketplace and embedded finance could easily revolutionise the fintech segment. They are the two faces of the same coin: marketplaces supply engagement and rely on financial service features to capture the demand, while the embedded finance supplies finance functionalities and crave engagement as demands.

Many of us use embedded financial services daily without noticing them. A report by Mambu[2] indicated that the global opportunity for embedded finance is expected to reach USD7.2 trillion by 2030, and certainly, this trend shows no sign of slowing down anytime soon.

Moving forward, financial institutions are expected to maximise the value of any platform by prioritising end-user convenience and stickiness while increasingly monetising engagement through third party features. We opined that, in this case, recommendation engines will rise to be a competitive advantage, to drive consumers’ awareness and consideration.

Trend #2 – More regulator attention to data and Artificial Intelligence (AI)

Data and AI are the two most important elements in today’s digitised world. Financial institutions need to compete in a hyperconnected world. The usage of data by fintech compamies, in particular, provides significant consumer benefits, including increasing access to credit for historically underserved populations.  However, the public should understand how companies are using their data.  Data should also be protected against mistreatment.  Therefore, in 2022, we can expect greater attention and governance to data usage and privacy from the regulators.

But when it comes to the regulation of AI, it is more complicated. The approach that regulators adopt has to be divergent, to strike the right balance between incentivising effective risk management while not clipping the wings of innovation. We think it will take regulators some time to develop comprehensive proposals – most likely in 2023 or later. 

Trend #3 – Decentralised finance in centralised fintech

One another trend we need to keep an eye out for would be the adoption of Web3. While Web3 is still a loosely defined term, we can understand it as the ‘future of the internet’ which aims at building a decentralised version of internet-based crypto/blockchain technology.

Its decentralised nature might be the key for crypto to be accessible to the mainstream marketplace. We’d expect to see an integration of Web3 features (such as decentralised wallets like Metamask & Phantom) into a non-Web3 platform and marketplace, where cross border payments are facilitated by crypto.

One recent development is that the payment card network Visa has announced that transactions can be settled using USD Coin (USDC), a stablecoin powered by Ethereum. Meanwhile, Mastercard is reported to be testing USDC for payments.

Trend #4 – The future of crypto is in NFT

Since we’re on the topic of crypto, we definitely can’t miss out on NFTs – one of the buzzwords in 2021. We believe it fuels the next phase of growth of crypto.

NFT represents unlimited potential. We’ve seen the intersection of NFTs and digital artworks and lands – but this may only be the tip of the iceberg.

I’d like to also see it from a different perspective: NFT transcends beyond a digital asset, it ties with a sense of belonging through ownership. It can be a group of like-minded folks wanting to share resources, it can be a private club, it can be a fans’ club. Perhaps, one day, we might need to rely on NFT to prove our identity.

Trend #5 – Increased collaboration & expansion

As the world rapidly shifts towards digitalisation, the battle among fintech companies will accelerate. While the segment is far from saturated, it seems that consolidation is one strategy for fintech players to sustain and grow.

2021 brought on more fintech mergers and acquisitions (M&A) than ever before. One of the highlights could be big banks venturing into embedded finance through acquiring fintech providers. We believe that the trend will continue in 2022.

For instance, MoneyLion Inc went public on NYSE in 2021 through M&A and also announced its plan to acquire Even, an embedded finance player, to complement its growth strategy.

Conclusion

Looking ahead, the thriving fintech space is very much focused on convenience, protection and decentralised, and continues to present enormous opportunities in 2022. However, fintech players must be aware and leverage the right technology and market to capitalise on opportunities.