This month at The Fintech Times our focus switches to reflection as we look back at developments over the last 12 months. 2022 has certainly been a challenging year for everyone with global economic activity experiencing a severe slowdown, with inflation higher than seen in several decades.
Throughout December, our community of fintech CEOs and leaders have shared their thoughts s on this year’s major fintech trends. Today we hear from Ageras, DataSeers, Hokodo, Lumanu and Token.
For Martin Hegelund, CMO and co-founder of Ageras – a fintech offering a complete ecosystem of tools and services for more than one million small businesses – the spotlight in 2022 was on buy now, pay later (BNPL).
“For the average consumer, the rise of BNPL, with a 75 per cent growth since last year, has been one of the major keywords for 2022,” he says: “That also ignited a healthy debate on how much government regulation is required in the fintech space.
“Clearly, the industry is maturing, and alternative financial products or technologies are increasingly being used, accepted, and trusted. So the mass adoption of unregulated financial products and the conversations around their impact on consumers, society, and the industry itself has been a significant theme.”
Adwait Joshi is the founder and CEO of DataSeers, a fintech helping banks and payment companies by applying big data and analytics at a large scale. He talks about two major events in 2022.
“The reduction of funding and related losses in the venture capital investment world, as well as the significant turmoil in the crypto world, most recently capped off by the FTX collapse. From FTX, BlockFi, and Voyager to Celsius, there’s no denying it has been a tough year out there for cryptocurrencies.
“On the funding side, research has given us a clear indication of what has transpired. While one-fifth of all venture capital investments went to fintech in 2021, support fell drastically this year. By the end of 1Q22, VC funding dropped by 20 per cent. By 3Q22, VC fintech investment totalled just $12.9billion, down $23.1billion year over year.
“It’s clear the fintech bubble is bursting, reshaping the battle between traditional financial institutions and their tech-oriented counterparts. Fintech companies have too often failed to execute their stated goals and priorities, including becoming operationally profitable or adequately capitalised.
“As a result, fintech companies are downsizing, dramatically cutting their staffs, lowering their expenses, and finding other ways to preserve their cash reserves and elongate their runways. Meanwhile, product adoption remains slow, as many service categories report low single-digit worldwide market share.”
This year, the macroeconomic environment has shifted radically, with the explosion of an asset bubble that had been fuelled by a long period of low interest rates, says Louis Carbonnier, co-founder and co-CEO of B2B BNPL provider Hokodo.
“Fintech – and the broader economy – must learn to operate in a ‘new normal’, with higher interest rates and more conservative VC funding,” he tells The Fintech Times. Against this backdrop, some areas of fintech like crypto have unravelled, but we expect that the more robust and sensible parts of the sector will emerge stronger from the crisis.
“Naturally, I’ve been following developments in the BNPL space. Throughout 2020 and 2021, BNPL exploded in popularity. Consumers relished the opportunity to spread the cost of purchases at an uncertain time. For businesses, adoption of BNPL was a natural progression from the shift to online trade.
“Then, in 2022, the trend in B2C changed trajectory. A huge, global BNPL provider was, sadly, forced to make a swathe of redundancies and experienced a devaluation of 85 per cent, amid rising interest rates and falling consumer spend.
“However, this is not a trend reflected in the broader embedded financial services space. Businesses are waking up to the potential of embedded finance, driving further innovation in the market. I don’t think this is a trend which will slow down as we go into the new year.”
Todd Clyde is the CEO of Token and an established operator of Silicon Valley software companies. He addresses the changing payments landscape.
“This time last year, we predicted that open banking payments would fund the new ‘fintech layer’ in 2022, and that has prediction has come true,” he says. “In the UK alone, open banking payments have grown over 155 per cent in the last year, and are now a mainstream method for topping up stored value wallets. Alongside repaying credit card debt, this has emerged as a top use case.
“Reflecting back on the last 12 months, it’s clear payments have asserted their position as the most exciting opportunity for open banking players. Many data-first open banking providers have now pivoted to payments, and we‘ve seen Personal Finance Management-focused solutions closing shop.
“As we head into 2023, growing uptake of open banking by retailers and consumers is moving the open banking conversation beyond use case discussions — it is starting to settle in as ‘another way to pay’. Eventually it will become the way to pay. That means payment service providers (PSPs) need to act now to ready themselves to respond to the growth in adoption that will only continue to surge over the next 12 months and beyond.”
Tony Tran, CEO and co-founder of Lumanu, a company supporting payments and financing in the creator economy, highlights how evolving fintech solutions have supported different people.
“The shift to remote work and the rise of tech-enabled communication tools has fundamentally reshaped the future of work, allowing creators and creative professionals to make a living in new, flexible ways. This has shifted creators into business owners, bringing with it new responsibilities, including accounting and managing cash flow, that requires easy-to-use payments platforms.
“In addition, embedded finance continued its ascent this year, empowering companies to offer consumers credit without having to leave their platform. This has proven to be a win-win for companies and customers alike. Customers benefit from the convenience and seamlessness of the experience, while companies can unlock new use cases and use customer data to improve financial access.
“In 2022, fintechs also played an important role in improving financial inclusion. Lower cost, far-reaching digital solutions are helping reach the approximately 1.7 billion people worldwide without access to banks, but who do have the ability to use a smartphone. By making banking more accessible, it is hopeful that more key socioeconomic disparities will be addressed.”