Valued at $7.3 trillion in 2020, it is projected to grow at a compound annual growth rate (CAGR) of 26.87% up to 2026 with the rising adoption of the internet of things and advanced technologies.
According to the Global Fintech Adoption Index in 2019, Fintech adoption was doubling every two years throughout the world. It increased from 16% to 64% from 2015 to 2019.
This growth was also seen during the Covid-19 pandemic, where digitalization took its toll and the Fintech industry took the role of the enabler in digital payments, as most of the world shifted to contactless and online shopping. We also saw a rapid growth of crypto payments being accepted throughout the global tech industry and a great potential for Crypto payment adaptation in different types of businesses.
This time, last year, things were going pretty well for the fintech industry, specifically the crypto market. In 2021, investors and crypto markets were hyping Bitcoin, and for a good reason. It reached a value of $69,000 and represented a promising future for the financial system. Now, exactly one year later, its value dropped down to $18,000, making crypto investors lose more than $2 Trillion.
2022 is a year of the crypto market collapse, as we witnessed the major downfall of the Celsius Network, the Terra/LUNA collapse, and most recently – the dramatic downfall of the infamous crypto market, FTX.
Does the FTX crash affect people’s trust in the Crypto market?
The efforts to incorporate crypto payments into businesses are now shaken. The trust of companies was always hard in the first place, but now with the downfall of major players, caution is the key factor when it comes to crypto investing and payments.
In 30 days, Sam Bankman-Fried, the founder and CEO of FTX has lost a $17 Billion fortune as a result of piled-up crises. Bankman-Fried sought help from its biggest competitor Changpeng Zhao, founder of Binance, to which Zhao first agreed, but then, after several suspicious activities from the now-bankrupt ex-CEO, Zhao walked away, leaving Bankman-Fried even more exposed. Reuters reported that Bankman-Fried may have secretly transferred $10 Billion of FTX customer funds to his hedge fund called Alameda Research. On top of that, at least $266 million had been withdrawn from FTX in 24 hours.
Although the once-crypto billionaire took responsibility for FTX’s collapse, the suspicious activities and withdrawals shook the crypto market to its core. The whole situation sparked international regulatory inquiries and a lawsuit against the company and all celebrities who have promoted it. The company’s financial statements and operations paint a very worrisome picture that transcends throughout the global crypto market.
Companies in this industry will need marketing wizards such as AWISEE, an SEO Agency for Fintech companies, to gain back the trust and audience that they are used to.
However, on the other scope of the crypto world, there are companies like the very well-known Coinbase, that are trying to be a more sustainable player in the world today. With their Coinbase Commerce, they have opened the doors for merchants and businesses across the globe and enabled them to receive payments from anywhere in the world in the cryptocurrency of their own choice. It can integrate with the checkout workflow or it can be added as a payment option on the shopping page. It charges no transaction fees and enables the user to convert any cryptocurrency to a fiat currency like the US dollar or the British pound.
Technology innovations have transformed the nature of financial services by highlighting long-standing issues with UX and UI in the capital markets industry. It’s an ongoing revolution which has enabled a full spectrum of new services that optimise the customer experience.
A good example are organisations providing FinTech solutions that use APIs to operate with customer data. The APIs extend the organisation’s existing capabilities and improve customer experience by delivering tailored services.
UX Challenges for Financial Organisations
One of the biggest challenges impeding progress is that financial institutions are still more focused on their products instead of the customer experience. They struggle to realise that evolving technologically is at the heart of efforts to serve customers better.
Another issue that financial firms face is that many of their systems are legacy applications that are too expensive to rewrite and replace. Often, they are left to operate alongside cutting-edge third-party software solutions without any means to communicate with them. This causes the user to interrupt their workflow and switch between various systems to complete a task.
Organisations that can’t solve workflow problems face the risk of employees moving to other firms with more modern platforms that allow them to execute tasks quicker and achieve better results for their clients. This is currently a growing issue for hedge funds where portfolio managers are moving away from inefficient infrastructures with all their clients.
FinTech is the way forward. By digitising operations, organisations will not only reduce costs and maximise productivity. Collaborating with financial technology innovations will also lead to a significant shift in the way customers are approached and will ultimately deliver improved customer experiences. Implementing new technology will mean establishing trust with increasingly digital-savvy customers by utilising their demands for “instant” service in today’s fast-paced world. Many processes will become completely automated, with systems ready to fit into a world of artificial intelligence. Acquiring new customers will mean providing a financial product based on a better, faster, and smarter user experience.
FinTech is the way forward. By digitising operations, organisations will not only reduce costs and maximise productivity. Collaborating with financial technology innovations will also lead to a significant shift in the way customers are approached and will ultimately deliver improved customer experiences.
The Buy Side Challenge
The investment process often involves navigating through a myriad of applications and fragmented data, leading to switching apps and copy/pasting between them. Such an inefficient workflow can lead to critical errors, operational risks, and low performance for the buy side financial organisations in the long term.
With increased regulatory pressure and customers that expect highly personalised and engaging experiences, the pressure on the buy side to reduce repetitive operations and deliver cohesive workflows is immense.
The Sell Side Challenge
Traders need to access client data fast. Trading software that allows them to quickly analyse data and perform research could significantly improve the fast-paced trading environment. An agile workflow solution will eliminate redundant steps and ensure smooth and efficient trading processes for sell side financial organisation.
Businesses on a mission to grow and prepare for the future need to focus their efforts on solid digital onboarding of both employees and customers. This means ensuring an innovative digital experience, automating more of their processes, and improving existing workflows.
Benefits of Prioritising User Experience in Financial Services
Digitalisation continues to scale across all sectors of the financial services industry. To keep up with customer demand, financial institutions need to consider adopting an enterprise approach to streamline workflows. The best way to achieve this is through intelligent software that allows for an integrated, simplified, and accelerated user experience.
For instance, buy side and sell side financial organisations can benefit from a fully integrated desktop environment that ensures minimum training effort, less multitasking, and faster responses. Integrating applications into a unified workflow allows professionals to make better informed decisions and get to market faster. By syncing up disparate processes and applications in a unified desktop integration platform, financial institutions can simplify and standardise internal operations to reduce risk and respond to the demands of their customers quicker and more seamlessly than ever.
By syncing up disparate processes and applications in a unified desktop integration platform, financial institutions can simplify and standardise internal operations to reduce risk and respond to the demands of their customers quicker and more seamlessly than ever.
FinTech Solutions that Solve the UX Problem
Desktop integration platforms can help financial institutions build applications with user experience in mind and transform the way they work. One of them is Glue42 - an interoperability provider, which ensures flawless integration between existing in-house and third-party systems, regardless of the language they are written in. It synchronises applications so they can seamlessly interact with each other in real-time, reducing the number of times users need to copy/paste their way through different apps.
The Glue42 desktop integration platform is FDC3-enabled to improve productivity and cut development costs. All its services are available through open APIs such as app directory, advanced window management, notifications and multi-stack interop. Glue42 helps organisations build a more efficient workflow with user experience in mind.
It's not just a store, the manager, employees, and the customers. Many things keep a business organized and operational. One of these factors includes fintech. Fintech is the abbreviation for financial technology and it is what streamlines and automates, like processing payments. If you're a new business owner, you might not be too sure about how to go about implementing it. In this post, we'll be going over everything new business owners need to know about fintech.
How Fintech Works
We're going to start by saying that fintech is a very complex thing to learn. We've already covered the basic premise of what fintech is. Now it's time to get into what it does. Fintech is supposed to make financial transactions for both the business and customers as simple as possible. This also applies to other things, like investing and cryptocurrency.
If you're looking to learn more about fintech, you'll want to pursue a Bachelor of Science in Business Administration. This degree can be expensive, which can be difficult to budget for. However, you don't necessarily have to pay for anything. You can do this by looking for scholarships for college students. Scholarships can cover at least half the price of your degree, but others might pay for everything. You can acquire your scholarship by applying for one using an online search and application platform.
What Trends Are Associated with Fintech?
Fintech is used for business-to-consumer (B2C), business-to-business (B2B), and peer-to-peer (P2P). These are all processes that every business participates in, which should go to show how big of an industry it's become over the years. Educate yourself on what to know about fintech recruitment trends so you can better understand how the following industries exist within the sector in terms of seeking out their ideal employees. Below is a list of examples of where fintech is used:
- Investing
- Crowdfunding
- Blockchain
- Lending
- Consumer banking
- Money transfers
When implementing this into your business, you must have a good understanding of each of these fields. Crowdfunding is a process where you host an upcoming business venture as a way to raise capital and support. There are many online crowdfunding platforms, which are all examples of fintech.
The Technology Associated with Fintech
Online platforms and virtual payments are only to name a few examples of the technology that powers fintech. A perfect example of this would be artificial intelligence (AI). AI has seen a tremendous amount of usage, especially when it comes to self-learning. A self-learning AI is one of those things that can automate the entire process. As the name implies, self-learning AI studies the behaviors and habits of users to come up with ways to help save money in the long run. Something that needs to be pointed out, however, is that implementing fintech is an investment within itself. You can expect to spend well over $30,000 on average. Depending on how you go about things, it's possible to spend over $100,000 to implement fintech into your business. Make sure to plan out your budget and take out a business loan if need be.
The rapidly changing technology landscape has made it difficult for banks and other financial institutions to move money across borders quickly, securely and efficiently. Archaic systems do not seem to have a place anymore, and financial institutions are given no choice but to evolve.
Nonetheless, with the advent of new and innovative payment solutions, cross-border payments' future looks promising. According to Juniper Research, B2B cross-border payments are expected to exceed USD 42.7 trillion by 2026. This growth is being driven by several factors that we will explore today.
Trends Reshaping Cross-Border Payments
1. Emerging Cross-Border FinTech Solutions
Cross-border fintechs have emerged as viable alternatives to traditional banks and other financial institutions. They can offer lower fees and faster transaction times by leveraging the latest technology. In addition, many of these fintechs offer API integration, which allows businesses to seamlessly connect their cross-border payment solutions with their existing accounting and ERP systems.
They also focus on specialised fintech-based solutions designed to automate their processes, such as mass-payment solutions and multi-currency accounts, without the need to be physically present in different countries. These are the kinds of solutions that traditional banks are often unable to provide.
The Bank of England has estimated that cross-border flows will grow significantly in the coming years, from USD 150 trillion in 2017 to an estimated USD 250 billion by 2027. This growth is being driven by a number of factors, including the increasing globalisation of trade, the rise of digital commerce and the growing popularity of mobile payments. With this increase in cross-border activity, there is a growing need for efficient and cost-effective cross-border payment solutions. This is where fintechs are able to offer a competitive advantage over traditional financial institutions.
2. The Proliferation of CBDCs
Central banks worldwide are researching and experimenting with central bank digital currencies (CBDCs). The Bank of England is one of the many institutions that are looking into this new technology. They have stated that a CBDC could provide "a more efficient and resilient payments system" and help reduce business costs.
CBDCs have the potential to revolutionise cross-border payments, as they would allow businesses to make international payments using a digital currency that is backed by a central bank. This would simplify the process, improve the speed and eliminate the need for intermediaries. In addition, CBDCs could help to reduce the risk of fraud and counterfeiting associated with traditional cross-border payments, as they would be issued using blockchain technology. This would provide a secure and immutable record of all transactions.
3. Real-Time Cross-Border Payments
One of the biggest challenges with cross-border payments is the time it takes for the money to reach the recipient. This is due to the fact that banks operate on different schedules and time zones, which can cause delays. In addition, banks often have to rely on intermediaries to process these payments, which can add even more time.
This is why real-time cross-border payments are becoming more popular. These payments are processed and settled immediately, which means that the money will reach the recipient almost instantaneously. This is made possible by using technology such as blockchain and smart contracts.
Currently, there are several initiatives underway to launch real-time cross-border payment systems, including SWIFT GPI and Visa Direct.
What Does The Future Hold?
The trends discussed here are all pointing to cross-border payments becoming faster, more secure, cost-efficient and more efficient from a customer standpoint. This is good news for businesses and consumers alike.
There are, however, some challenges that need to be addressed. Firstly, the closed-loop nature of some of the new cross-border fintech solutions may limit their market power. Bech and Hancock note that, in contrast to stablecoins, cross-border fintech solutions rely much more on existing providers and infrastructures (banks and payment systems). This means they are less deep than stablecoins in terms of the closed loop they bring.
Secondly, the legal and regulatory environment for cross-border payments is complex. This is due to the fact that there are multiple jurisdictions involved. Regulations are constantly changing, and this can make it challenging for businesses to keep up to date.
Finally, data security is a key concern for businesses when making cross-border payments. This is due to the fact that sensitive data, such as financial information, is often involved.
Despite these challenges, the overall trend is positive, and it seems likely that cross-border payments will continue to become faster, easier and more efficient.
About the author: As Co-Founder at Capitalixe, Lissele Pratt helps companies in high-risk industries obtain the latest financial technology and banking solutions.
With 7+ years of experience in the financial services industry and her global perspective, the entrepreneurial-minded Lissele is a recognised expert in foreign exchange, payments and financial technology. Her entrepreneurial spirit took her from crafting her first business at the age of 16 to building a seven-figure consultancy within the space of three years.
Lissele's hard work and determination landed her a spot on the Forbes 30 under 30 finance list in 2021. You can also find her insights in popular publications like Business Leader, Fintech Futures, Fintech Times, Valiant CEO, Finextra and Thrive Global.
As a recognised thought-leader, she has over 11,000 followers on LinkedIn, with an average engagement rate of 20k views and over 1,600 subscribers on her LinkedIn newsletter.
It is safe to say that FinTech job marketing is booming. Most financial services are looking to FinTech recruiters to fill complex and tech-related positions. The customer demand for various services like cryptocurrency investing and digital banking means that FinTech brands need to keep expanding their tech team. Based on research, it has been found that nearly 46% of all jobs in UK banks are related to technology.
What Is FinTech?
Before we jump into the main gist of this article, let us first look into the basics. A FinTech company is any business that utilises technology to enhance, modify, or automate financial services for consumers or other businesses. Some great examples include trading platforms like Robinhood, automated portfolio managers like Betterment and Wealthfront, peer-to-peer payment services like CashApp and Venmo, and mobile banking apps. Apps that deal with the trading and development of cryptocurrencies can also be categorised as FinTech companies.
What Are Some Recruitment Trends In FinTech Companies?
Businesses now face increasing competition to draw the best applicants for new job roles due to the explosion in FinTech prospects. You will have to keep a close eye on the current hiring trends to stay updated on the ongoing shifts in the market and land the top talents for your organisation. Some recruitment trends you can see in FinTech hiring include:
Candidates Have Started Caring About Company Values
Before, candidates could look into and research the company they are applying for and track its records. They have also started caring more about the things they discover. These individuals now seek employment with companies that uphold their underlying beliefs and provide them with a feeling of purpose in their work.
We do not mean that the candidates are not looking for benefits and salaries. These are still considered key factors in deciding whether they accept the job offer. However, only competitive salaries do not guarantee that the candidate will join the company.
If you want greater hiring success for your brand, you must show them the commitment to your core company values and be transparent and proactive with the candidates.
FinTech Companies Have Gone Global
If you did not know before, Singapore is one of the largest international FinTech hubs today; its global ranking is 4th. In the past few years, significant growth has been seen in other Southeast Asian nations like Vietnam, the Philippines, Thailand, and Indonesia. Moreover, Israel has started noticing a strong start-up culture, with more than 12 FinTech companies like Melio and Lemonade. Even Mexico has witnessed significant growth in this sector.
The expansion of FinTech companies and work-from-home opportunities has strained the talent pool for most FinTech brands, which now have to compete internationally. As the demand for talent keeps increasing, the candidates will expect additional benefits and compensations, especially among international professionals.
Speed Matters
Since the early 2020s, the time to hire has witnessed a sharp growth. Companies are looking for ways to quicken the hiring method, whether in-person or in a virtual setting. Since hiring departments have started using more tech-based tools like SignalHire, the average hiring speed has only increased. In most of these tools, they use an automatic search for people's contacts, also providing information about social networks and past places of employment. Also, similar e-mail finders allow you to write to candidates directly in the tool and track further recruitment progress. All these features will help minimise the time required for hiring. You can learn more about quick candidate search here.
If you use a complicated way to hire candidates, you will miss out on the top talents. You need to look for ways to simplify the recruitment pipeline and streamline all the processes in hiring, like interviews, etc. This will also allow you to extend the job offer to the candidates more quickly, thereby preventing the loss of potential hires.
Job Roles Are Increasing On All Levels
When it comes to FinTech hiring, most of the conversation will centre around the roles of the contributor, like back-end app developers, IT staff, analysts, and crypto brokers. While these job roles will still be important in the future, these are not the only ones available. As such, companies are expanding their tech staff and adjusting the leadership structure to reflect these changes.
Since 2020, C-level positions and tech-centred executive roles have been on the rise. Positions like Chief Technology Officer or digital sales manager are slowly becoming common leadership positions in financial companies. This is a new type of demand that can be seen in FinTech companies as brands are looking for candidates with both tech skills and leadership qualities.
Expect A Global Workforce
There are two important reasons. FinTech companies are global—the first reason is easy to understand. Since the lockdown, most people have started working remotely and can work from any place as long as it has WiFi.
The second reason is more specific towards FinTech companies. The epidemic has brought attention to the size of the unbanked population worldwide and the suffering it causes. Unlike traditional banking, FinTech companies can help solve this problem.
European-focused FinTech brands have started entering the global market, which will lead to such companies unlocking unbacked markets like Pakistan, Mexico, Nigeria, Indonesia, India, and Bangladesh.
The only thing you need to remember is to hire a talent acquisition team that can work globally. Or, you could simply hire such a service.
What Are Some In-Demand FinTech Roles?
If you want to streamline your FinTech recruitment process, you need to have a strong understanding of the jobs in demand and the companies hiring. Now that you have a general idea of the current trends in this industry, let us take a closer look at some in-demand jobs in the FinTech industry.
Software Engineering
As mentioned before, this is a type of industry that deals with robust technology. When building their online services and platforms, these companies need to try to acquire the best of the best.
Most of the open roles available in FinTech companies are related to software engineering. While many software engineers are available today, only some will be selected based on their coding knowledge and unique skill sets. On further research, it has been found that FinTech companies look for people who have knowledge of coding languages, like:
<ul>
<li>Java</li>
<li>Linux</li>
<li>Javascript</li>
<li>Ruby</li>
<li>Python</li>
</ul>
Operations
While software engineers form the backbone of FinTech companies, it is the operating segment that drives the company forward. Most FinTech companies allocate 13% of the total company workforce to Operations.
Operations is not easy – it takes a lot of collaborative effort and coordination to ensure that the software engineers can create the product on budget and on time. The workers also need to ensure that the customers are happy and satisfied. The top three job roles that are highly in demand in FinTech companies include:
<ul>
<li>Customer Support</li>
<li>Customer Success</li>
<li>Information Technology</li>
</ul>
Data and Analytics
FinTech companies have to deal with many numbers and data; these companies often look for candidates who translate the incoming data into insights. Therefore, they are hiring a data analyst to help sort out the data they receive daily. Most FinTech companies allocate 11% of the total workforce for these positions.
Final Thoughts
As you can see, the increase in job opportunities in FinTech companies means more competition to attract the best candidates for the job roles. You will have to keep an eye out for the current hiring trends and ongoing shifts in the market so that you land the best candidate for your FinTech organisation or company. What are your thoughts on the subject? Let us know in the comments!
The “buy now, pay later” company said it raised $800 million in fresh funding from investors at a valuation worth $6.7 billion. This figure comes in significantly below the $45.6 billion value secured by Klarna in a 2021 cash injection led by Japan’s SoftBank.
The news of Klarna’s valuation drop comes after weeks of speculation that the firm has been seeking a so-called down round. This is where a privately-valued firm raises capital at a valuation lower than when it last sold new shares to investors.
“During the steepest drop in global stock markets in over fifty years, investors recognised our strong position and continued progress in revolutionising the retail banking industry,” commented Klarna CEO Sebastian Siemiatkowski.
Klarna reportedly plans to use the funding to push on with its expansion into the United States, where the firm already has around 30 million users.
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In Adjust’s Mobile App Trends report, we explored the recent performance of FinTech apps, highlighting reports that banking app revenue reached $6.8 billion last year—(an 88% increase on 2020) and that over half of purchases (52%) were made with a digital wallet in 2021, and use of cash declined 42% compared to 2019. Adjust data itself showed a 19% increase in finance app downloads compared to 2020.
As the industry continues to grow, there are huge opportunities in the FinTech space for mobile app developers and advertisers alike.
Embracing user privacy
It’s been more than a year since the rollout of iOS 14.5 and Apple’s AppTracking Transparency (ATT) framework. This marked a critical shift in focus towards protecting consumer privacy. Although early predictions for industry-wide ATT opt-in rates were as low as 5%, our recent data shows a much higher rate of 25% — a number that is increasing consistently.
While the opt-in rate for FinTech apps sits below the industry-wide average, at 11%, these changes to data privacy have reinforced the need for marketers in FinTech to extract value from their own first-party data. Given this, we can expect to see continued acceleration in ATT opt-in rates for the FinTech vertical, as more users understand the value of opting in and receiving personalised advertisements.
Therefore, app marketers in the FinTech realm should implement robust opt-in strategies that communicate the benefits of targeted advertising to users. It’s this exact proposition, which has already been communicated for years, that’s led to hyper-casual games consent rates reaching as high as 40%.
Maintaining accelerated install growth
Adjust’s report finds that installs of FinTech apps grew by 35% between 2020 and 2021. Looking at the breakdown of these installations per subvertical. Payment apps make up approximately 57% of the installs share, followed by banking at 34%, stock trading at 7%, and crypto at 2%.
A rise in post-pandemic interest in investing apps continued in 2021, while interest in cryptocurrencies led crypto apps to overtake stock trading apps to become the majority of asset management app downloads. Bitcoin and overall crypto market capitalisation reached new all-time highs in April and November. As expected, we found that coverage of “meme coins” such as Dogecoin and Shiba Inu and the popularity of NFTs on the Ethereum blockchain led to a surge of new users into the FinTech space.
Globally, the share of paid installs relative to organic installs in the FinTech vertical grew from the beginning of 2020 until midway through 2021. Starting at 0.11 and growing to 0.15, 2021 ended with a ratio of 0.14. The most exponential growth can be seen in the crypto vertical, which started in 2020 at 0.11 and finished in 2021 at 0.23, indicating that the big increase in paid campaigns for cryptocurrency apps also, logically, resulted in a boost in the number of paid installs. Banking’s ratio dropped consistently, starting at 0.12 and finishing at 0.07, showing that the increased need and interest in banking apps caused users to seek the apps out themselves.
With more users than ever before flocking to FinTech apps, we know that marketers and developers are looking to expand their channel mixes to capture the largest number of potential new customers. We found that this was reflected in our trends data, as the number of partners each FinTech app is working with has also increased alongside the competition. What’s more, the average number of partners for the vertical as a whole grew from 3-4 in 2021. Crypto saw the greatest increase — starting in 2020 with an average of 2.5 partners per app and finishing in 2021 with an average of 4.5.
Increasing sessions and understanding user behaviour
With an increase of 53% globally, the growth of FinTech app sessions recorded is even more significant. Our findings highlight a boost in engagement within the vertical, as existing and newly acquired users record more sessions than ever before. While global sessions follow a continued upward trend throughout the year, the highest point can be seen in April, which was 92% higher than the 2020 average, and 27% up on the rest of 2021.
The breakdown of sessions across the FinTech subvertical differs significantly from what we saw for installs. Banking takes first place at 46%, followed by payment at 31%. Stock trading and crypto take more of the sessions share than the installs share, at 17% and 6%, respectively. This suggests that the users who download apps in these categories are clocking more sessions than those using banking and payment apps.
We discovered that this high level of engagement is also reflected in the length of sessions by users in each subvertical, with the most significant growth seen among crypto apps. Session lengths in crypto and stock trading are consistently longer than those in banking and payment, which aligns with the business models of each category. While a payment app might only be needed for a number of seconds for a task to be fulfilled, users buying and selling stocks or cryptocurrencies likely need to spend much longer to complete actions.
According to Adjust’s report, in-app revenue for FinTech apps is also increasing steadily, showing consistent growth from January 2020 through to December 2021. While subscriptions, third parties (sellers and beneficiaries), and advertising are the key ways that FinTechs monetise, we recognise that subscription models have become increasingly prominent. This helps to drive the increase in in-app revenue, as many FinTechs have progressed from the growth stage into the profitability stage.
What next for mobile FinTech?
In 2021, we saw the shift toward mobile accelerate, with more users than ever before turning to apps for their financial needs. With installs and sessions in the vertical increasing across all regions and subverticals, it is clear that the global FinTech app ecosystem is thriving, and continued growth can be expected from this space for the remainder of the year.
As for what’s coming next for the future of mobile FinTech, we expect to see growth in Buy Now, Pay Later (BNPL) services, digital wallets enabling access to cryptocurrencies, as well as cloud banking from traditional banks. For mobile app marketers in the FinTech space, focusing on getting the opt-in is crucial. Although numbers are comparatively low, pushing this rate up by even a couple of percentage points can prove invaluable when it comes to building out conversion value models and predictive strategies for the aggregated SKAdNetwork data set. Focusing on finding these high-value users is key, along with building retention strategies that keep them sticking around. The best way to achieve this perfect balance is to improve the accuracy of your campaigns and to create a user experience that is perfectly optimised to your specific audience segments. Drilling down into your data to determine the key touch points along the user journey is how you’ll achieve this—great data makes for great insights.
Banks are a necessary part of the small business landscape, a 2020 survey of SMEs by Statista found that 99% of SMEs work with a bank or building society. Small businesses are often extremely loyal to their bank, unfortunately, that loyalty is rarely reciprocated.
Banks rarely go beyond the bare minimum when it comes to supporting SMEs: products are designed for mass use, but poorly suited to the needs of any individual business. While banks are increasingly coming around on the need for technology and digitalisation, they are followers, not leaders in this space.
Why banks don’t serve modern SMEs
For an example of the issues with banks, let’s look at onboarding. Getting a small business set up with a bank is a frustrating, time-consuming experience at the best of times, and it’s made significantly more challenging by the inclusion of any changes, such as complex entity structures and special purpose vehicles (SPVs). The old-fashioned process often requires in-person attendance at a branch, even following Covid, and can take weeks.
Overall, banks are large, slow-moving institutions. They have historically been successful, and they’re reluctant to rock the boat as a result; innovation is risky, and banks like to play it safe. They’re wrapped up in legacy red tape and long-outdated processes, but every bank is in a similar position, so there’s no competitive pressure to do better. Unfortunately, the very loyalty that SMEs show to their banks also means that they have little incentive to improve.
FinTech’s enter the scene
According to the Federation of Small Businesses, SMEs make up more than half of all UK business turnover. This represents a remarkable opportunity, so it’s no surprise that entrepreneurs have leapt into action. Seeing a clear gap in the market, newer, nimbler companies have emerged specifically to serve the needs of SMEs.
Unlike the big banks, these businesses are eager to innovate and leverage technology to deliver a set of features designed to make life easier for small business owners. Compare the weeks-long process of signing up for a bank with that of signing up with a fintech - which is straightforward, takes minutes, and can be done from the business owner’s smartphone.
Over the past decade, these alternative financial services (AFS) have evolved from plucky start-ups to trusted institutions in the small business world. Providers have built out their ecosystems, ironed out early issues, and now represent a realistic alternative to the old banking giants.
What can SMEs do?
Every SME is unique, and each one has different needs from its financial provider. The first step that small business owners should take is to ask themselves questions about what they need from banking and expenses and the challenges they face. Often, this is something that SMEs have never seriously considered – the big banks are so well established, it’s easy to forget that there are other options or assume banks are the better one.
Many SMEs don’t actually need to work with a bank and would be better off with an alternative financial provider. For instance, modern payment providers offer many of the same services as a bank, yet are far more responsive and deliver a higher quality of service. In fact, many providers connect SMEs with a dedicated account manager from day one, making the transition over as simple and hands off as possible.
For others, a more tech-savvy partner may act as a supplement to the bank, adding capacity rather than replacing it entirely. Many businesses use the bank to store funds while managing them through a tech platform for greater insight into their finances. Combining a core banking solution with specialised solutions for the financial processes a business regularly needs – such as managing employee expenses, international payments, and foreign exchange – is well worth considering for SMEs which aren’t ready to ditch their banks just yet.
The future of SME finances
There’s no doubt that the entry of fintech’s and alternative financial service providers has spurred banks to improve their offering, but they still lag far behind. It could be years until they implement the quality-of-life features that every smaller provider already has. For that reason, SMEs leveraging new providers – whether instead of or in addition to a bank – will have a competitive advantage.
About the author: Simon England is Managing Director at Equals Money.
Klarna CEO and co-founder, Sebastian Siemiatkowski, made the announcement to his workforce via a pre-recorded video message on Monday. While most Klarna employees won’t be impacted by the cuts, Siemiatkowski said some will be informed that Klarna can no longer offer them a role.
“When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today,” Siemiatkowski said.
“Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession.”
Klarna currently has over 6,500 employees worldwide.
Buy now pay later companies, such as Klarna, which allow consumers to spread the cost of purchases over a series of interest-free instalments, became exceedingly popular over the Covid-19 pandemic as consumers spent more on material items.
However, a potential recession would undoubtedly see the popularity of such services decline as consumers look to cut down on non-essential spending.
Despite the high cost and high maintenance traditionally associated with corporate portals, banks have been slow to adopt SaaS technology for helping them better manage their budgets. Leading banks are spearheading the way in facilitating digital trade services for their trade clients and prioritising the support of digital trade by relying on innovative Fintechs to build fast, future-proof solutions that can even support multi-banking capabilities.
To future-proof trade finance communications, these are the top priorities large banks are considering and some of the factors that have nudged financial institutions to pursue solutions from external vendors.
The ability to deliver a quick digital trade experience to customers
Through trade portal as-a-service solutions, banks are now able to allow their trade customers to not only conduct transactions but over time be able to fully handle directly from a single portal application, advising as well as utilisation of electronic documents
Many of the world’s largest financial institutions are not able to offer a fully digitised service to their trade customers due to the immense cost, time and complex implementation processes required to offer a fully digitised user journey. But with advancements in recent technologies like Bolero’s Galileo, banks are well placed to offer truly digitised experiences to their customers to conduct their business at speed and with great efficiency.
The pandemic has highlighted the inherent inefficiencies within trade finance operations and as a result, the demand for digital trade services is at its peak. Trade customers today want to conduct their business online therefore it becomes vital for banks to digitise the customer experience as quickly as possible or risk losing that customer.
Dissatisfaction with their current portal solution
As a result of corporates' digitisation of their trade finance processes, banks have been under significant pressure to provide new and improved digital services to their corporate customers who are pushing for a fully digital experience.
Some of the banks we have spoken to tell us that their existing portal solutions do not meet the requirements of their clients anymore. Corporates today are looking for solutions that could adapt quickly and flexibly to new requirements so that they could offer their corporate clients a quick and smooth transition from the old to the newer more innovative systems. They can handle their trade finance transactions as well as having all correspondence between their trade clients and the banks electronically.
Exorbitant ownership costs
For many banks, the total cost of ownership for a trade portal is prohibitive. As a result, banks are reluctant to offer their trade improved customer experiences because the setup costs are too high which in turn slows down the adoption of these services despite the incredible appetite from trade customers.
Subscription-based, turnkey solution cuts the cost of acquisition from millions to a fraction of the cost whilst also reducing the need to hire teams to build solutions and to support clients by developing new upgrades and by providing regulatory-change compliance. By replacing their legacy systems with a state-of-the-art technology platform, banks are able to deliver a more sophisticated digital experience to their customers at a lower cost than they would have paid before.
That’s not all, for smaller more regional banks that do not have many trade clients, the efforts and resources associated with installing a portal solution for their clients often are not worth it. A plug and play solution opens the market up for financial institutions of all sizes.
Freedom from technical debt
Technical debt often becomes a major factor that deters banks in their pursuit of building bespoke solutions as they do not want to deal with the expensive upkeep of their trade portals.
We are seeing many banks that have changed course as they adopt white-labelled solutions that not only cut costs but free them from the shackles of constant updates for their trade customers. In turn, they are providing upgrades to their online banking platforms and making a positive change to the customer experience and channelling innovation into a booming industry, all without the technical burden caused by in-house solutions.
Ability to support digital trade with e-presentations
Many of the existing legacy portals we see banks use today do not allow for corporate clients to manage their own trade transactions and products like Letters of credit, guarantees, electronic bills of lading and standby letters of credit.
As corporate clients become more demanding of their trade partners to embrace digitisation and increasingly rely on technology to conduct business, banks are stepping up to the challenge by delivering enhanced user experience, improved functionality, and a broad suite of connectivity options.
Importance of structured bank communications and audit trails
Structured bank communications and audit trails between banks and clients are very important. Banks have the responsibility of ensuring that their communications with clients are structured and clearly defined to avoid any ambiguity or uncertainty. It is also important that the correct parties respond to the communication in a timely manner, such that there is an appropriate audit trail for all individuals involved.
For example: On many occasions, we have seen cases where a client receives a notice from the bank but does not respond to it immediately. In some instances, the client may not be aware of the deadline or may be unaware of what actions need to be taken as a result of receiving this notice. The lack of proper structure and clear messaging can often lead to delays in responding to requests from banks.
Lack of connectivity for corporate clients and reduced customer stickiness
As demand for multi-bank trade finance solutions has more than doubled over the last few years, an increasing number of corporates that use the services of multiple banks are finding it inefficient to work with every bank on an individual basis.
Larger corporates have the bargaining power to dictate to their banks the formats they should use, however for smaller corporates, buying or building a multi-bank solution can prove to be expensive – and then they convince their banks to work with it. The growing demand for multi-bank solutions presents a difficult hurdle for many banks that must focus on client needs.
To end; a black swan event has created chaos and new opportunities for businesses, forcing them to adapt to a new technological status quo. To navigate successfully through the technological advancements being made, corporations are undergoing a rebirth and embracing new-age technologies. Banks must do the same to keep up.
About the author: Jacco De Jong is Global Head at Bolero.
Fintech companies are on the rise, with more and more people using them to manage their finances. The international fintech market is projected to grow rapidly, reaching a value of about $324 billion by 2026. It will develop with compound annual growth of approximately 25.18 percent between 2022 and 2027.
This skyrocketing growth prediction shows the relevance of fintech companies in the current world. These companies are also under constant pressure to develop new tech and services. And while creating these services, they need to safeguard customers' data.
This article will help you comprehend the reasons behind the increasing need to prioritize privacy in the fintech industry.
What is data privacy?
Data privacy is the degree to which individuals should be allowed to access, possess, use, and share information. For example, you wouldn't mind sharing your name with a stranger while making an introduction, but you would not want to do so until you've gotten to know one another better.
Furthermore, when sensitive data enters the wrong hands, things can go wrong. A data breach at a government office, for example, might result in sensitive information being released publicly. A data security incident at a school might jeopardize students' personal information, which could be used to commit identity theft.
Therefore, the risk of losing data is everywhere, and each sector must take action to eliminate this. If privacy is breached, the company will suffer financially and reputationally. But the good thing is that consumers are more aware of their data privacy rights than ever before and are vocal about when their privacy is violated.
Why do fintech companies need to prioritize privacy?
This is the digital age, and one cannot forget that the number of hacking cases is increasing every year. The attacks on big companies like Equifax have made it clear that no company is safe from cybercrime.
Besides the risk of cybercrime, fintech companies also need to prioritize privacy to protect their users from other dangers. For example, if a customer's data falls into the wrong hands, it can be used for blackmailing or identity theft.
Users themselves show incredible interest in security and privacy-focused options online. They might drop certain services if their operation or track records seem invasive.
For one, more privacy-conscious people choose to download VPN apps to minimize their digital footprints. A Virtual Private Network protects data exchanges online by encrypting internet traffic. Thus, users connect to VPNs when making financial transactions online. It gives users peace of mind and more confidence to conduct business online.
To comply with regulations
One of the main reasons fintech needs to prioritize privacy is to comply with regulations. Financial institutions have always been subject to stringent regulation, and fintech companies are no exception. They need to ensure that all customer data is protected and secure. It is particularly crucial considering recent data breaches suffered by Capital One.
To protect customer data
Another reason why fintech needs to prioritize privacy is to protect customer data. As mentioned above, financial institutions are subject to stringent regulations to protect customer data. Fintech companies need to ensure that all customer data is protected from unauthorized access, use, and disclosure.
To protect the company from liability
If a fintech company doesn't take the necessary precautions to protect user data, it could be held liable for the damages or losses suffered as a result. It could include financial losses, loss of business, and damage to reputation.
To build trust with customers
One of the main reasons fintech companies exist is to build trust with their customers. If customers don't trust a company to protect their data, they are unlikely to do business with it. Trust is essential for any company that wants to succeed in the fintech industry.
To compete with other fintech companies
Competition is fierce in the fintech industry, and companies need to do whatever they can to stand out from the crowd. Offering superior levels of privacy and security is one way to do this. Moreover, this can be the unique point of their success story.
To attract new customers
To grow, fintech companies need to attract new customers. One way to do this is by offering superior levels of privacy and security. This will make customers feel more comfortable doing business with them, and they may be more likely to recommend them to others.
To retain current customers
Fintech companies also need to prioritize privacy to retain their current customers. If customer data is mishandled or security breaches, customers can decide to take their business elsewhere.
To prepare for the future
The fintech industry is constantly evolving, and companies need to prepare for the future. In the same way, cybercriminals are also preparing for the future and speeding up the process to stay ahead of time.
So, one way to deal with this is by ensuring that all customer data is protected and secure. This helps build customer confidence and ensures that the company is well-equipped to deal with future challenges.
Conclusion
The fintech industry is rapidly evolving. Companies are putting efforts to do whatever they can to stay ahead of the curve and protect their customers' data. Privacy is essential for companies in the fintech industry, and the reasons for the same are explained briefly above.
As merchant bankers focused on Financial Services and impact investing, Middlemarch Partners believes that ESG-focused FinTechs have a unique ability to achieve rapid growth, deliver ESG-focused innovation, and attract investment capital to support their efforts to improve the environment and society while generating substantial returns.
We believe that major financial institutions in their effort to adopt these ESG tenants will be compelled either to partner with these sustainable FinTech firms or to invest/acquire them to gain an upper hand with their industry peers.
VC interest in ESG-related FinTechs has surged in the last twenty-four months. MasterCard issued a report which stated that venture funds deployed approximately 2.5 times more equity into ESG-related FinTechs in 2020 relative to what they invested in 2019 (from ~$0.7B to ~$1.8B). Middlemarch believes this trend will continue as earlier stage ESG FinTechs mature (and need growth equity) and more innovative FinTechs enter the market to address unmet ESG needs in the financial services industry.
Rise of Climate FinTechs
Climate action – addressing the damage done to the environment by human activities-- is perhaps the most talked about and researched topic among all the Sustainable Development Goals promoted by the United Nations and embraced by ESG investors and thought leaders. There is no surprise then, that Climate Tech was one of the fastest sub-sectors to emerge within FinTech. While there are many interesting segments in this space, we focus on banking and lending as well as payments, investing, trading and risk analysis. For each segment, we present unique companies that are building innovative products to tackle climate change through financial innovation.
Banking
Over the last few years, some of the largest and most influential banks globally have committed to reducing emissions attributable to their operations. They have also pledged to reshape their lending and investment portfolios to produce a net-zero carbon footprint by 2050. Although it remains to be seen how much this ‘Net Zero Banking Alliance’ can actually achieve among the largest banks, Middlemarch believes next-generation FinTechs are winning the battle for ESG-focused consumers who choose their banking providers based on the strength of their ESG-related banking products and their ability to address climate-related objectives.
One traditional financial institution that is taking action to advance ESG goals in a material way is Amalgamated Bank, a US-based regional bank. It is a great example of a traditional bank focused on sustainability. A net-zero bank powered by 100% renewable energy, Amalgamated Bank believes in supporting sustainable organisations, progressive causes, and social justice. It does not lend to fossil fuel companies, and 24% of its loan portfolio is dedicated to climate protection loans and PACE financing (e.g., financing for energy efficiency upgrades, water conservation upgrades). Amalgamated Bank has made tangible progress in aligning its long-term business to achieving Paris Climate Agreement targets. Amalgamated Bank offers a strong business case for how a bank can deliver against socially responsible investment objectives.
A compelling example of a FinTech using ESG to market as well as to address environmental issues is Aspiration Bank, a US-based, online-only FinTech that offers a ‘Spend & Save’ cash management account (CMA) where the deposits are not used to fund any oil and gas projects. It also offers a zero-carbon footprint credit card which claims to plant a tree every time a purchase is made from the card. The bank is set to go public in a $2.3B SPAC transaction later this year. With celebrity investors like Leonardo DiCaprio, Orlando Bloom, Robert Downey Jr. and Drake, a multi-million sponsorship deal with Los Angeles Clippers and a multi-billion SPAC in process, Aspiration Bank sets the tone for high-profile, ESG-linked FinTechs to disrupt the banking industry by attracting a younger and more environmentally oriented consumer demographic.
Similarly, Ando, a US-based, online banking platform, invests customers’ deposits exclusively in green initiatives like renewable energy and responsible agriculture. By allocating more than $12M of its customers’ money to green loans since launch, Ando has empowered its users to make a meaningful impact with their savings. Launched in Jan 2021, the company announced a $6M seed round in October 2021, with over 30,000 customers.
Lending
The financial services sector that has most embraced ESG-related efforts is Debt Financing. There have been many green bonds and sustainability-linked loans issued. In addition to these bonds and loans that are promoted by large financial institutions, specialised FinTech lending companies are emerging that focus on sustainability and have developed dedicated lending platforms and products to address the ESG objectives of their consumer clients.
Both Goodleap and Mosaic Inc. are excellent examples of lending platforms focused on financing sustainable home improvements. Goodleap, America’s top point-of-sale platform for sustainable home solutions, offers home upgrades with flexible payment options. With more than $9B in loans deployed through its platform, the company is valued at $12B post its recent $800M capital raise. Mosaic is a leading financing platform for US residential solar and energy-efficient home improvement projects. The company surpassed $5B in loans through its platform in July 2021 as well as closed its 10th solar securitisation — more than any other solar loan issuer in this space. Both these platforms offer simple financing solutions for their customers and are poised to capture a critical component of the sustainable lending market in the years to come.
Carbon Zero, a US-based credit card issuer, offers a simple way for customers to offset their carbon impact. The credit card fee collected by the company is invested in industry-leading forestry and carbon capture projects instead of environmentally harmful ones. Users can automatically neutralize their carbon footprint and achieve a Carbon Zero lifestyle. Incumbent credit card provider Visa recently announced a similar card program called FutureCard which offers 5% cashback on green spending to reward consumers who demonstrate ESG-supportive purchase behaviour.
Payments
Climate FinTechs in the payments segment focus on influencing the spending and shopping behaviour of consumers to help influence them towards embracing brands, companies, and practices that both are more sustainable and help reduce their consumer carbon footprints. And while all these offerings advance ESG objectives, they also help Climate FinTechs attract a key demographic segment and sustain their transaction revenue by aligning financial transactions with ESG goals.
Ecountabl is a US-based, purpose-driven tech company that helps consumers shop and spend on brands and companies that align with their social and environmental goals. Ecountabl seeks to make consumers more aware of their spending tendencies. Users can connect their credit card or bank account to Ecountabl so that it can monitor the ESG impact of their purchases. Ecountabl achieves this by maintaining one of the largest databases in the world monitoring the level of ESG adoption for brands and employers. The company is venture-backed with funding from CRCM Ventures.
Meniga, a UK-based company, focuses on addressing the issue of carbon emissions produced by consumer spending patterns. It offers a carbon insight platform that banks can use to inform their customers about their carbon footprint based on their spending. The platform also helps offset this emission by inviting customers to take challenges, adopting green products, participating in the bank’s CSR initiatives, or finding other ways to offset their carbon footprint. Meniga drives insights from the Meniga Carbon Index to provide accurate estimations using transaction data.
Alipay, the mobile payment app by Ant Group of China, launched an initiative called Ant Forest which encourages users to make decisions that lower their carbon footprint through the spending behaviour using the Alipay app. The resulting reduction in carbon emissions are recorded, and users are rewarded with “green energy” points which can be used to plant actual trees that users can monitors using satellite imagery. Ant Forest has helped over 600 million users plant more than 326 million trees since it launched in 2016.
All three of the examples above focus on influencing the customer to make better energy consumption choices, rather than help them offset their emission by investing in environmentally friendly projects. By putting the customer in charge of their emission behaviour, these companies help consumers focus on their own contributions to advancing ESG goals. It appears that these firms are intent on changing behaviour and are leaving the carbon trading investment opportunity for more institutional investors who are likely to be more effective participants in that market.
Investing
Asset Management and Wealth Management are key focus areas for ESG-focused FinTechs. These companies help individual investors generate a more ESG-compliant portfolio by either offering a specialised marketplace to access ESG-friendly investments or by managing consumers’ portfolios with a focus on composing an aggregate portfolio that achieves measurable ESG goals.
Raise Green is one of the first green crowd investing portals in the US that offers investors a marketplace for local impact investing. The portal helps investors get fractional ownership in clean energy and climate solution projects. The firm is focused on appealing to the younger demographic segment which favours impact investing. The firm completed an angel round of equity financing in April 2021.
There are numerous FinTech portfolio management providers like Arnie Impact and Carbon Collective that offer personalised or pre-built portfolios which focus on sustainable investments and are aligned to the personal values and financial goals of the ESG-focused individual investor. Arnie recently completed its early-stage venture round in September 2021 while Carbon Collective completed one in January 2021. Both companies offer a new option for retail investors to build a long-term sustainable portfolio.
Trading
Trading is a sector where FinTechs can leverage blockchain technology to lower costs, reduce intermediary involvement and at the same time establish exchanges and marketplaces that enable the trading of carbon credits to advance environmental goals while monetising that effort.
Aircarbon, a Singapore-based, global carbon exchange platform built on blockchain technology, bundles carbon credits from different projects into a single instrument that can be traded on its digital platform. Unlike the current system of carbon credits trading, where companies purchase credits linked to individual projects, Aircarbon aims to create and offer standardised carbon credits instruments via bundling of projects. This approach could enable a more standardised carbon credit economy which could catalyse large-scale, institutional commodity trading.
Climate Impact X is another Singapore-based global carbon exchange and marketplace for carbon credits jointly established by DBS Bank, Singapore Exchange Limited (SGX), Standard Chartered Bank, and Temasek. It supports trading of carbon credits created from projects involved in the protection and restoration of natural ecosystems. The company recently completed an auction of a portfolio of 170,000 carbon credits connected to eight recognised forest conservation and restoration projects located in Africa, Asia, and Central- and South America. The company aims to have such auctions on a regular basis starting in 2022. The development of an expanded carbon credit supply via auctions could help the carbon offset market reach $100B in tradable carbon by 2030.
Risk Analysis
Risk analysis is a Climate FinTech category that has seen the highest rate of exits and mergers & acquisitions based on a report issued by New Energy Nexus. Risk analysis companies focus on measuring two kinds of climate risk data: 1) transition risk, which relates to the process of transitioning to a lower-carbon economy and 2) physical climate risk, which focuses on the physical impact of climate change. Both of these risks are important to investors, and investors rely on these analytical solutions to guide their investment decisions.
Carbon Delta, a Swiss company, provides insights that evaluate climate change risk in public companies for investment professionals. A key example of a company that measures this transition risk - Carbon Delta calculates ‘Climate-value-at-Risk” which provides forward-looking and return-based valuation assessments for an investment portfolio. By offering a calculation of the value of the future costs related to climate change, the company can help influence how investors and operators can direct capital to less environmentally harmful projects. This company was acquired by MSCI in 2019.
Jupiter Intel, on the other hand, measures the physical risk of climate change at the asset level by using satellite data, artificial intelligence, machine learning and Internet-of-Things connectivity. The Climate Score provided by its platform enables users to project the effect of climate change on a portfolio of assets. Banks, asset management firms, and other financial services companies can leverage this data to manage risk and allocate capital to assets that maximise positive climate impact. The company raised $54M in Series C venture funding in a deal led by MPower Partners Fund and Clearvision Ventures in September 2021.
Middlemarch is Poised to Support ESG-focused FinTechs
Middlemarch Partners believe that FinTechs as well as traditional financial services players can use ESG to attract customers who care about changing how we interact with our environment and each other. Not only is Middlemarch Partners focused on helping capitalise on next-gen financial services companies that want to focus on environmental objectives, but we also want to help established traditional financial services companies find ways to reorient themselves towards ESG efforts.
Middlemarch Partners is also cultivating investors who want to help lead the charge in ESG-oriented financial services companies. We know those investors are looking for those businesses that can deliver strong returns and, at the same time, advance ESG objectives. That is the winning strategy that will allow us all to do well by doing good.
