5 Key Trends in Fintech for 2021
January 22, 2021
Galileo CEO Clay Wilkes is a fintech visionary. So, we asked him to look into his crystal ball and share what he sees as the hottest financial services trends of 2021. Here’s how he responded. Agree? Disagree? Let us know!
Accelerated adoption of embedded finance across industries:
• Enabling new business categories. Similar to how Uber disrupted the taxi industry by integrating payment functionality directly into its app to reduce ride-payment friction for drivers and passengers, we’ll see more companies--across industries--embedding payments into their offerings.
By eliminating riders’ worries about having cash to pay for rides or whether cabs accept cards, Uber created an entirely new transportation category. Similarly, Doordash changed the game for real-time food delivery, and Amazon changed retail by enabling us to buy almost anything instantly from our laptop or mobile device.
Embedded payments enables business concepts that don’t work--or at least don’t work well--without it.
• Promoting stickiness. Embedded payments makes the app brand and card brand increasingly important. As in the above examples, simplicity and ease of use established each company’s app as the go-to choice for rides, food delivery and general purchasing. And, the payment card that’s entered in the app initially will be the card that’s top of wallet--indefinitely. Brand matters!
• Liberating businesses to think outside the box. Embedded payments won’t only reduce the need for consumers to carry cash or even physical cards but will enable out-of-the-box thinking, leading to further positive disruption to the status quo by decoupling payment from the service or purchase.
• Eliminating friction. All kinds of businesses, most especially those that don’t aspire to be financial services companies, will recognize embedded payments as the solution to eliminate the friction they now experience when they make or accept any type of payment.
• Making it happen fast. Speed is the key. Non-financial services businesses looking to integrate embedded payment solutions will choose those that are seamless and based on powerful technology platforms, with the proven ability to implement fast--in weeks or even days.
A significant economic boom following the pandemic:
• Leading the way with consumer spending. Reminiscent of the economic boom in the early 1920s following the end of the Spanish Flu, the U.S. will experience a strong consumer-led economic expansion after COVID-19. Driven by deferred spending, COVID-built personal savings will drop as spending on travel, personal well being, eating out and in-person entertainment soars based on pent up demand.
• Boosting business with government support. And businesses that have been negatively affected by COVID-19 will continue to bounce back, boosting the economy. Government support, which will be offered to help those who have been devastated by COVID-19, will ultimately be poured back into the economy.
Incorporation of fintechs into President-elect Biden’s stimulus package:
• Recognizing the success of fintechs in distributing the first round of COVID-19 stimulus payments, a tech-forward Biden administration will rely more heavily on neobanks, including many Galileo clients, to maximize efficient distribution of funds allocated in future stimulus packages, including the next--expected in early 2021.
Growth of fintech in Latin American will begin to rival that of the U.S.:
• After missing out on several cycles of technological developments within payments and banking, what was once a liability for LatAm fintech will prove an advantage to its growth.
Without the complications of an existing embedded infrastructure to be supported and maintained, LatAm fintechs are starting fresh, utilizing the latest technology and bypassing outdated legacy systems.
In the not too distant future, fintech growth in LatAm is likely to outpace the U.S.
Increased use of all forms of contactless payments is a permanent change:
• Avoiding contact during payment. COVID-19 has accelerated contactless payment adoption among a previously disinterested U.S. consumer market. The uptake in preference for tap-and-go payments, including cards and wearables, makes perfect sense in a health-safety conscious environment where no one wants to touch anything outside their homes that’s been touched by others. But COVID-inspired adoption has accelerated behavioral changes. Even after COVID has loosened its grip, consumers won’t give up the newly found convenience of contactless payments they were introduced to during the pandemic.
• Decoupling shopping from physical locations. Similarly, COVID’s accelerating effect on e-commerce and m-commerce will continue long after the health crisis abates, as consumers have become hooked on the choice and convenience of shopping on their laptops and phones.
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