2021 was the year of recovery and opportunity for many, following months of disruption caused by the pandemic. But whilst many industries have struggled to bounce back from the disruption, many Fintechs have managed to thrive in a somewhat hostile economic climate as a result of innovation, digital disruption, lucrative funding and a vision for how products can change the lives of consumers whilst helping businesses grow.
Over the past 24 months there has been a clear switch from offline services to more digital and online driven interactions even in those “customer segments” that were believed to not be “mobile friendly”. Especially in Latin America where a big part of the population has been forced to adopt digital services. The “covid effect” combined with a great smartphone penetration have been the key enablers of fintech success in 2021.
As a passionate fintech enthusiast, I am very excited for what 2022 will bring us., This is going to be a great year where we will be able to apply innovation at scale, and have the opportunity to partner with leading financial institutions.
- Great financial access
In countries where there is a banking oligopoly (Brasil, Mexico, others), competition and innovation are inherently suppressed. The oligopolies will innovate amongst themselves to support their own market position, but any innovation that threatens this position may be ignored or countered. This is not often in the best interest of citizens who want better convenience, choice, rates, terms, lending, etc. This creates a compelling opportunity for neobanks and others to offer better products to consumers to manage their financial welfare and to scale. These products will change the game in these markets and will have or earn the support of the people and regulators when the benefits to citizens are made apparent. That’s why for me, 2022 is going to be a groundbreaking year for banks like Nubank, Uala, and RappiBank.
- Hyper personalization
This trend is here to stay, and it is now making waves in retail banking and wealth management. One-size-fits-all financial services exclude too many customers. By delivering highly targeted experiences, providers stand to benefit from higher customer satisfaction, growth, and loyalty. This will be proved by the fact that in 2022 customer experience is going to be the new territory of fight vs interest rates. Users are tired of annoying mobile banking apps when they could have a slick 4,5 clicks max interactions with neobank or superapp.
In wealth management, I expect segment-specific providers to enter the market in droves, such as those that target the aspiring mass affluent.
- Embedded finance
This is a term used to indicate the offer of financial services by companies that do not have their DNA in this sector, such as retail, big techs, among others. The acceleration of this trend results from the Banking as a Service solution offered by FinTechs, which allow companies from different segments to create their banks and digital accounts. By providing financial services, these companies can strengthen the relationship with customers, improve their services and develop other sources of revenue. Latin America is leading the charge with companies like Conductor out of Brazil and many more up and coming startups in the space. This has the potential to really disrupt markets.
- Infrastructure and laws
Year over year local regulators get friendlier with fintechs in Latin America from enabling cloud services, to promote open banking or by building instant payment infrastructure. We have seen those services getting popular in the last 3 years particularly with PIX in Brazil and Co.Di. in Mexico. However, in 2022 those services will reach a critical mass to really be considered a threat to the existing financial institutions. We are going to see more and more latin american countries launching those services which enables SMEs to exchange money digitally without losing a single cent in those transactions promoting a more cashless environment.
From a regulatory perspective, we are going to see a big push in the open banking space which will enable several use cases across several industries. Moreover, after the big moves in Mexico and Brazil we are going to see other countries in central america and south america promoting financial innovation. In wealth management, I expect segment-specific providers to enter the market in droves, such as those that target the aspiring mass affluent.
- Super app domination
Super-apps integrate financial services into their platforms to provide seamless experiences for their customers. For banks, this means that an increasing number of users may bypass banking apps and simply use the more integrated super-app. Super-apps with digital wallets also make it easier for the users to stay in the super-app ecosystem and reduce their dependence on cash and credit cards.
As the popularity of super-apps grows, they could become a much bigger source of competition for banks than either neobanks or fintechs. By keeping users engaged on their platform, they could make it almost impossible for banks to convince customers to leave the super-app in order to use the bank’s standalone digital banking apps. Rappi is already doing a fantastic job by even providing you cash to your doorstep, but in 2022 we are going to see similar companies rising the latam markets.
In summary, 2022 is going to be a very interesting year for fintech and financial service in general, I cannot wait to read back this article in December and see what’s actually happened vs. not