1. Alternative payment methods are replacing cash

The payments space has been one of the key drivers of change in fintech this year.

According to a Visa Back to Business study, in 2020, 78% of global consumers changed the way they pay, and 70% used a new payment method for the first time.

Although the need for safe and convenient methods of payment skyrocketed during the pandemic, the field had been experiencing a significant surge even earlier. For instance, 92% of Visa payments in Australia were contactless as early as in 2017.


“Convenience is a key driver for all customers, whether they be consumers or other businesses. We’re now accustomed to having everything we need at our fingertips, and financial institutions are embracing this change in behavior by harnessing technology and developing more financial products for their customers.”

—Lynne Darcey Quigley,
CEO and Founder of Know-it

On top of the shift from cash to (often contactless) card, alternative payment methods—APMs for short—have begun to take hold. They include digital wallets (such as Apple Pay or Google Pay), mobile wallets, pass-through wallets, cash-based vouchers, and buy-now-pay-later options.

This year, Google will launch GooglePlex, a banking app integrated with Google Pay that will allow users to make payments and manage their savings using a single application.

To provide seamless services, tech companies are also leveraging APIs and digital infrastructure, integrating financial institutions with ecommerce platforms.

Chris Hadorn, who leads KPMG’s Global Payments team, believes that open banking in particular will drive increasingly integrated payment solutions. “It’s currently mandated or regulated in a number of jurisdictions, primarily in EMEA, but we’re going to start to see it make its way across the pond and into North America, which will further support and facilitate Banking-as-a-Service platforms.”

2. Cryptoassets are becoming mainstream

Cryptoassets, just like many other areas of fintech, were profoundly affected by the unfolding pandemic.

For instance, changes in monetary policies in the US, which were introduced to offset the economic damage of lockdowns, meant that individuals and institutions had been looking for ways to protect their wealth.

As many turned to Bitcoin, the cryptocurrency experienced a real boom in the first half of the year, hitting a new all-time high price. Today, the cryptocurrency market is worth over $2 trillion.

Over the last year, a number of large companies, including Tesla, Square, and MicroStrategy, have added Bitcoin to their balance sheets, and some banking institutions have begun offering investment products based on the cryptocurrency to their clients.

Dave Abner, head of global development at Gemini, a cryptocurrency exchange, thinks that the first half of this year has been a “breakthrough” in many ways. “There’s tremendous focus and attention being paid to [the crypto industry],” he says.

Some countries have even begun to actively consider granting them a legal tender status.

In June, El Salvador adopted Bitcoin as the national currency in the hope that the move would open up financial services to the 70% of the citizens who don’t have bank accounts and make it easier for Salvadoreans living abroad to send money home.

But as cryptocurrencies gain popularity, there has been a lot of talk about regulation and oversight. Lawmakers around the world are looking for ways to make cryptocurrencies a safe bet for investors while keeping cybercriminals at bay.

According to a report by Elliptic, cryptocurrency businesses and financial institutions must prepare for tighter regulations. “Those that fail to take appropriate steps now could find themselves in regulators’ crosshairs, risking large fines or penalties.”

3. Embedded finance is booming

With the aim of retaining customers and prolonging their so-called “lifetime value,” businesses of all kinds and levels of maturity are increasingly offering embedded finances.

The concept, which comes down to non-banking companies like ecommerce platforms providing financial services, includes buy-now-and-pay-later programs, insurance options, and Banking-as-a-Service offerings.

For customers, the main appeal of the solutions has been convenience and ease of use. For instance, in the past, consumers who wanted to take out a loan to finance a purchase had to do it separately. It was virtually impossible for non-financial organizations to provide banking services of any kind.

With embedded finance, they can do so at the point of purchase. This was made possible thanks to the Open Banking movement, and its supporting regulations such as PSD2, which removed many of the previous barriers.

Louisa Murray

“Open Banking was the opening of the gate which led to Banking-as-a-Service and where we see the real excitement, Embedded Finance. This includes everything from being able to launch a credit card, integrate wage advancing and disbursements, right through to subscriptions, and the ability to pay any fungible asset and automate receivables.”

—Louisa Murray,
COO at Railsbank (UK & Europe)

Railsbank, which promises to “make embedding finance into apps and customer journeys as simple as drag and drop,” has led the way in making financial products and processes digital. Murray said she believes “it’s fair to say we are seen as a pioneer and innovator in the industry. We are continuing pushing the boundaries of what is possible within a rapidly changing financial services industry.”

Experts estimate that the embedded finance industry could generate $230 billion in the US alone by 2025, and $7.2 trillion globally by 2030. That is more than the combined annual revenue of the top 30 banks and insurers today.

Mike Ross Kane, CEO at Hydrogen, believes that embedded finance is bound to be at the center of the digital-first financial sector and “for those banks who did get in on the ground floor, embedded finance represents a tremendous opportunity for expansion.”

4. The use of artificial intelligence and machine learning is becoming broader

Artificial intelligence plays a huge role in finance, underpinning a number of essential processes, from insurance underwriting to money laundering prevention. You might not even realize how many of the financial products you use on a daily basis are based on AI.

One of the hottest fintech trends this year that is likely to transform consumers’ relationship with financial products is autonomous finance. In short, it’s an algorithm-based financial management technology that uses artificial intelligence and machine learning to make financial decisions without direct human input. It does so by identifying patterns of behavior, collecting information about investment goals, and analyzing current ways of banking.

Autonomous finance is revolutionizing corporate finance in particular, which has traditionally relied on largely manual efforts, freeing up analysts’ time in the process. It’s already available in tools such as J.P. Morgan Wealth Management, Acorns, SoFi, and Ameritrade.

Artificial intelligence is also being used increasingly in identity verification.

According to Michael Van Gestel, head of global document fraud at Onfido, “There is no question that COVID-19 has catalyzed massive growth in identity fraud attempts, with industries like financial services disproportionately affected.”

The company uses AI-based technology to assess whether a user’s government-issued ID is real or fake, then compares it against their facial biometrics. The company provides its services to the likes of Revolut, Bitstamp, and Curve.

5. Sustainability is again in the spotlight

The COVID-19 pandemic and climate change have put even greater emphasis on sustainability in finance. After the events of recent months, there’s no going back to the old “normal.”

As the financial sector plays an integral role in helping create resilient economies and meeting ambitious climate pledges, it’s increasingly coming under scrutiny by concerned consumers who expect financial institutions to step up their game.

Companies such as Sustainable Development Capital LLP are already doing so.

This multinational investment management firm, which specializes in environmental infrastructure, focuses on bringing capital together with the most effective technologies to create solutions that are beneficial for the planet.

The company has a track record of positively impacting the environment by investing in green projects.

Another area where fintech companies can make a huge difference is the remittance market.

Worth over $500 billion annually, it’s dominated by traditional providers that charge high fees, are too slow to meet customers’ demands, and have limited reach in rural areas that need them most.

There are around 1.7 billion adults worldwide who don’t have access to a traditional bank account, whether from a financial institution or a mobile money provider, according to the World Bank.

One of the fintechs that have taken on the problem is Taptap Send, a UK-based company that lets people send money back home to Africa and Asia instantly and at very low prices, using a mobile application.

The company says that building its whole tech stack from scratch has allowed it to pass on lower exchange rates to its customers than the competitors.

With a focus on serving populations in some of the poorest nations on Earth, Taptap Send is working toward making the UN Sustainable Development Goal of reducing remittance costs 2030 a reality.

Marshmallow is the UK’s first car insurance provider to team up with ClimatePartner on a carbon offsetting program. The company says that sustainability lies at the heart of its operations.

Oliver Kent-Braham, co-founder and CEO of Marshmallow, told STX Next that “now, for every Marshmallow policy purchased we cover the carbon offsetting costs for the first 500 miles. Our customers don’t have to do a thing. We hope to see others in the sector follow suit shortly.”

6. Open Banking is here to stay

Open Banking connects banks, third-party organizations, and technical providers, enabling them to securely exchange data through the use of application programming interfaces (APIs).

The concept emerged as part of a wider drive toward a more open financial ecosystem that offers greater value to the customers.

It allows you not only to perform the usual operations more easily, but also use your accounts for a number of other purposes that were simply not available before. Some of the benefits of using Open Banking include account aggregation, which means you can see multiple accounts from different providers in one interface, subscription management to allow you to detect and manage all recurring payments, and personal finance management to give you a total overview of your finances across different accounts.

Given the wide variety of domains it can be used in—including personal finance, consumer lending, real estate, and insurance—it’s no wonder that more and more customers are beginning to see its advantages.

According to a recent survey by Mastercard, 81% of US adults are currently linking their bank accounts to third-party financial apps, with many citing convenience as the top reason for turning to the technology.

Just like many customers, you might have misgivings about sharing your financial data with third-party providers. However, Open Banking has, in fact, been designed with security at its heart. Its central premise is that your financial information belongs to you and not the financial institution that holds it.

Open Banking is heavily regulated, uses rigorously tested software and security systems, and allows you to decide when and how long you want to provide access to your data.

Andrew Beacock, Head of Engineering at Canopy, a UK company that simplifies the process of renting properties, told STX Next during a recent session in our Tech Leaders Hub series that companies need to be absolutely clear in how they communicate the benefits of their services to the potential users and eliminate any privacy concerns they may have.

Andrew Beacock profile picture

“You need to instill a sense of trust in your product, whether it’s how you phrase what your product does, your terms and conditions, or the privacy policy that you have in place, to show to the customer they can trust you and be confident that you’ll look after their data in a safe and efficient way. Part of it is having a good, established brand. But also you need to have a compelling idea. For someone to trust you with all that information, what are you going to give them back? The customer will give you their banking information which is valuable to them, you will boost their credit score and give them budgeting and credit insights and financial tools to use that data. And that’s the return they are going to get.”

—Andrew Beacock,
Head of Engineering at Canopy

7. Fraud management, cyberthreat, and regulatory risk teams are collaborating to defend the online transaction space

One of the most important trends we observed in 2021 that we can expect to see more of next year is the bringing together of fraud, risk, and cybersecurity teams in fintech and FI/banking.

According to Joshua Bower-Saul, CEO of Cybertonica, in the past these domains had their own silos, budgets and programs, which were sometimes coordinated but on occasion would also become isolated from each other.

In a conversation with STX Next, Bower-Saul pointed out that statistics show a massive rise in all kinds of fraud scenarios and cyberattacks (ransomware, hacking of large identity bases and massive, automated banking and scam attacks) since the beginning of the pandemic.

Interestingly, the stay-at-home lifestyle brought so many new accounts into a fully digital existence that fraudsters have grown their business just like legitimate actors, and even faster. Today, fraud and scam attempts are up 80% and more in many countries around the world.

The actors in the fight against fraud, cyber and regulatory violations tightened their collaboration in 2021. The effort is exemplified in the story of 4Stop, a company that transitioned from a standard fraud prevention platform just 3 years ago to an orchestration offer with compliance, identity, and cyber tools before being acquired by JUMIO.

According to Bower-Saul, this is part of the reason Cybertonica began working with Acuris Risk to create new combined offers in cyber threat detection.

Joshua Bower-Saul-1

“In this last year we have seen many new alliances among firms working in fraud prevention, identity, compliance, and regulation to provide reinforced and single-platform services. This convergence is the way of the future and there is no doubt the multi-purpose risk hub will replace the integration of multiple vendors.”

—Joshua Bower-Saul,
CEO at Cybertonica

Final thoughts on fintech trends in 2021

Unlike many other sectors, fintech has experienced significant growth during the pandemic. Although some of the trends shaping fintech today had begun before 2020, the changing economic conditions accelerated their adoption.

As many consumers demand not only efficiency and convenience but also sustainability and inclusion, financial service providers are taking note. The companies we listed in this article are prime examples of leadership, innovation, and championing of modern values. 

For more fintech inspiration, head over to our blog, where you will find plenty of articles covering a wide range of topics within the financial sector, including:

If you work for a fintech company and need an extra hand to help with the technical side of things, let’s talk. In the meantime, feel free to take a look at our fintech clients’ testimonials.