Three trends that will drive fintech growth in 2021
Before the pandemic, fintech adoption was doubling every two years according to the Global Fintech Adoption Index 2019, growing from 16% in 2015 to 64% in 2019. Much of this increase can be attributed to fintech’s ability to be more agile than conventional brick-and-mortar financial institutions—but there’s more than agility at play here. In 2020, fintechs became essential for business survival during the pandemic, acting as a core enabler of the rapid migration to digital payments at a time when consumers were opening up to new transaction solutions when opening up their wallets.
We expect this digital transformation to continue in 2021, but for different reasons than we saw in 2020. If last year was about survival, 2021 will be about convenience, inclusion and sustainability fueling the further adoption of financial technologies, both in the coming year and beyond.
While COVID drove adoption of contactless technology, desire for convenience will carry it further
As we were wiping down packages and groceries and hoarding hand sanitiser, contactless payment finally found wide acceptance in North America. A National Retail Federation (NRF) survey found that 19% of people made their first contactless payment in May, with 57% predicting they would continue to use contactless payments after the pandemic.
This increase in adoption, driven by the need for contactless payment solutions, will continue in 2021 as more and more consumers are exposed to the convenience they enjoy when using these solutions.
Banking the unbanked
Another trend driving fintech growth will be the inclusion of the “unbanked”: those who currently have limited or no access to financial services. The World Bank Group’s Global Findex Database says around 1.7 billion adults lack a traditional banking account, whether from a financial institution or a mobile money provider. In 2021, banks and government agencies can – and, we believe, will – look to the fintech community to help include more people in the American economy by providing them access to new financial service solutions.
An example of how this might look is a Converged Card: a state-issued driver’s license or ID credential with a built-in payment credential. This could be provided in either the form of a physical card or as a digital ID on a mobile device. Imagine a state-subsidized program being able to ‘turn on’ a prepaid function on a person’s driver’s license to directly deposit funds received from unemployment benefits, tax refunds or housing and utility assistance. Customers can also use that same card to make payments anywhere a credit card is accepted. This not only eliminates costly cash-checking charges and delays due to waiting for a check to arrive by mail, but also ensures the funds are going to the designated person, and that the face on the ID card matches the person using the card.
To grow sustainably, we need to be sustainable
Finally, sustainability has turned from a nice-to-have to a must-have in the world of finance. In the most recent Dentsu Aegis Network study, 92% of global customers stated they thought their bank should actively contribute to preserving the environment, and 87% said they wanted credit and debit cards made out of eco-friendly materials. It is important to consider this trend when planning any customer-facing project.
What we find encouraging is that these trends are being driven by the needs and concerns of customers and our communities—health and hygiene, the desire for convenience, financial inclusion of underrepresented communities through access to public and financial services, and the need for sustainability. These trends position fintech uniquely to help address some of the most pressing problems of our time and should lay a solid foundation for continued growth in 2021 and well beyond.