2021, like the recent years, saw tremendous growth and advancement in technology. While the Covid-19 pandemic stagnated or hindered the economic progress of quite a few industries, the technology industry was among the least affected ones. This advancement was not limited to specific sectors or industries either, and new developments and introductions were made on a global scale. The fintech in 2021 also witnessed some breakthroughs and milestone achievements that we will discuss in this article.

Technology solutions and digital innovations aimed towards enhancing and optimizing banking, insurance, wealth management, or other financial services constitute the fintech industry. The last half-decade saw the industry make impressive strides pertaining to artificial intelligence, blockchain, and many other spheres giving way to modern and innovative ways of conducting different businesses in the industry of finance. A digital facelift improved the operations of loans, insurance, and electronic payments in a significant manner.

The most significant factor, driven by the pandemic, during the year was the realization of related businesses of all sizes that fintech is more a necessity for them than a disruption. More and more operators in the finance world have come to realize that the potentials of fintech do not only offer customers alternatives to conventional options but provide businesses the same as well. With limitations on several physical approaches that were available in pre-Covid times, many financial services would have been almost impossible to provide to customers had it not been for modern and cutting-edge technology.

Expectations of customers when it comes to funds-handling have shifted to digital experiences that are seamless and agile. Adoption of fintech is not a matter of being efficient anymore, but a matter of maintaining your position in the market or even staying afloat if you are a financial company. This is a major reason why many established companies decided to partner with fintech companies and startups. In 2021, many fintech companies that were operating on a B2C model completely shifted their approach to a B2B model. This allowed them to be able to access a higher clientele volume, and the financial companies were able to leverage their expertise in fintech matters. Let us look at some statistics related to fintech in 2021 and discuss newly developed fintech industry practices and trends that are currently no more than a year old.

Digital-Only Banking

The age of physically spending time at a bank is no more as more and more digital-only banks are getting established. With paperless transactions, P2P transfers, and global and contactless payments, virtual banks are quickly becoming a norm. Consumers look for a one-stop mobile solution for all their payment needs, whether they pertain to conventional currency or digital cryptocurrencies. 2021 saw a major drop in visits people made to banks as they are increasingly preferring resetting pins, reviewing balances, managing costs and payments, and accessing analytics from their smartphones.

Artificial Intelligence

The solution tactics that artificial intelligence offers have revolutionized the fintech industry as more financial institutions and modern financial services are leveraging them to the fullest. There is still a long way to go for AI technology to reach its optimal maturity, but 2021 saw more and more banks, insurance companies, P2P payment platforms, and wealth management, and other financial services adopt the usage of AI.

The current statistics suggest that finance companies can lower their operating expenses by 22% close to the year 2030. The cybersecurity of financial institutions and the collection of relevant data and analytics are two domains that AI manages extremely efficiently. The most popular functionality adoption of AI from the financial sector has been client service and customer relationship management software that utilizes smart systems and processes to deal with consumers in an efficient manner.

Innovations in Electronic Payments

Technologies pertaining to verification of identity, contactless payments, mobile wallets, and mobile payments are just a few areas of electronic payments that saw enhancements in 2021 in the technologies they use. There was a 30% growth in tap-to-pay transactions in 2021, and research found that half of the customers are unlikely to shop from a place that does not accept contactless payments. With more than 25% of people across the globe currently using mobile wallets, the percentage is all set to reach 60% by 2025 if it keeps moving at the projected pace.

Open Banking

With a tremendous increase from $7.29 billion in 2018 to $15.13 billion in 2021, open banking is a fintech component that did not administer modesty in its rapid pace of growth rate. Open banking leverages data sharing through the use of artificial intelligence and certain APIs to allow third parties to access and manage the data related to clients’ finances and banking operations. This digital sharing of information between credible and reliable companies forms a secure and systematic partnership which is a win-win for all stakeholders. Looking at the current open banking trend, it is projected that the sector will reach $43.15 billion by 2026.

General Happenings Within the Industry

Cross-industry partnerships, the introduction of new super fintech applications, and traditional banks transforming into marketplace banks have all been common throughout the year. Fintech in 2021 has seen startups targeting small business banks and insurance companies, startup credit cards, and other niche use cases, while large-scale and established fintech firms have been adding new and innovative products that are technologically advanced to their offerings.

Both of these approaches benefit the industry and allow it to become stronger and stay bold. Employing predictive analytics to evaluate the current standing of a consumer and crafting future strategies for them is something that has gathered momentum with personal finance management driven by machine learning and artificial intelligence. Robo advisor 4.0 performs market analysis and evaluates real-time financial portfolios to suggest the next financial steps one should take to reach their stated goals. Similarly, budgeting assistants are also not futuristic things as they are here to give you reminders for the payment of your bills and suggest which account to use for different expenses.

2021 has also seen an increase in the adoption of voice as a method of authentication that allows customers to authorize and validate voice transactions. Setting up recurring payments, rerouting money from one account to another, and canceling subscriptions through voice instructions along with conversational AI bots are not industry novelty anymore. People also receive personalized personal loan offers on minimal interest rates, and people are becoming more comfortable making payments with virtual cards that digital banks offer as they are not comfortable disclosing their credit card information.

The B2B payment space is especially welcoming towards virtual cards. The total amount usage of virtual cards is set to hit the $1 trillion mark in 2022 as they mitigate chances of fraud, simplify reconciliation, and transact at quick speeds.

In Europe and UK, SCA, GDPR, and PSD2 have been two hiccups for fintech in 2021 as well as the past few years. However, with the European Commission’s proposal including a set of innovations and regulations, the hindrance has diminished considerably. With the better half of the regulations still concentrating on customer privacy and the protection of data, steps towards supporting fintech operations have also been recommended. They include:

• Customers are not required to provide paper documents anymore.
• The limitations on financial companies pertaining to their provision of services that were not core to their primary business will be revised.
• The KYC process and demands have been rendered much more harmonized.
• The regulations between member states that were fragmented will be readdressed to reduce the decentralization.

The decision-makers in the US are progressing even slower towards efforts to boost fintech. Their approach has been to try fitting it into one of the regulatory boxes from the financial legislation of the 70s. However, the announcement of FedNow going live in 2023 is something that fintech and SME banks can be excited about as with a settlement and real-time service for payments that will operate round the clock, they will neither have to rent infrastructure from big and established banks nor will have to build a private one.

Some other fintech in 2021 highlights include:

• There are currently more than 85 unicorn fintech companies across the globe.
• 46% of people in the world employ digital channels to carry out their financial operations.
• Research suggests that complexity of use and concerns pertaining to security are the most and the second most major issues, respectively making people stick with the traditional methods of payment.
• 7% of customers use their mobile banking apps more than once every day, while 24.4% use them at least twice a week.
• By the year 2023, conversational artificial intelligence bots are set to save banks $7.3 billion.
• The total value of digital payment transactions in 2021 reached $6.7 trillion and is expected to reach $10.7 trillion by 2025.
• The insurance industry will save $1.3 billion by the year 2023 with the help of AI.
• Insurance fintech in 2021 topped $10 billion worth of investments.

Wealth management companies’ combined assets exceeded the $600 billion