The struggles many businesses faced in 2020 to early 2021 at the onset of the COVID-19 have become a distant memory for many, which begs the question – have we reached equilibrium? Remember when everyone and their dog seemed to be squeezing as much productivity out of the pandemic as possible, by rushing to reach the peak of digital transformation, all whilst adapting to working remotely? In contrast to this period of intense change, 2022 is likely to be marked by innovation, and stability, rather than businesses just managing to stay somewhat afloat. We recently spoke with leading fintech analysts, including Thad Peterson, Strategic Advisor at Aite-Novarica Group, and Jacob Morgan, Principal Analyst at Forrester Research, to get some insights into this new trend and what else we can expect to see in 2022.
Is cash still a thing? The growth of mobile payments and digital wallets.
With each passing year, consumers increasingly forget about their coin purses – data from Boku predicts that 60% of the world will use mobile payments by 2025, and Sweden's journey is sui generis when it comes to becoming completely cashless by 2023. "The actual act of payments used to be contained at either the Point-of-Sale terminal or online at the shopping cart. Payments can now happen anywhere, within social media feeds, in the aisle in a retail store, or in the case of stores like Amazon Go, nowhere at all. Payments are morphing into a utility that seamlessly completes a transaction. Friction is failure in payments, and the friction is rapidly leaving the ecosystem," said Thad Peterson, Strategic Advisor at Aite-Novarica Group.
Increasing (or complete!) automation in stores is expected, with many accepting only card or contactless payments rendered via mobile devices. Unsurprisingly, ESG standards will compound this as businesses are encouraged to move away from plastic payment cards and cash due to the environmental impact of their production.
"The rising prevalence of digital wallets and the re-surfacing of QR codes, whose time has finally come, are a consequence of the pandemic - contact-free and COVID tracing solutions rely on the humble QR code, now visible in shops, cafes and ‘order-at-table-stay-away-from-my-counter' tools that will continue to proliferate in 2022. These simple solutions take the cognitive load from customers and staff, and whilst they never went away in APAC, they will be everywhere next year in all sorts of unexpected places. On top of this, the wallet morphs into the lifestyle platform, which will start to become more prevalent outside of APAC in 2022 as firms weave several capabilities together in consumer-focused super-apps," said Jacob Morgan, Principal Analyst at Forrester Research.
Consumer protection will become more important, in tandem with technological advances. The FCA have already begun preparing its members for an influx of new rules that will come into play after July 2022, which will force financial services firms of all kinds, to take more responsibility for fraud.
Businesses have been primed for this forthcoming regulation and are well aware of the need to keep their consumers protected from scams that have increased, since many consumers turned to online shopping during the pandemic.
"The significant shift to digital financial services brought about by the pandemic has created an expanded attack surface for fraudsters to exploit. With this shift comes consumers who are new to the ecosystem and, generally, less sophisticated, providing even more fertile ground. Scams against consumers are the easiest targets for fraudsters in this environment. Defences will need to leverage state-of-the-art detection methods to mitigate authorised push payment fraud without impacting the customer experience," said Jim Mortensen, Strategic Advisor at Aite-Novarica Group.
Banks want to be hip again!
Consumer habits have undoubtedly changed during the pandemic, causing bank closures – Virgin Money, HSBC and Lloyd's being amongst those who have decreased their physical high street presence. Over the past couple of years, we've seen virtual banking as the new bricks-and-mortar. Aurelie L'Hostis, Senior Analyst at Forrester, said that "[Banks are] eyeing the opportunity to pick up innovative offerings and plug digital gaps, banks will continue their frenzy of deal-making, investing in, or acquiring fintechs."
At Forrester, they also expect "tech spending by banks to achieve double-digit growth in 2022."
Fintechs are watching payroll closely
Digital transformation projects have resumed now that we are on the other side of the pandemic and fintech companies are aware that payroll will be receiving funding to modernise processes. Fintechs will undoubtedly want their solutions to be considered in any plans to invest and innovate. 2022 will see payroll options like salary on demand, salary advances, crypto payroll, and early direct deposit come into the mainstream.
Finally, Gartner’s 2021 Market Guide for Multicountry Payroll Solutions supports the emergence of this area as one to watch for next year;
“Multicountry payroll transformation projects have received significant investment over the last year to facilitate post-pandemic recovery and support hybrid work scenarios. Application leaders should streamline their payroll delivery model to achieve compliance, efficiency, and optimal EX.”