Today, Finch Capital issued their 2022 predictions (visit predictions report here) for European FinTech. The predictions summarizes and compiles industry data from various databases and research institutions. It also includes the Finch team’s own perspectives on the market, proprietary insights and data based on a decade of investment experience in European FinTech. We believe the following 11 trends will shape 2022.
- Fight for share and margin for PSPs – Processing margins in decline, value added services will define winners. As competition increases and payments processing becomes commoditized, the ability to monetize other products and find an edge to win customers will be key to survive.
- Crypto/DeFi goes mainstream – Corporates start to adopt Crypto & DeFi, paving the way for global adoption. Increased interest of CVCs to allocate capital to the space, adding an additional stamp of approval needed to go mainstream.
- Sustainable apps for consumers find scale – Consumer cash surplus and interest at all-time high. Drastic increase in sustainable fund flows and household saving rates peaking, combined with increased interest from consumers will help sustainable investment apps to find scale.
- Buy Now Pay Later replaces credit cards – in 3 to 5 years the fight for market share will get real. The latest generations will drive this shift once they overtake baby boomers in consumer spending and penetration of BNPL continues.
- Embedded Insurance on a roll – One of the super apps in Europe will crack an embedded insurance product, biggest potential with Money Management apps. Insurance API ecosystem needs to develop further to meet this growth.
- Back to Basics for Artificial Intelligence – AI took a big hit last year, it’s time to re-focus on basic AI and keep it simple. Most of the value is in traditional AI and analytics and does not focus on very niche finance functions. Implementation time and time to value are questionable.
- The ‘home-journey’ redefined – PropTech will start covering the transaction chain front to end. Earlier waves have shaped certain elements of the value chain, while the coming years are all about hand holding the customer throughout the process in a digital environment.
- AI enabled debt collection software – fastest growing use case in Financial Services. E-commerce purchases are increasingly financed with debt, triggering a need for more efficient collection processes with a new consumer group within both retailers as well as agencies.
- End 2 End KYC and Identity management is the name of the game – As financial crime gets complicated, KYC solutions that only focus on simple ID checks will get left behind. Continuous monitoring is complex but key as one of the biggest concerns amongst industry leaders.
- Payroll rails the next big thing – The open banking war is over with payroll rails becoming the next infrastructure play. Payroll APIs will allow financial product providers better insight into a consumer, enabling actionable results rather than just monitoring (bank APIs). Imagine a lender reducing its interest rate on the basis of ”writing” its deduction into the payroll and thereby almost eliminating non-payment.
- BaaS M&A – A big bank, payments or software vendor will buy a BaaS company focused on payments to enter the vertical.
"2021 was another amazing year for European FinTech, we expect 2022 to be more bold on many fronts from the mainstream adoption of some trends that shaped up the last 5 years such as Crypto, DEFI and digital home journeys, to a more polarized landscape of NeoBanks and Brokers"
Radboud Vlaar, Managing Partner Finch Capital