Europe is one of the leading markets for fintech development. The region accounts for 17% of the global fintech valuation, with significant players like Revolut, TransferWise, Klarna. However, in Europe, Fintechs are not only growing fast but also maturing. That brings new trends and exciting changes in the sector.
Inclusivity overrules profits
Fintech trends in 2022 are led by seamless digital payments, the transition to the metaverse, cybersecurity, and cryptocurrency. But one of the most prominent tendencies emerging is inclusivity and the shifting focus from profits to the end-users.
Inclusivity was mentioned a lot during the Fintech Day 2022 event. During the panel discussion about the future predictions and fintech trends for 2022, speakers representing Fintechs, investors, and regulators agreed that attention to the customer would guide the sector for the years to come.
Fintech companies could lead this transformation by reaching the unbanked part of the population and helping them ensure financial stability. Fintechs offer diverse payment and money management options and borderless solutions which could help reach impoverished countries. Recent studies also confirm this by giving an insight into the power of financial inclusion and its effects on poverty. And while it can take a long time for traditional banks to become more inclusive, Fintechs lead the way.
The biggest challenge – financial literacy
Many people, especially in developing countries, don’t have bank accounts and rely only on cash. That hinders them from financial opportunities and stability. This problem often comes from a lack of accessible financial platforms and financial literacy.
Even people from developed countries lack the understanding of digital banking operations and therefore choose to avoid trying opportunities Fintechs could offer. Another problem poor financial knowledge brings is susceptibility to scams and hacking. Each day financial scams become more advanced, making it harder for people to distinguish them. And most victims lack knowledge about navigating digital banking and cybersecurity.
However, the nature of scams is also shifting. While many associate financial scams with hacked accounts, a large portion of the frauds happen by people voluntarily transferring their funds. That means that scammers use social tactics to get close to potential victims to take their money. And the nature of social hacking is different than hacking into someone’s account.
Many different platforms are involved, and Remco Janssen, Founder & Publisher of Silicon Canals, believes that Fintechs could help solve this problem if social media platforms also took more responsibility to monitor suspicious activity. “Email providers, social media channels have a huge responsibility towards cybersecurity because they enable people to communicate with each other or at the same time haggle money from the people. And those platforms aren’t doing enough right now to prevent scams.”
Gytenis Galkis, Partner at 70ventures & Founding and Board Member at LitBAN explained that one of the solutions could be technologies like artificial intelligence. “Banks have many opportunities to crosscheck suspicious transactions or loans, and that’s where technology could be. But that has to happen instantly, so that’s where artificial intelligence and algorithms come.”
Could cryptocurrency and blockchain become a part of the solution?
After the discussion, most panelists agreed that although the current financial landscape often excludes the most vulnerable people, Fintechs could direct the change. One of the main trends that could emerge in the future could be blockchain as a service. Cryptocurrencies receive a lot of interest in developing countries and countries that undergo adverse political and economic changes. By bringing cryptocurrency and blockchain technology to the light, it could become a channel for more accessible products and services.
Erika Maslauskaitė, Chief Commercial Officer at Nikulipe, in the midst of the problems that cryptocurrency and blockchain face, also sees its potential. “I think opportunities [of cryptocurrency] could include more new products and services to encourage younger users and fast-growing emerging markets to adopt the blockchain technology. And in the end, it could bring a smoother regulation for the industry”.
One of the ways how we could enable transparent and legal expansion of emerging technologies like blockchain and include more people is by regulating the sector. Although it might sound counterintuitive, according to Akvilė Bosaitė, Partner and Co-Head of Banking & Finance Practice Group at COBALT Legal, appropriate regulations could bring more opportunities than limitations.
“The biggest problem I see for cryptocurrencies is that they are off the border, something illegal, unregulated, especially from the perspective of the regulator. But I encourage regulation because once you start regulating, it starts to be accepted as something that’s already there, so let’s acknowledge that. And when we regulate, we should regulate to a normal, reasonable standard as not to complicate the development,“ explained Akvilė Bosaitė.
Even as Fintechs focus more on the users, that uncovers not only numerous opportunities but also challenges. The stance of fintech is clear to search for solutions that could connect people and bring them closer to financial stability. And in the upcoming years, we will see what tools and solutions they use to achieve that.