The payments and fintech ecosystems have been rapidly converging for years due to greater investments in open banking, stronger partnerships between fintechs and finserv companies, and innovation across the digital payment market. An acceleration of these trends, ignited by the pandemic, will set the tone for fintech in 2021 and beyond.
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More than ever, pressure has been put on governments, financial institutions and fintech players to enhance the payments industry to deliver businesses and consumers faster, more inclusive, more secure payment and payout solutions. On the backend at fintechs and finserv companies, a push for cheaper, nimble, and more efficient true banking-as-a-service tools has become an arms race. The story of fintech in 2021 will be one of collaboration and digitization, which I break down below in my 3 payment predictions for the year ahead.
Deeper Fintech and Finserv Partnerships will Drive the Open Banking Movement
Continued support for the open banking movement across the paytech and fintech market will deliver better, cheaper payments solutions. At the heart of this topic is the regulatory discussions around how to streamline open banking through APIs in a manner that supports efficient data integrity.
One trend that has been gaining traction, and will continue to in 2021, is the role of prepaid in accelerating open banking. This is largely because of prepaid’s cost-effective, low-regulatory burden that enables nimble, relevant offerings. Prepaid, for example, has become a backbone of the banking-as-service advancements as the movement toward open banking strengthens.
A desire to enable more regulatory-friendly payment solutions will create greater partnerships between fintechs and finserv companies working toward a unified goal: bringing more innovative payment and payout options to businesses and consumers.
Fintech Innovation will Boost Financial Accessibility to the Digital Economy
The deepening of card issue solutions as true banking-as-a-service will allow fintechs and banks the ability to innovate investment, payment, banking and lending products and services that were previously siloed from each other. Greater innovation across the fintech industry, and the push for serving more demographics of businesses and consumers will drive new players into the market.
Boosting financial accessibility is all about products and services that enable digital inclusion. As fintechs race to provide simple, secure methods for consumers to pay for goods and services, or receive funds digitally, this continues to disrupt traditional financial services. A desire to accelerate the number of consumers who can participate in a digital economy will spark even greater fintech and finserv collaborations.
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In many countries, the pandemic has underscored the number of consumers that are still underbanked, underserved, and unable to fully engage in many online commerce experiences. Banks, governments, fintechs and businesses share a common goal here: removing barriers that prevent consumers from participating in the digital economy. The need to have financial tools beyond just a bank account will be a major topic to follow throughout the pandemic and beyond. Prepaid is also part of that equation and will play a key role in fintech and finserv discussions in 2021.
Digital Payments will Pave the Way for the Faster Payments Movement
A digital overhaul of payroll and vendor payments, driven by a rise in the gig economy, and accelerated by pandemic-related disbursements, will spur more investments in transforming payments infrastructure to create solutions that support the faster payments movement.
Virtual cards and tools that enable embedded finance is a trend that will accelerate in 2021. Issuing virtual cards via a mobile app or wallet to ease friction that exists across the traditional financial ecosystem is a trend fintechs and banks will integrate into their business and consumer-facing tools.
Digital payments solutions that provide fast, economical, and low-risk payment and payout tools will come out on top. A push for more diverse digital payments offerings that appease more businesses and consumers will also bring prepaid into the spotlight. Products and services that navigate regulatory hurdles will become increasingly popular as they are able to quickly remove barriers of entry for fintechs and finserv companies looking to move faster.
A trend worth watching in 2021 will also be a shift in prepaid’s role in bank and fintech digital payments investments. Because prepaid makes a particularly good use case for innovating digital payments for the gig economy and mobile and digital commerce platforms, I predict it will set itself as a real player in the embedded finance and fintech and finserv digital payments innovation.
