By Dima Kats, CEO of Clear Junction
As the industry grows, becomes more diverse and adapts to ever-changing regulations, there will be an increasing need for partnerships and collaboration to take advantage of the emerging opportunities.
One direction we’ll be seeing partnerships emerge will be in the form of open banking. Traditional firms are beginning to see open banking as something more appealing due to the opportunity for partnerships.
Payments industry analysts predict that firms who adopt open banking early and secure partnerships will reap the rewards compared to their competitors, especially those who specialise in helping their clients fit into ESG guidelines more.
2022 will likely be the year when open finance starts reshaping financial services and the year that banks open up to the opportunities that open finance represents. With regulators in the EU and UK proposing measures to heighten data sharing principles across a broader set of financial products, 2022 will see many banks experimenting and evolving their business models toward a more open, collaborative platform approach.
Crypto 101: Understanding the facts.
Just as venture capitalists continue to capitalise on fintech’s growth, retail investors continue to gain confidence in speculative spending. Cryptocurrency has been a hot topic in the news as one of the more volatile assets a backer can gain. Crypto’s like bitcoin and Ethereum have grown from niche internet fads into more serious investment options that have attracted knowledgeable backers (and some admittedly less calculated gamblers).
In 2022, the industry expects cryptocurrency to grow into even more of a mainstream investment opportunity. Government regulation often lags behind new technology by a few years, but cryptocurrency is reaching a critical mass where government legislation is necessary to address the potential implications of a decentralised economy.
The sector believes that government regulation will most likely address the security challenges of transactions between crypto and fiat currencies. Transactions are done quickly, anonymously and because
the currency exists online on the blockchain, there is no paper trail to follow. Scammers prey on these disadvantages to steal money from their victims.
Action Fraud, a British reporting centre for fraud and cybercrime, stated that 720 incidents were recorded in the UK in January 2021 alone, the equivalent of 23 per day. As cryptocurrency grows in mainstream appeal, so too will the number of crimes associated with it. Currently, cryptocurrency has no regulatory safety net, meaning that if someone steals your hard-earned bitcoin, it is unlikely you will get them back. In 2022 I predict that cyber security will become a huge area of focus not just for fintech, but for many sectors globally. A more digitised world will, unfortunately, suffer from more sophisticated and widespread digital crime.
COP26 in fintech: Understanding the value of ESG.
Leading on from regulations surrounding crypto, another aspect of fintech that will be imprinted by policy and legislation, is how well fintechs integrate ESG into their business. ESG is a continually evolving criteria of standards that measure how well a business is managing to perform in regard to sustainable, fair and environmentally friendly practices. ESG at the moment is slightly vague, partly due to its ever-shifting nature, but there has been an increased global focus on sustainability that is causing tangible changes to the way investors are looking at potential assets. There are already plans for the UK to become the first ‘net zero financial centre’ by 2050. These plans outline the UK’s aspiration to become a world leader in decarbonising financial institutions. It’s clear that ESG is high on the UK government’s legislative agenda, but how can fintech help?
Fintech companies naturally deal with a significant amount of financial data, that can be analysed and shared with government and private bodies to help them optimise their financial strategy against ESG guidelines. In other words, fintech can make sure that money is used in an eco-friendly way. Some fintech companies have already started to move into the new area of ‘green finances’ and have made it their business model to help other companies develop and maintain sustainable financial practices. Transparency will be key for fintech and ESG in 2022 in order to maximise these opportunities.
2021 was a turbulent year for fintech, but 2022 could bring significant opportunities to take advantage of. New niches in the fintech market are opening up, and as the economy diversifies, those opportunities will keep growing. Sustainable fintech, capitalising on crypto and increased data transparency in the sector are just three of the major subjects of interest to examine in 2022.