Biggest Fintech Trends of 2022: View from Moorwand

The fintech sector has seen astronomical change over the last two years. In 2020, the pandemic caused a huge shift towards contactless payments and online shopping. This year we’ve seen the position of ‘Buy Now, Pay Later (BNPL)’ solidified, as offerings such as Monzo Flex and Curve’s now famous offering of almost exactly the same name, Flex, have helped pave the way for yet more BNPL players to enter the market. There has also been a surge of new crypto offerings, enabled in part by high-profile backers like Elon Musk.

Now, looking ahead to 2022, what will be the key trends shaping the market?

From mergers and acquisitions (M&A) to talent shortages, here are my top seven fintech predictions for the coming year.

1. More high-profile M&A

Mastercard has acquired several businesses in the last year. We've also recently seen Rooster Money acquired by NatWest, and Klarna has been on an acquiring spree, picking-up the likes of Stocard.

These large traditional banks or fintechs are choosing to buy capability rather than develop it themselves.

Next year I expect this M&A run to continue as more players like Starling (which just acquired a mortgage portfolio) opt to buy up firms to bolster their offerings.

2. Consumers (gradually) embracing Open Banking

Open Banking providers have become a lot more established in the last year and early adopters have become savvier to the technology and its benefits, helping to encourage more privacy-conscious, or even suspicious consumers. As a result, I predict that we'll see displacement in the acquiring methods used in 2022. Retailers who would have put all their volume through UK debit cards will gradually see more customers requesting alternative payment methods thus encouraging greater use of Open Banking.

We'll also see more acquirers (who often manage the checkout page) prioritising Open Banking options over other payment options. However, some consumers will need to see the same level of incentives as using their debit or credit card to decide to make a change.

Open Banking is still a little clunkier than the slick journeys seen in platforms like PayPal. Nevertheless, as it develops next year, more consumers will start to use Open Banking products more frequently.

3. B2B vs B2C 

Corporate fintech still hasn’t reached its potential, but we will see firms catching on to this more in 2022. The latest Finch Capital report (State of European Fintech 2021) found that B2B funding is on the rise, as investors have become drawn to the capital-efficient nature of B2B (generating more value per invested capital than B2C).

For those B2C fintech brands that have nailed the customer experience and foundations for their existing customer base, it is a natural progression to add B2B to their portfolio.

B2B offerings that have a niche focus will also be in high demand as there are many audiences in need of specific solutions tailored to their unique needs.

4. Increasing regulation

I don't predict that regulation will get any lighter in 2022. If anything, with the increase in varied propositions, we expect the regulators to become stricter as it becomes harder to fit all propositions into clear legislative boxes.

This does have the potential to stifle growth for fintechs coming to the market with new ideas as regulation hasn't always kept up with innovation. This will probably have the most impact in the crypto space where very few regulators have known how to set the rules, and each is moving at their own pace.

5. Even more crypto 

Regulators are increasingly recognising crypto as something they need to pay attention to. Next year, we will start to see approaches discussed on how to regulate it consistently and safely across the UK and EU. This will be helpful as the ambiguity surrounding various government bodies’ current stance is challenging and leaves many awaiting further clarity. 

Furthermore, Mastercard and Visa now have a much more open-door policy to crypto than in previous years. Their awareness and acceptance of crypto has massively helped founders bring crypto ideas to life. With that in mind, I predict an influx of crypto-based programmes coming to the market next year.

6. The war for talent

2022 will be a candidate’s market as we come out of the pandemic. There may be growth issues for fintechs as they struggle to hire and retain key roles due to aggressive external hiring tactics from large firms. Finch Capital predicts an increase in tech salaries due to the high demand, and with so much exciting movement within the industry, avoiding attrition will be key.

7. A shift to specialists

Over the next 12 months, fintechs are likely to move to working with more specialist partners to support their wider objectives. Moorwand’s own research found that younger firms will launch into adjacent markets, and mature firms will look at SME or corporate segments. But to fulfil these ambitions, 75% of those who plan to change the partners they work with will look to use specialists to meet their goals. 

This makes sense, as specialist partners are preferred by those who are further along in their journey. Plus, the data shows that those who use specialists can generate almost £1m more in annual revenues.

Final thoughts

Overall, the fintech sector is on an upward trajectory and next year will see this continue with sizable new investments, mergers, and interesting new products. Although there is plenty of work to be done around regulation, the mainstreaming of Open Banking and suchlike, I am excited to see what the next year brings for the industry and how companies meet challenges head-on.