CASE STUDY

Fintech is changing everyday Americans’ lives at an accelerating rate. Who would have thought that Venmo or instant checkout would be so prolific in consumers’ daily lives a decade ago? The financial world is primed for disruption, as the last several years have shown, and it’s being upended by more than just cryptocurrency. This past year saw significant changes to the world of fintech, such as the rise of neobanks, contactless payments, buy-now-pay-later (BNPL) and more. With all that afoot, what can fintech expect in the next year? I believe the accelerated rate of digital transformation and innovation will continue in 2022. Many of the trends the industry is seeing now will be at the forefront. That said, here are four of my key fintech predictions for the upcoming year. These views are my own and do not necessarily represent the views of LendingClub or its management.

Prediction One: The Fintech And Bank Consolidation Arms Race Continues

2021 brought on more fintech mergers and acquisitions (M&A) than ever before, and this trend will continue. According to CB Insights (download required), 43 fintech companies became unicorns by Q3 of 2021, a term that refers to a privately held startup valued at over $1 billion. I predict that next year more fintech companies, flush with cash, will look for new ways to expand and drive growth via M&A. You may also see more of a seismic shift as banks leverage fintechs to help them offer new services to their customers that they are unable to offer alone. How will small banks fight goliath big banks and fintechs? The answer is through consolidation. Smaller community and regional banks, sandwiched between big banks and fintechs, will look to merge and try and go above and beyond in their customer service. They will adopt more digital tools, such as virtual assistants and text- and voice-enabled payments to fraudulent alerts and credit score notifications, to help simplify the mobile banking experience.

Prediction Two: The Battle For The Customer Will Accelerate

Financial services and products are not one-size-fits-all. What works for one person won’t work for the next, and the good news is that financial institutions are finally catching on. As the internet continues to reduce the barrier between consumers and retail banking, as it has done in so many other industries, we will see more focus on digital banking solutions that are uniquely tailored to specific customer segments. Around 5.4% of U.S. households, or 7.1 million households, are unbanked. More fintechs and banks will look for ways to include the unbanked in the financial system. You will see more specialty banking services created for specific targeted segments. You already see this with neobanks like Aspiration for climate-conscious “green” consumers and Stretch for the specific banking needs of those who were formerly incarcerated. You saw this type of tailored service happen in dating apps. There used to only be one or two dating sites, and now there are literally hundreds of uniquely segmented apps catering to specific audience segments. But one thing will not change. As these super-targeted segments proliferate, it will be increasingly important to provide live support to customers. Because you are dealing with people’s money, you need to have someone on the end of a phone line, not just email and social media contacts, to address customers’ questions. Customer support will increasingly be seen as a differentiator for all types of financial services.

Prediction Three: Increased Regulatory Scrutiny In Many Aspects Of Fintech

With the increased importance of fintech in everyday Americans’ lives, there will be increased regulatory scrutiny. I believe this is a good thing for the industry. Within the next few months, there will be new representatives in many of the agencies that look at financial services companies. I expect this will lead to more regulation on fintechs, specifically the emergent areas of BNPL and crypto. The importance of being an authentic brand, where the company’s business model can be demonstrably aligned with its stated mission and values, will also grow in importance as the fallout from major 2021 financial stories, such as the Robinhood-GameStop controversy, are explored in detail by regulators.

Prediction Four: Every Company Will Become A Fintech

This next prediction has been in the works for years and will only accelerate in 2022. You will see more financial services embedded into non-financial companies, like Uber letting us pay directly through the app or tipping for your pizza delivery on the same form you order pizza, but on a grander scale. Financial institutions will look to whittle away the banking and payment barrier to offer a more seamless experience for consumers. It started with payments but will extend further into credit in 2022. Consumers won’t need to fill out a big form. In the coming years, I anticipate that they will be able to just press a button and have access to credit, which can ultimately make money work better for everyday Americans. While 2021 has been unmatched when it comes to fintech innovation, 2022 will rise to the occasion as more banks and fintechs leverage technology, data and a more hybrid model to transform banking for consumers.

QUESTION:

1. The question is do you agree with all four predictions why or why not? State the reason of agreement and disagreement broadly.

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