Although B2C fintechs directly compete with banks, the benefits of collaboration will drive banks and fintechs towards being co-opetitors. The growth of fintech has been truly phenomenal in the last four to five years. If 2020 and 2021 were growth accelerators for fintech, 2022 is expected to give a further boost. Here are four trends that we expect to see for the fintech industry in 2022:
1) Mushrooming of Digital Offering Digital platforms have gained significant traction over the last two years. This newfound success will attract even more competitors and we could see new digital offerings from
Banks - As Banks crack the code of digital with their legacy systems and processes, they will offer digitised versions of even more 'in-branch' services, as well as, their own version of successful fintech platforms.
Fintechs - As a natural progression, Fintechs will offer more complementary services to their client base via a direct or a 'co-petitor' model
BAAS empowered platforms- Innovations such as Banking-as-a-service (BAAS) will enable platforms (both fintechs and non-financial) to partner with banks/fintechs to offer white labelled financial services, wherein the bank/fintech manages regulations and operations, while the platform leads client acquisition and servicing. e.g. Standard Chartered Nexus' partnership with Bukalapak & Sociolla in Indonesia.
2) Further Consumerisation of Financial Industry The financial industry is now headed towards further consumerisation for two reasons 2.1) Mushrooming of Digital platforms - An increased competition will push all platforms to look for differentiated experiences, products and services. 2.2) The big-tech threat - Big-tech entering into financial services is no longer just a boogeyman. Moreover, consumers are now benchmarking their banking/fintech experience against those offered by big-tech and their social media platforms. Thus, opening up both the banks and fintechs to a very serious threat of being disrupted by big-tech. Google disruption of fintechs and banks, in UPI payments, is the perfect example. However, banks and fintechs are sitting on troves of customer data and valuable know-how of the industry. The 'ahead-of-the-curve' leaders will use these alongside AI-based offerings (hyper-personalisation, Next-Best-Action, etc.), gamification, and frictionless customer journeys to offer individually differentiated experiences at scale. Hence, driving the entire financial industry towards further consumerisation.
3) Pragmatic Regulatory Strategy will determine long-term Winners Most regulators are using existing, and often outdated regulations, to regulate fintechs. Moreover, fintechs looking to scale (via new services; organic or inorganic client acquisition; or expansion to international markets) often need to manage even more regulators and regulations. For example, the expedited regulatory change of the BNPL segment in Australia and the UK Thus, the long-term winners will be those who have a pragmatic regulatory strategy to 1. grow within the current regulatory framework, 2. Anticipate regulatory changes, and 3. Proactively plan for these changes
4) Co-opetitors, rather than just competitors. Based on the 1996 book titled Co-opetition, "Co-opetitor" are competitors, who can also be collaborators. Although B2C fintechs directly compete with banks, the benefits of collaboration will drive banks and fintechs towards being co-opetitors, wherein fintechs can offer additional services and products that are serviced by banks (via collaboration or BAAS partnership), thus delivering a win-win for both
Fintechs can avoid the complexities and delays associated with additional regulatory licenses
Banks can acquire new customers at a lower CAC
Moreover, with out-of-box thinking, this collaboration can be extended to many more areas such as digital credit scoring, fraud management, etc.