2022: A FUTURE FOR SIMPLE AND FRICTIONLESS CROSS-BORDER PAYMENTS

Dima Kats, CEO, Clear Junction

 

Even after 18 months of stuttered lockdowns, businesses are still learning how to navigate the effects of the pandemic. However, in 2022 there is a lot more certainty surrounding how events in the future might unfold compared to the start of the series of lockdowns in 2020-2021 – when businesses had to accommodate ever-changing rules.

Ironically, the coronavirus pandemic may be a catalyst for a more globalised world in the near future, which will directly and quickly affect the world of finance and payments.

 

Activity in the fintech sector.

Fintech development flourished over the course of the pandemic. Reducing the need for face-to-face interactions was essential for maintaining economic activity during lockdowns. Many of the trends that are driving the increased economic activity in the fintech sector are a direct result of social distancing: the rise of digital payments, increased work-from-home arrangements, retailers diversifying their payment channels, and an increased use of autonomous finance. As a result of these trends, there has been a large number of fintech start-ups emerging.

Due to the growth of the fintech sector in the past year, there has been a significant increase in demand for industry professionals, and the effects of that demand will be playing out into 2022. This is mainly due to employees being re-trained during the pandemic for new roles, creating a more skilled and mobile workforce.

 

Cross-border payments.

There are currently three trends that are reshaping cross-border payments, and in a sector that is predicted to reach over $156 trillion in 2022, staying ahead of those trends may prove to be a lucrative decision.

The first trend is the changing consumer demands. Customers are less inclined to pay for banking services while still expecting them to be fast and intuitive. Alternative service providers that can offer the customer more of what they want while being faster, cheaper and more transparent will gain a competitive advantage over banks.

The second trend is the increase in trade with emerging markets. As the share of international transactions involving emerging markets grows, cross-border payment solution providers are focusing on these markets. Growth in these emerging markets is bolstered by free trade initiatives, while some countries have established protectionist policies that slow them down. Growth in emerging markets is expected to be at around 11% per year, while the overall growth of cross-border trade is estimated at just 5% per year.

The third trend is that the accessibility of mobile phones has increased. As people gain a larger online presence, there is more opportunity for people to make online payments. The percentage of mobile phones ownership among adults in emerging countries is at 83%, compared with just 62% in 2014. This figure is expected to increase even further, and subsequently increase the number of e-payments being completed.

 

Cryptocurrency in 2022.

We expect to see cryptocurrency develop even more mainstream appeal as it becomes less speculative and more widely accepted. This will cause banks to increase their investment in fintech, in conjunction with governments introducing new regulations to ensure that transactions that involve both traditional currency and cryptocurrency are safer. One of the most tangible effects of the pandemic was the need to use online payment solutions. In the same way, people are beginning to trust and realise that cryptocurrencies may be a feasible payment solution even in the post-pandemic world.

Consumers are increasingly dependent on digital devices, but over half of them prefer to make online purchases over a computer than a mobile device. Mobile screens on smartphones or tablets are smaller than desktop monitors, which leaves users feeling discouraged and less secure while shopping compared to completing transactions over a desktop.

Mobile shopping or M-commerce has benefitted from several innovations that encourage users to finish payments on their phones: instant checkout solutions like Apple Pay, the use of augmented reality to show consumers the products they are buying, and sites building mobile-friendly user interfaces. Due to these innovations, Insider Intelligence predicts that shoppers will inch closer to using their mobile devices as a preferred channel in the next few years.

 

Open banking and the need for collaboration.

As the industry grows and becomes more diverse, there will be an increasing need for partnerships and collaboration to take advantage of the emerging opportunities.

One direction we’ll be seeing them in 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. The rise of alliances within the finance industry began to take place long before the ongoing pandemic. Currently, over 30 partner banks represent hundreds of fintech  relationships and financial services. We think firms who adopt open banking early and secure partnerships will reap the rewards compared to their competitors.  firms who adopt open banking early and secure partnerships will see themselves reaping the rewards compared to their competitors.

2022 will likely be the year that open finance starts reshaping financial services and the year that banks savvy 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.

The multiple challenges to the finance industry over the last year have highlighted the need for fresh thinking, to face the future with strength and confidence. Fintech partnerships can create a significant opportunity for levelling the playing field, streamlining internal processes, adding technological capabilities, and improving the end customer experience.

Companies like Clear Junction offer businesses a mix of these benefits and opportunities at one time. Continued and original collaboration and partnerships between fintech companies and banks are essential for the future of the financial services industry and the finance sector. The digital marketplace is indeed growing, and the future belongs to the financial institutions that can stay ahead of the curve.

I think we need to add some context about the Fintech industry over the last 12 months, and how the pandemic has actually affected the industry. Need for innovation etc etc how much money has been put into it etc. And then lead on the predictions around talents and retraining. Otherwise this byline reads as just a list of predictions, without adding the relevant context.

 

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