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3 Trends Reshaping FinTech in 2021


by Ralph Dangelmaie and Richard Counihan

Where will FinTech focus next and what problems remain to be solved? 

©NatalyaBurova/iStock/Getty Images Plus

Since March 2020, you’ve probably read countless articles hyping the acceleration of e-commerce, the digitalization of financial services, and other clichéd FinTech predictions. But now what? If indeed COVID-19 kicked down doors for FinTech, where will the industry focus next, and what problems remain to be solved?  

To answer those questions, we joined forces. Coming from the payment space and digital auto financing, respectively, we each can offer a distinct perspective. We will consider three areas of FinTech that merit your attention.

  1. “Corona-Free” Payments, Now Widely Available, Need Automation

In the 2010s, conventional wisdom said that digital payments would supplant cash, cheques, and other paper relics—eventually. Paper remained ingrained in accounts receivable (AR) and accounts payables (AP) processes, small purchases, tipping, dinner-table bill splitting, etc. Then, thanks to the pandemic, no one wanted to touch paper. Even though the danger was overdramatized, people demanded “Corona-Free” (i.e., digital) payments. Now that organizations have embraced NFC credit cards, digital wallets, and Faster Payments, what is left to do? 

In a word, automation. Small businesses have too much of their monthly revenue tied up in accounts receivable (AR) and accounts payable (AP) processes. Exactly how much is a topic of ongoing research at Ralph’s firm BlueSnap. Preliminary results suggest that the cash flow problems are severe enough to be a factor in business failures. Harvard University’s tracktherecovery.org, a nonprofit data project, finds that 33.6% of U.S. small businesses have closed since January 2020. How many of these cases could have been prevented with better FinTech?       

Companies that automatically email and text invoices and auto-reconcile them on the backend will save time and perhaps alleviate their cash flow crunch—maybe by enough to keep their doors open. Those that continue to manually email, mail, and fax invoices, mail paper invoices, and fax invoices do so at their own peril. Throughout 2021, automation of AR, AP, and other accounting processes will be competitive in the FinTech field.  

  1. Where “Buy Now, Pay Later” Can Expand  

Buy Now, Pay Later (BNPL) platforms are divvying up consumer e-commerce. Whether you shop for a £1,000 electric scooter or £50 shoes, chances are, the e-commerce site will invite you to pay in instalments through a partner like Splitit, Affirm or Klarna. For many shoppers, this is rather convenient. Why not spread out the payments over six months while enjoying a 0% APR—something most credit card providers don’t allow.

Until recently, 25 or so BNPL players fought for the same customers: B2C e-commerce sites. Unless they diversify, most will either fail or get acquired at a bargain. Where to diversify is the question. BNPL technology is not well-suited to complex markets.

For example, digital financing for auto purchases and repairs (Richard’s focus at DigniFi) have been BNPL-proof because the platforms are not equipped to assess the risks. Financing £2,000 in repairs on a 2013 Toyota Highlander is a lot different from extending £150 to buy an air fryer. One may improve the individual’s ability to repay the loan; the other almost certainly will not.   

Unable to penetrate auto, home, and student loans, BNPL platforms probably will funnel into generic B2B loans. From plumbers and electricians to medical clinics and law firms to coffee shops and family-owned stores, many small-to-midsize businesses need financing. Traditionally, they would open a line of credit with a bank. But if the BNPL players offer a better value proposition—immediate approval online, lower APRs, and flexible 0% payment plans—businesses will at least try BNPL. A big FinTech of 2021 is, what will banks and credit networks do in response?

  1. FinTech Fight Between Online Car Marketplaces and Dealerships

Cazoo, an online marketplace for used cars in the UK, has had a banner year. It joined the “unicorn” club of startups worth $1 billion USD or more, even as the tally of global unicorns dropped by 38% in 2020. UK dealerships embraced the shift to e-commerce as well. The automotive retail platform GForces reported that UK car purchases made through its software increased 1,228% in 2020 and were worth £500 million. 

Demand for Corona-Free payments and the allure of easy financing both fed this trend. Cazoo offers an online loan decision in minutes and APRs as low as 8.9%. That sounds more pleasant than negotiating with the dealership finance guy for three hours in a windowless office wearing masks, doesn’t it? No wonder GForces is working to digitize financing and instant approvals for its dealership partners. 

If digital financing options at hybrid dealerships gain parity with the online-only Cazoo, which will be more competitive? The US, roughly a year ahead of the UK in this battle, offers some insight. The US versions of Cazoo—Carvana and Vroom—initially startled physical dealerships, which clung to their brick-and-mortar model, at least until COVID-19. 

Now, dealerships realize that a physical presence is a competitive edge. They, unlike online-only platforms, are members of their communities. They sponsor youth sports teams, donate to local charities, and build solid referral networks. Once digital financing tech evens the playing field, Cazoo may find itself on defense rather than offence.

Conspicuously Undermentioned

This article gave little to banks and credit card companies. We assure you, they are encouraging Corona-Free payments (as long as a card is involved), preparing for coopetition with BNPL platforms, and watching auto repair financing with concern. They also have vast troves of financial data to draw upon. 

HSBC, Barclays, Visa, and MasterCard, amongst others, are not about to write off these opportunities. Watch for them to launch new financing services or acquire existing players. When a FinTech prediction is legitimate, there is always a fierce battle for the windfall. 

Ralph Dangelmaie is the CEO of BlueSnap. Richard Counihan is the CEO of DigniFi.