The Year to Lead with Fintech Ecosystems

Fintech ecosystems are set to grow with a number of trends emerging in 2022.

2022 is set to be a big year for the fintech ecosystem, with $3 billion in venture capital expected to be funded by 465 fintech companies by the end of the year. At their core, fintech ecosystems are a complex network of startups, fintech startups, financial institutions, regulators, governments, investors, and talent organizations that share an interest in developing the financial services industry through technological innovation. Although the concept of the ecosystem is still largely in its infancy, it shows great potential to disrupt banking and provide innovative services.

Read on to discover the latest trends in the fintech ecosystem set to gain traction in 2022.

Open Banking has laid the foundations for the growth of payment services

Open banking continues to gain momentum. More than 2.5 million UK consumers and businesses are now using open banking products to manage their finances, access credit and make payments. Moreover, the concept of open banking has taken root among government and transnational regulators of banks over the past decade, with the UK’s Open Banking Implementation Authority (OBIE) marking its third year of open banking as a regulatory requirement for financial service providers.

The primary goal of implementing open banking is to increase choice and competition for both consumers and small businesses. This was a key step in enabling innovative FinTech companies to integrate services for data networks between financial institutions and non-financial organizations. The development of PSD2 (Payment Services Directive II), managed by the European Union in late 2018, is promoting a highly integrated European payment and information sharing system that is set to expand with more fintech-enabled services in 2022.

Notably, Swedish payment processor Klarna has successfully combined consumers’ checking account data with CRA (Credit Reference Agency) data to build an in-depth profile of applicants’ financial standing. By implementing this strategy, Klarna “integrated open banking data to improve access to credit, enabling new products to be brought to market based on gained customer insights.”

2022 will likely see more financial service providers follow in Klarna’s footsteps by leveraging their open banking connectivity and focusing their efforts on offering specific as-a-service capabilities such as third-party payments integration.

Only digital banks benefit from gamification

Only digital banks are gaining serious interest in the fintech ecosystem and are a threat to legacy traditional banks. They greatly appeal to younger clients who need simple financial management. The coronavirus pandemic has caused a significant growth in the use of digital banking platforms only, with digital wallet usage rising to 83%. There is now a growing need for the ability to conduct remote banking through mobile apps and banking apps are now offering additional services across their platforms.

For example, gamification is a rapidly growing trend in digital banking only. It is the strategic process of using game psychology in a non-game context to motivate behaviors that support business goals. A number of digital banks have taken the initiative to implement in-app gaming offerings. An example of this is the Ukrainian game “Monobank”, which has teamed up with developers to launch an in-app game “Space Invaders” that offers customers a fun gaming experience inspired by the past while managing their money.

Digital first banks are set to adopt the increased play of their banking apps going forward in 2022, with banking apps like Greenlight, Current and Step already gaining prominence in digital banking only as they collectively raise more than $500 million with a focus on attracting Teenage clients.

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