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5 Predictions for 2021 Expected to Play Out in the Fintech Industry

5 Predictions for 2021 Expected to Play Out in the Fintech Industry

For the overwhelming majority of people around the world, 2020 couldn’t be over fast enough. It was a year of great pain, disruption, and instability; more than 1.8 million people succumbed to the virus and millions more lost their livelihoods. It will be a year remembered by history due to the pandemic. While a new year offers the chance of a reset, the coronavirus still looms large heading into 2021—although the vaccines represent a bright spot on the horizon.  

Amid the turmoil, 2020 provided many lessons to learn as well as indicators for the future across many aspects of society and business. The fintech industry is certainly no different. The pandemic accelerated certain fintech trends while exposing blind spots in the industry that start-ups have aimed to tackle.

Fintech predictions for 2020 were made without prior knowledge of the coronavirus crisis, but 12 months later, the pandemic is still shaping forecasts for 2021.

Eyes on Cryptocurrencies

As world markets continue to fluctuate with a correction expected in the near future, and interest rates remaining low, investors big and small are seeking other ways to help their money grow. Step forward cryptocurrencies—in particular bitcoin, which has seen a record surge in recent weeks. The value of one bitcoin reached a peak of $34,000 over the weekend following New Year’s Day, then fell below $30,000, then recovered to $32,000 by the evening of January 4th. In 2021, many experts are predicting bitcoin and other digital currencies to rise even further.

However, the cryptocurrency space is one of extreme volatility, so a downturn can occur at any time—as has been the case over the past few years after previous record highs. Still, as digital currencies become more widely accepted by online merchants, and more people become versed in how they work, 2021 could prove a year when crypto emerges as a legitimate currency and not just a trading commodity.

Remote Payments Continue to Go Mainstream

One of the biggest consequences of the pandemic, in terms of the fintech industry, has been the acceleration of remote payments. Companies are having to adapt to both a cashless and less congested method of conducting business, and customers are becoming more accustomed to these more convenient payment methods.

It seems reasonable to expect that the same acceleration will continue in 2021, particularly through app-based payments, both with peer-to-peer and customer-to-business transactions.

For peer-to-peer money exchanges, mobile applications such as Cash App and Venmo are sure to grow in increasing popularity, while companies who can best utilize remote payments will see huge benefits.

SMEs Receive a Much-Needed Boost

The past 12 months have been a horrible time for many small and medium-sized businesses. According to an analysis conducted by Yelp, more than 160,000 businesses in the US closed between the start of the pandemic and August 31—this number included both temporary and permanent closures. It’s a safe assumption that many more have been forced to shut their doors since.

However, there are signs that surviving SMEs could experience a much-needed boost throughout 2021. There is a nationwide desire to help keep local businesses alive, but customers need more pandemic-friendly means of conducting transactions. This is why online retail giants, in particular Amazon, have thrived over the past year, and hundreds of thousands of mom-and-pop shops have gone bankrupt. The SMEs that are able to adapt and implement remote shopping and payment methods are in a position to benefit.

M-Commerce Set to Explode

It’s not only mobile payment apps that have experienced a great leap forward due to the effects of the pandemic—mobile commerce has also been accelerated over the past year.

Big players like Facebook have already made aggressive moves into the m-commerce space, with the Shop and WhatsApp payment initiatives, while Instagram Marketplace was launched in March 2019.

But as nearly all businesses need to go mobile to counter the lack of foot traffic, m-commerce is expected to see a major boom in 2021 due to more SMEs offering their products and services through their own mobile platforms.

The restaurant industry is a prime example. While marketplaces such as Uber Eats and Deliveroo connect customers and restaurants, self-made m-commerce apps can allow the same restaurants to serve their customers directly without the exorbitant commission fees. Each app has a different method of charging fees, and restaurants don’t always pay the same rate, even on the same app, but these fees tend to be in the range of 20% to 40% of the restaurant’s revenue from the app, according to a May 2020 NPR analysis.  

Online Investment Platforms Surge in Popularity

If there has been one brutal financial truth that the pandemic has exposed, it’s that too many Americans lack the necessary emergency savings to ride out such a crisis. In response, an increasing number of people have looked for ways to safeguard their futures, with record sign-ups for online brokerage firms like Robinhood and eToro.

These online investment platforms and apps have made it cheaper for people with lower incomes to trade stocks, make investments, and improve their financial planning knowledge. The pandemic has been a wake-up call to millions of people who are now taking their financial futures more seriously, and 2021 should see a continued increase in the popularity of online investment platforms.