In the sixth iteration of the Finch Capital report, the growth investment firm lays out its expectations for the future of financial technology and laments on the past year. Among its many prognostications, the report projects credit cards will be replaced by emerging “buy now, pay later” (BNPL) shopping options offered by a number of fintech firms.
“The No.1 reason [BNPL] is used is to avoid expensive credit card fees,” reads the report. “There are some real concerns about debt exposure for young people, but most BNPL firms limit exposure and don’t harm credit.”
According to IBS Intelligence, Klarna, PayPal and Laybuy are among the top BNPL players servicing Europe. Klarna is widely considered the most valuable Sweedish FinTech, it adds.
Another notable trend cited in the report is the pending global adoption of cryptocurrency and decentralized finance (DeFi). Finch Capital forecasters said they expect crypto and DeFi to go mainstream next year, which in turn will pave the way for greater adoption of the concepts shortly after.
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Per the report, other major trends expected to come in 2022 include pressure for more mergers and acquisitions, artificial intelligence-enabled collection of debt and the proliferation of payroll rail infrastructure.
"Payroll [application programming interfaces] will allow financial product providers better insight into a consumer enabling actionable results rather than just monitoring (bank APIs),” reads the report. “Imagine a lender reducing its interest rate on the basis on ‘writing’ its deduction into the payroll and thereby almost eliminating non-payment.”
From Twitter
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Additionally, the report also touches on some risk factors threatening growth in the fintech sector. In fact, it even goes as far as to indicate the entire space could see a slowdown in 2022 as there are a number of “triggers” to be weary of in the coming months. They are follows:
- War on talent: This would have two separate impacts. First, growth plans would become more challenging as the search for talent could linger, and second , costs would rise as salaries increase
- Public & IPO slowdown: This could put pressure on valuation outlooks and exit strategies, especially in Europe as big cap mergers are rare;
- Increased regulatory scrutiny: This could lead to higher costs, more fines and expansion slowdowns; and
- Interest rates: As inflation rises, startups could face mounting debt. As such, “any small change can have a dramatic impact on cash flows,” reads the report.
