The trajectory of the fintech and payments revolution that was building before March 2020, and that we saw accelerate throughout the pandemic, is very much here to stay. For example, payments made via mobile devices alone are expected to exceed USD 2 trillion globally by 2023.
Evidence suggests, however, that this has not been merely driven by a wider cultural preference for convenience and efficiency, but that success is linked to a deeper ideological shift that sees consumers seeking economic empowerment through banking services that offer high standards of flexibility and transparency.
The pandemic years saw investment in fintech reach record highs, as conditions made the need for innovation clear. When investment levels dropped in 2022, there was a creeping fear not only that the boom was over, but that some kind of ‘fintech winter’ had set in.
What we have been witnessing is a period of substantial market consolidation, with some players exiting the market and several notable acquisitions also making their mark. Crucially, numerous established banks and financial services players have increased their in-house innovation to create their own digital offerings. While investors may be tempted to bet on these incumbents in times of geopolitical uncertainty, it’s smaller firms and start-ups that set the gold standard in the pace of innovation.
The upshot is that the sector is growing, both as the technology improves and as adoption increases. Furthermore, 86% of industry experts believe that traditional payments providers will collaborate with fintechs and technology providers as one of their main sources of innovation. This highlights an important reality -the reduction in direct investment levels doesn’t correlate directly with the perception that confidence in the fintech sector is wavering, as some commentators would have us believe.
Within payments, the Buy Now, Pay Later (BNPL) sector showcases the way ahead for digital payments. Both consumers and retailers are increasingly integrating BNPL services into their lives and businesses respectively, and interest in the payment method has only increased over the course of the cost-of-living crisis.
On one hand, consumers are turning to BNPL as a deferred payment option that allows them to manage their budget, and spend responsibly and safeguard them against accruing long-term debt. BNPL is already projected to account for 10% of all UK ecommerce spending by 2024, and there are no indicators to suggest this will change.