Obviously, big financial institutions with deep pockets will continue to develop new services to increase market share. But, the truth is, they pivot with the agility of an ocean liner. This is due in great part to their massive legacy infrastructure investments, which make it hard to implement modern consumer-experience based improvements, as well as their historic habit of undervaluing consumer experience. In reality, how many people are really “wowed” by their banks, or expect to be in 2022?
And yet, over the past several years as tech has matured, the barrier to entry in financial services and banking has become less steep. Financial startups (or FinTechs) today can move ten times faster than they could a decade ago. This is the result of the availability of investment money, common APIs and reduced development costs. Smaller financial players are more nimble and can adapt quickly, putting pressure on established institutions that have underperformed with consumers.
Is it any wonder that at the end of Q2 2021, CB Insights reported financial technology had attracted a record $34 billion in venture-capital funding, with one of every five dollars invested flowing into the space? Fintech is the hottest space for startups today and will continue to be through 2022. Here are a few predictions for the fintech spotlight in 2022.
There will be a concerted effort to serve specific vertical markets, the very ones that big institutions tend to overlook. No one likes to be an afterthought, and there is a huge opportunity to cater to, and capitalize on,
very specific and yet very meaningful markets. These could range from small industry-specific entities, for instance fintech for freelancers, side hustlers or automotive dealers, to those catering to specific communities, such as single-parent households or LGBTQ+. In short, there’s a lot of greenfield to stake a claim. Fintech can (and does) deliver a more personal, custom experience than anything big banks and institutions can offer, and this will resonate with audiences that are likely to appreciate products and services that are uniquely tailored to their specific needs.
Take it to the bank
Getting to the underbanked will be a huge focus in 2022. You might be surprised to learn that according to the Federal Reserve, roughly 63 million Americans are underbanked or completely unbanked. Yet, this audience isn’t on the radar for big banks – they want active users who they can upsell — sure bets with little to no risk. That’s a huge opportunity for FinTechs. Bringing services to these consumers will give FinTechs an opportunity to meet the needs of the underserved, create lasting relationships with new and overlooked consumers, and build great products.
Learning to earn
A recent survey by OnePoll showed more than 80% of parents wish they knew more about finances when they were younger. Now they’re looking for tools to educate their children to help them have better spending and savings habits, so history doesn’t repeat itself! The good news is, according to research by Finder, roughly 60% of 10-15-year-olds already use online money management tools. All concerned are ready to move forward, so “learning to earn” will become a key positioning point for those who understand the business value of educating an audience. Foremost, it creates loyalty and stickiness, which is extremely important as customer acquisition costs continue to rise.
Many a parent’s worst financial fear is to see a child enter adulthood, only to make a financial decision that sets them back a decade. At the same time, kids want financial autonomy. These are not mutually exclusive goals, in fact, some entities see them as complementary – and rightly so. There are collaborative family tools that give children ownership of their finances with a safety net, including my own company’s app, which offers a fee-free app and debit card with parental oversight. ids conduct real financial actions and gain from experiential learning. With this practice, they are building financial management muscle that will last them a lifetime. As entrepreneurs and businesses start to recognize the spending power of this segment, I expect to see more investment and opportunities here.