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Four predictions found that 91% of consumers in the region had transitioned
to contactless payments as a result of COVID-19.
for fintech and However long the pandemic lasts, these trends in consumer
behaviors will persist throughout 2021. Cashless payments
payments in 2021 will continue to outpace cash, digital-only banking will see
more widespread adoption and digital wallet usage will
expand. Financial services providers that can quickly and
effectively react to these changes will thrive.
2. Securing fintech investment could
become more challenging

While Innovate Finance reported that investors pumped
£1.8bn into UK fintechs in the first half of 2020, an increase
of 22% over the second half of 2019, more than half of that
amount was invested in just five companies—Revolut,
Checkout.com, Starling Bank, Onfido and Thought
Machine—with early-stage fintechs raising just 8% of total
investments.
Has the ongoing economic uncertainty surrounding
COVID-19 pushed investors towards 'safer' bets on more
mature, later-stage fintechs? It's hard to say for certain, but
we predict that startups may find capital harder to access in
By Richard Hodgson 2021 as investors focus on "category winners" and become
Global Processing Services more conservative and risk averse.

espite the overwhelming challenges of a glob- Fintechs seeking investment in the next 12 months will
al pandemic, 2020 saw an enormous amount thus need to have a differentiated proposition, a clear path
of resilience, ingenuity and innovation in the to profitability, strong leadership, and partnerships with
D world of fintech, payments and financial ser- credible, experienced suppliers.
vices. As we reach the final days of this most eventful of
years, we're setting our sights on 2021 and sharing our pre- 3. The embedded finance gold rush
dictions of what to expect from the next 12 months. will begin in earnest

1. The effects of COVID-19 will continue Aside from COVID-19, embedded finance has been the
to influence consumer behavior industry topic of 2020. It encapsulates the idea that financial
products in and of themselves are less important than
It is now well established that COVID-19 has accelerated the context in which a customer needs them. While the
many pre-pandemic trends. For example, while the traditional core banking model has offered diminishing
number of cashless payments was already rising globally returns, brands like Amazon, Apple, Uber and others have
(a 14 percent increase in non-cash payments between 2018 seen success by embedding payments, loans and insurance
and 2019, totaling 708.5 billion transactions, according directly into their offerings. It's not hard to see the value of,
to Capgemini), lockdown restrictions to combat the for example, a car rental company offering car insurance
coronavirus have supercharged the trend. Who could during the hire process, or a house hunting app offering
have imagined that the World Health Organization would mortgages.
advise against using cash for health reasons?
According to research by 11:FS, the embedded finance
The impact on the digitization of financial services has opportunity will be worth $3.6 trillion by 2030. This will be
been dramatic. In the UK, 6 million adults (or 12 percent of supported by the banking-as-a-service (BaaS) ecosystem,
the population) downloaded an online banking app for the which offers the full banking stack to any business,
first time during the initial lockdown, 90 percent of face- regardless of industry, seeking to improve customer
to-face transactions made in April were contactless, and experiences with capabilities it would have been unable to
in July 2020 there were 1.5 billion debit card transactions build alone.
(20.8 percent more than in June 2020). This is according
to research published by Wired, Charged and UK finance, The BaaS model has now reached a level of maturity that
respectively. will likely see a proliferation of brands capitalizing on it
in 2021. The floodgates have therefore been opened, and
In the APAC region, which was already the global leader in as the number of businesses embedding finance into their
non-cash transactions (243.6 billion cashless transactions offerings increases exponentially, so will the number of
in 2019, according to Capgemini) due to high adoption of traditional banks offering their services to companies via
mobile payments and digital wallets, a Mastercard survey the BaaS model.
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