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Fintech disruption trends: a changing payment landscape on the horizon

From the rise of software-based payment technology and cross-border e-commerce to an increase in Fraud-as-a-Service, this article explores 2021's main fintech disruption trends.

From embedded finance to the demand for software-based payment technology, cross-border e-commerce and the the rise of Fraud-as-a-Service, this article explores the main fintech disruption trends the financial services industry can expect in 2021 and beyond.

Below, six UK fintechs share their main fintech disruption trends.

1. Embedded finance

Richard Hodgson, chief financial officer at Global Processing Services — the payments processing partner for challenger brands — believes that the embedded finance gold rush will drive the world’s leading disruptor companies.

“Aside from COVID-19, embedded finance was the industry topic of 2020 — it encapsulates the idea that financial products in and of themselves are less important than the context in which a customer needs them,” explains Hodgson.

He continues: “While the traditional core banking model has offered diminishing returns, brands like Amazon, Apple, Uber and others have seen success by embedding payments, loans and insurance directly into their offerings. It’s not hard to see the value of, for example, a car rental company offering car insurance during the hire process, or a use hunting app offering mortgages.”

Research from 11:FS highlights that embedded finance will be worth $3.6 trillion by 2030.

According to Hodgson, this significant increase in value “will be supported by the Banking-as-a-Service (BaaS) ecosystem, which offers the full banking stack to any business, regardless of industry, seeking to improve customer experiences with capabilities it would have been unable to build alone.”

He adds: “The BaaS model has now reached a level of maturity that will likely see a proliferation of brands capitalising on it in 2021. The floodgates have therefore been opened and as the number of businesses embedding finance into their offerings increases exponentially, so will the number of traditional banks offering their services to companies via the BaaS model.”

2. Software-based payment technology

With such a dramatic drift shift to digital commerce, largely accelerated by the impact of Covid-19, demand for software-based payment technology will exponentially increase, according to Justin Pike, founder and chairman of MYPINPAD — the software-based payments company.

In this digital world the consumer is opened up to a variety of choice that can’t be replicated in the physical world and competition is fierce.

“Consequently, consumer facing brands have recognised the criticality of technology that can significantly improve the customer experience,” says Pike.

He believes that software-based payment technology forms the missing piece of the puzzle in terms of innovating and improving the customer experience in a remote environment, where the customer experience is completed on mobile devices.

“Standardisation of the payment experience through software, across all channels (both online and offline) is where we are rapidly heading. This innovation will bring a myriad of benefits for both consumer and brand, but it absolutely must be built on a foundation of security,” Pike continues.

3. Cross-border e-commerce

The consumer appetite for cross-border ecommerce is growing in both emerging and established markets.

“For merchants, the opportunity to reach new markets and customers is too good to miss. However, customers now demand the same level of speed, convenience and value from any retailer, regardless of where they are,” says Mike Shafro, CEO of xpate — the payments platform.

In order to deliver this level of customer experience, cross-border merchants looking to enter new markets should analyse payment data to optimise conversions and ensure a seamless customer experience.

To succeed, Shafro advises cross-border e-commerce merchants to localise their e-commerce site and checkout pages, implement the solutions that help them meet regulatory requirements for authentication, and optimise the customer experience for mobile.

4. App-based commerce

Just like the growth of cross-border e-commerce, app-based commerce will also see a significant rise in 2021.

Apps will enable businesses to engage with customers in a better, safer way, while improving the customer experience.

“As we continue to adapt and recover from the impact of the pandemic, apps will continue to play a vital role in reducing unnecessary contact during the checkout process,” says Jeremy Nicholds, CEO at Judopay — the mobile payments platform.

He suggests that contactless payments need to go one step and the next step, in the wake of the pandemic, is to make payments truly touch free, allowing customers to complete their transaction at a safe distance.

“We will likely see this technology, already available in the market, taking off in 2021. Such a solution enables a staff member to display a QR code on their own tablet or smartphone which is then scanned by the customer using their own phone, instigating the payment. This helps not only the nation’s small and medium sized enterprises (SMEs), get back on their feet following previous and current lockdowns, but the whole country,” Nicholds adds.

5. Fraud-as-a-Service

Tamas Kadar, co-founder and CEO of SEON — the fraud fighters — suggests 2021 will see a rise of Fraud-as-a-Service.

He says: “PSD2 and 3DS are forcing fraudsters to change tactics. But the bad news is that fraudsters are now creating entire networks, structures, and business models dedicated to phishing and transaction fraud. If this new wave of CrimeOps continues to develop, 2021 will be a rough year for fraud managers.”

This is will be exacerbated by a rise in online payments and the consumer expectation of frictionless onboarding.

6. The shift to a cashless society

Lee Jones, managing director Northern Europe, GSV at Worldline — the European payments and transactional services company — explains that Mobility-as-a-Service will become the end goal for transport operators, while cashless options for parking payments will explode.

“This year, we expect to see an even greater shift towards a cashless society across these key sectors, making the buying experience quicker and more convenient overall. As a result, merchants and operators must make the consumer experience their top priority as trends shift towards simplicity and convenience, ensuring online and mobile payments processes are as secure as possible,” he says.

Analyst view

Commenting on the disruption of the finance and banking industry, Gartner analyst, Juergen Weiss, Practice Research says:

“Many business and IT leaders in banking are concerned that neobanks or digital giants will become fierce competitors — especially in the payments segment. While we expect the future battlefield will be the business ecosystems of digital giants such as Amazon, Google or Apple, the reality is that most fintechs are actually not directly competing with banks. We track almost 3,000 startups in our database and we consider less than 10% of them to be truly competitive to incumbent players. In addition almost 20% of all the startups listed in our database received funding from established industry players. It’s probably no surprise that payment processing is the dominant technology category the major players are interested in. We anticipate to not only see more funding but also more takeovers of fintechs.”