The FinTech industry has grown steadily in the past decade, but the past year has arguably seen more innovation in the sector than ever before. For a start, global funding for FinTech exceeded that of the past year by more than 96%. We’ve seen more FinTech companies than ever before becoming ‘Decacorns’ (businesses valued at more than $10 million), and more than 65% early stage deal activity happening outside of the U.S. 

At 10Clouds, when we summarized our FinTech predictions for 2021 last year, we wrote about the emergence of FinTech as a Service (FaaS) platforms, the rise in digital only banks, and the wider use of biometric technology in financial onboarding. All of these happened to varying degrees, but we also witnessed a significant rise in autonomous finance, and embedded finance, which are likely to be the key areas of growth for the coming year. 

So what else will the future hold for FinTech in 2022? Below are my top five predictions. 

1. A boom in embedded finance

Embedded finance has taken the financial world by storm, and its growth is likely to continue well into 2022. The term is used to describe the seamless integration of financial services into a traditionally non-financial platform. It allows customers to access financial services within the context of what they’re doing. A good example is an online taxi app which includes an inbuilt payment solution. 

A key part of embedded finance is Buy-now-Pay-later, which is well on its way to becoming mainstream in 2022, with solutions such as PayPal, Klarna and PayPo offering customers exactly what they need in online shopping - transactions which are easy to execute and seamless in their nature. 

Embedded investment programs make the arena even more accessible, by offering easy and inexpensive access to funds and stocks. A key player in this market is Acorns, an embedded investment app that rounds up its users' spare change from purchases, automatically allowing them to save and invest. This is another area that is likely to grow exponentially next year. 

2. Digital one-stop-shop solutions for customers

Digital-only banks were a trend that we predicted last year, but it’s one that is on a steady growth trajectory and is likely to become much more mainstream in 2022. The start of the pandemic meant a total move to digital banking with bricks and mortar stores closed to customers in many parts of the world. 

Last year, a McKinsey study revealed that digital payment is up there with the biggest fintech products. New generation financial institutions solved the emerging challenge by leveraging fintech solutions. They were able to offer convenient digital-only banking services removing the need for physical interaction. And there will be increasingly more digital institutions which will provide fully remote services, which is great news of course for consumers.

3. Better Forex solutions for SMEs

We all know that Covid resulted in a huge increase in home-deliveries, and with that came a corresponding expansion in international e-commerce. This in turn offered significant growth potential for SMEs across the world. According to a study by Accenture, the total cross-border payment flow is currently growing by around 5% (CAGR) a year and is predicted to exceed $156 trillion by 2022.

But while customers are already being offered simple payment solutions for purchasing products from across the globe, many SMEs are still struggling with foreign payments. They’ve been described as ‘the squeezed middle’ when it comes to forex. This is because there’s still no global payments provision for SME clients, which means that they are forced to use the often unaffordable solutions designed for enterprises. 

The long list of regulations prevents companies from accessing services such as underwriting or invoice financing. In practice, this means that SME owners face hurdles when they try to raise working capital and keep operations running.

Luckily, new solutions are emerging, including BaaS platforms offering foreign currency services, such as OpenPayd, Curve, Stripe and Airwallex. 2022 is likely to see a rise in the usage of these platforms, as well as an emergence of new players on the market.

4. Traditional financial institutions exploring crypto and NFTs

While many financial analysts focus on how blockchain technology can disrupt banking, it is worth taking note that a number of banks are actually jumping on the blockchain bandwagon, largely due to the extreme yields that it offers in comparison to traditional channels. But it also has other uses in the sector. 

BNP Paribas has announced it will begin looking at how blockchain technology can be applied to its currency funds and for order processing. At the same time, tech-focused stock exchange NASDAQ OMX Group has revealed that it is working with blockchains to "reduce the time, costs, and points of friction across the capital markets."

An additional benefit of blockchain is that it provides unbeatable security for both ends of the transaction funnel, particularly when it comes to identity management. It is being used more widely to fight fraud and to manage regulatory and audit issues.

Finally, it’s important to remember the speed of blockchain transactions. The technology can accelerate asset transfers, payments, and even investments, while simultaneously eliminating errors that cause delays and costs.

Given these advantages, it’s easy to see why Blockchain is a trend none of us can afford to ignore.

5. New Platform as a Service (PaaS) solutions

FinTechs are always trying to balance two essential sides of their offer to customers: efficiency and security. With evolving financial regulations in many parts of the world, customer data APIs appear to be a sensible solution. Platform-as-a-service provision essentially means that banks and FinTechs can adapt to regulatory changes with a customized infrastructure, enabling them to embrace the cloud. 

Another promising year for FinTech

There’s no doubt that 2022 will be another year in which we’ll see significant investment and innovation in the industry.