To disprove the zeitgeist often associated with the arguably stagnant US financial services industry, the new kids on the block – fintech firms – are now actively solving problems that have lasted and hindered consumer financial lives for too long.

According to Insider Intelligence, in-store mobile payments for the US are set to hit $125 billion in 2025 and Apple Pay currently makes up 92% of mobile wallet transactions in the nation, as reported by Talk Android. Whether this change has been fuelled by the Covid-19 pandemic or not, it is evident that options other than cash are picking up steam. The providers of these services and products are also becoming increasingly popular.

While the 100 or so VC-backed unicorns in the fintech market have a combined worth of $404 billion, as noted by CB Insights, 46 are from the US, with Stripe having the highest value of $95 billion, beyond surpassing decacorn status. US financial services have been ripe for disruption and fintech in this country is growing at an incredible pace. Furthermore, research states that the industry is seeing an 8.6% CAGR and this growth is predicted to continue at the same rate until the year 2024.

Taking a step back, what is the route forward for 2022? What are the challenges and opportunities that fintech leaders should consider next year? Money 20/20 will be returning to Las Vegas next week and we’ve captured the most disruptive stories and trends in the fintech industry that will be discussed at the show. The event stockpiles the most inspiring content from experts across the industry with the intention of catalysing change through the sharing of ideas. As the annual meeting place for disruption and the conference's 10 year anniversary on the horizon, attendees should expect a reimagined and immersive experience.

Digital

Goldman Sachs’ launch of digital bank Marcus is one of the most discussed fintech events of the past decade. The success that Marcus has seen in the US was and continues to be of an unprecedented scale - growth that no other traditional bank has been able to achieve with a digital bank launch. Recently, Harit Talwar, the man who has led Goldman Sachs' foray into consumer banking as the head of Marcus, announced his retirement.

With six years, eight million customers, $100 billion in deposits, $10 billion in loans and card balances and partnerships with Apple, Amazon, and Walmart behind him, Talwar revealed in a LinkedIn post: “I left a big job at a great company [Discover] to be the first employee of an idea - that Goldman Sachs could build a modern consumer business. Many people thought I had lost my mind!" He continued: "How often do you have the opportunity to build a modern digital business inside a 150-year-old preeminent investment bank? We had the audacity to think big, and it’s safe to say we proved the skeptics wrong".

At Money 20/20, Stephanie Cohen, global co-head of consumer and wealth management at Goldman Sachs, will be taking to the stage to share how the bank has been able to keep pace with innovation in consumer finance, but also establish itself as a leader in digital financial services, with the launch of Marcus. Tapped to succeed DJ superstar David M. Solomon in the role of CEO of Goldman, Cohen will be able to provide a unique perspective of the bank’s future after her 20+ year tenure.

Credit

Modernising credit card issuance is a long overdue endeavour. However, several large US banks, including JPMorgan Chase, US Bank and Wells Fargo, have signed up for a US government-backed pilot using alternative data to get credit to people with low or no credit scores.

Around 53 million American adults do not have regular credit scores and this problem disproportionately affects Black and Hispanic people, according to the CFPB. The pilot, which will come to the fore in 2021, will allow banks to assess creditworthiness based on users' account balances and overdraft history - as long as they share customer deposit data from checking and savings accounts through the likes of Early Warning Services, for example. Plaid and Finicity also have a role to play in collating rent and utility payments.

While traditional banks have only started to make moves in the alternative data space after federal banking regulators in the US signalled their support back in 2019, fintech firms such as Grow Credit, Tomo Credit and Cardless have also been looking at innovation in this space, to improve traditional scoring models and serving customers historically unsupported by the legacy players.

DeFi (and TradFi)

The future of finance is decentralised. While the fintech industry has been beating around the bush when coming up with real life use cases for distributed ledger technology, innovative players have built open infrastructures that can be highly customisable and allow entities or individuals to “programme their money”, telling it what to do rather than telling banks what to do with it.

According to Chainalysis research, growth in DeFi has meant that North America is now the world’s second-biggest largest crypto market. While North American addresses received $750 billion in cryptocurrency between July 2020 and June 2021, or 18.4% of global transactions, Central, Northern and Western Europe received $1 trillion during that time period, accounting for 25% of global volume, as reported in Coindesk.

In contrast, North American monthly transaction volume increased by over 1,000% between July 2020 and May 2021, from $14.4 billion to $164 billion, which Chainalysis attributes to DeFi, which accounted for 37% of total transactions in North America between July 2020 and this past June.

While DeFi gives organisations more control, it has become clear that there are vulnerabilities in this area and mainstream adoption remains out of reach for the short term. Issues around regulatory scrutiny have emerged, but discussions still need to had around whether identity and credit data has a place in DeFi or whether TradFi data in DeFi will forego intentions around decentralisation and inclusion.

Privacy

Although California’s pioneering Consumer Protection and Privacy Act (CCPA), the first comprehensive consumer privacy law passed in the US, went into force in early 2020, some of the law’s implications are already emerging.

Similar to the General Data Protection Regulation (GDPR) in the European Union, it has granted consumers the right to know more about how an organisation conducts its privacy practices as well as the right to view, delete and own identifiable information, preventing companies from selling personal data. Financial insitutions are not exempt from this law. As regulators are focusing on standardisation, banks should start, if not doing so already, or continue to assess their data processes and review privacy practices to account for their interaction with regulations like GDPR and CCPA.

In addition to this, a group of US Democrat members of Congress have introduced legislation designed to protect consumers from the risks posed by stablecoins such as Libra by requiring issuers to obtain a banking charter. The Stablecoin Tethering and Bank Licensing Enforcement (Stable) Act, aims to ensure the issuance and related commercial activities of such currencies are strictly regulated. Using the argument that the Covid-19 pandemic has left many low- and moderate-income Americans shut out of traditional financial services, turning to alternative fintech options, and leaving them vulnerable to bad actors looking to issue stablecoins, these lawmakers are looking to make change.