No one could've predicted the year that 2020 has been. Despite the changes thrown our way, we're still excited about what's to come as we look forward to the future of fintech in 2021!While our year has looked very different, thanks in large part to Covid-19, we've still had so many incredible highlights. Back in April, we launched Flex, our integrated payments platform, which allows growing software companies to get started with payments in a fraction of the time traditionally required. In line with our aggressive goal of turning every SaaS company into a payments company, we raised additional capital this summer to support product expansion. Most importantly, we've grown our passionate team of payments people to work towards democratizing financial access by making embedded payments possible for more organizations.
For our annual payments predictions roundup this year, we posed a series of questions to key members of our leadership team to learn more about their perspectives. Follow along with Kavita Jiandani, Director of Product, Emmanuel Pleitez, Director of VC & PE Business Development, and Sean Donovan, Finix Co-founder, as they discuss the future of payments!
*answers edited for brevity and clarity
What's most exciting about payments right now?
Kavita: The ability for merchants, banks, and payment providers more broadly, to stand up new capabilities for their customers has untapped a sea of valuable offerings in the market; whether that is the ability for a software provider to offer payments processing, a merchant to provide transactional or revolving credit offerings, or a neo-bank to stand itself up with differentiated service. All this is possible due to the companies providing the "building blocks" that have encapsulated much of the complexity of payments.
Sean: The fast pace of innovation. Adoption of new technologies is fast-forwarding years right before our eyes. Every restaurant and store now has an online order offering. Every retailer now supports some form of contactless payments. More independent contractors are accepting Venmo/Square cash for payments. This is cool stuff! I'm nerding out over all the creativity that is happening in the space.
Emanuel: As payments volume continues to digitize, software players are increasingly learning to participate in the action. We're just getting started in this secular trend.
What are the most significant changes that fintech will undergo next year?
Sean: Oh, wow! So many! We'll see an acceleration of technologies that benefit those impacted financially by the pandemic. I think we'll also see a push for faster funds and payouts for consumers and businesses alike, and fintech will figure out a way to provide services for free or at cost. Legacy financial institutions will struggle to keep up. This will result in a shift towards fintech. I think fintech will continue to ease the burden beyond just the speed of cash but in other ways that provide more liquidity. Payroll advance based on less data or better access to financing/lending.
Emanuel: Fintech will continue to disintermediate every part of the financial services industry. Banks and processors need to understand that they need to innovate, or else they will continue becoming commoditized, and fintech companies will eat away at their margins.
Kavita: Regulation, as fintech continues to push the boundaries on innovative offerings, the neat definitions that existed in the payment ecosystem have quickly blurred, making it challenging to navigate the sets of network rules that apply. Furthermore, as fintech companies geo-expand, they need to navigate the regulatory landscape and data privacy requirements of different countries with gravity. This is why, here at Finix, we take compliance and regulation very seriously and have invested in this discipline early on in our journey.
Which hurdles will be the hardest for fintech/payments infrastructure to overcome?
Sean: I think diversity in everything we do as an industry. I believe ensuring systems are in place to make underwriting decisions will need to be reworked. As a country, we are waking up, and we are all looking inwards. We'll need to ensure that as an industry, our systems are promoting equality across the board. I think this will gain traction in q2 next year; as companies go from talking the talk (with announcements of initiatives and $ commitments) to actually walking the walk and investing in a better tomorrow.
Emanuel: The hurdles are whether or not fintech companies want to take on more regulated parts of the industry and how much risk they're willing to endure. The deeper you get into our global money transmission and banking infrastructure, the more you have to tangle with regulations.
- Data Security - Building for security is paramount when fraud has become highly organized and sophisticated. Infiltrating payments infrastructure providers can prove to be a gold mine for fraudsters. Access to credit card numbers and customer PII information is lucrative for organized crime, as this data can, in turn, be used for dark web commerce, money laundering, identity theft, etc. The impact and sophistication of data breaches drive an illustration that building for security needs to be a continuous endeavor.
- Scale -- Easy access to payments capabilities has allowed customers to avail these to increase. This virtuous cycle of growth begetting growth means that providers need to build for scale from the get-go whether that scale is for volume or geo-expansion.
Who are the companies to watch?
Kavita: Value-expansion companies, such as - Shopify, Square, Lightspeed - building richer, stickier ecosystems for their customers and "building-block" companies like Finix, Galileo, Modern Treasury, Rapyd, Marqeta, which are providing deep, intuitive API-based integrations for specific needs of the payments value chain.
Emanuel: I think any industry vertical software company. Also, watch Shopify, Adyen, and companies in which Visa, Mastercard, and AmEx invest.
Sean: Finix, of course! Too many to name, really. Any startup with a solid balance sheet and reliable internal controls/processes are working towards modernizing embedded financial services in various sectors.
Regardless of how things develop for fintech in 2021, one thing is for sure; the payments industry is still the most exciting place to be. We've spent a lot of time this year as a team improving our processes, growing our team, and getting laser-focused on our capabilities. Our mission is to turn every software company into a payments company by making accessible payments tools for vertical SaaS companies. Thanks for following along on our journey; we're just getting started and will see you next year!