This text was initially published in German on Gründerfreunde on Tuesday, November 10th 2020.
It’s no secret that the global fintech scene has developed rapidly in recent years. Not only providers for end customers, such as challenger banks, but also B2B companies have expanded their offerings. Due to the Coronavirus pandemic, user behavior and general conditions for financial products have changed within a short time. But which Fintech trends will also be relevant in the long run? As the official fintech hub of Berlin, we answered this question in this blogpost.
1. New opportunities through “Open Banking”
The topic “Open Banking” is not new, but it brings many new providers on the market. The starting point is the revised Payment Services Directive 2 (PSD2) guideline, which enables bank customers to grant third-party providers (TTPs), e.g. Fintech companies, banks, insurance companies or consulting services, access to their bank account data. This allows payments to be authorized or account information to be collected and optimized. This step has enabled banks and Fintech companies to offer additional financial services products, such as personal financial management tools, loyalty programs and payment platforms, and to personalize their offerings. The PSD2 policy has been in effect since 2019 and has given many new players the opportunity to actively participate in the financial world.
2. The integration of “white label” products
Digitization has changed many processes. Customers benefit from flawless, interactive user interfaces that aim for the best “user flow” and the greatest possible user-friendliness. Many providers have long since recognized that they do not have to reinvent the wheel and can integrate third-party offerings into their portfolio through the possibilities of PSD2 and APIs, so-called interfaces, thus offering customers greater added value.
Fintechs’ white label products and modular systems will enable traditional banks and insurers to offer innovative services quickly and effectively. These collaborations will help the entire industry, as Fintechs have the right mindset and know-how to develop new ideas in a short period of time and traditional companies enjoy a loyal customer base and brand awareness. One example is finleap connect’s Switch Kit service, which can be seamlessly integrated into a bank’s user interface, enabling account holders to change accounts easily.
“With white-label products such as the account change service, companies can offer their customers real added value and expand their value chain in a sustainable manner.” – Frank Kebsch, CEO finleap connect
3. The rise of mobile payments
Germany is a country where cash is highly valued. This was at least the case for a very long time. Even long before the Corona pandemic, cash payments were already declining steadily, as the Bundesbank discovered in a recent study. The use of mobile and contactless card payments is still on the rise. Besides the introduction of the NFC procedure and the enabling of contactless card payments, it is now standard practice to pay electronically with smartphones or electronic wearables, such as smartwatches and fitness trackers. This is made possible by providers such as Google Pay and Apple Pay, who have been active in Germany for several years. This year, with the launch of Samsung Pay, another provider will be added. Here, too, the focus is on cooperation between companies, as the service is made possible by cooperation with Visa and Solarisbank.
4. Sustainable financial products: from current account to investment products
Sustainability has been on the advance for years and has also reached the Fintech industry. The mindset of consumers has changed and the demand for sustainable products is increasing. The corona crisis and the standstill in business have further fuelled this development and many people have rethought their position on sustainability, travel and consumption. Players, such as the sustainable Challenger Bank Tomorrow, are again attracting many new customers this year.
Sustainable direct banks aren’t currently the only winners. The new way of thinking also has an impact on investments, as a recent study by the Forum for Sustainable Investments showed. According to the study, the number of private investments in sustainable investments will increase by 94% in 2019 compared to the previous year. It is expected that this number will increase further this year.
5. What does the future of finance look like?
One answer to this question is a look at the next generation, Generation Z, as it is often called. In order to be successful in the long run, traditional players and Fintechs alike must get to the bottom of the question, which (new) financial products will be relevant for GenZ in the future. The “GenZ-Report: The financial future is now” addresses these questions.
Although financial services are omnipresent in everyday life, they are neither anchored nor embedded in the consciousness of this target group. GenZ is rather aligned to the search for self-fulfillment or recognition in the here and now. The respondents stated that they save for short-term (emotional) satisfaction and less for long-term (rational) goals. It is therefore not surprising that the most popular financial product is the savings account. Although money is saved, the desire for flexibility and the ability to access the money at any time outweighs the benefits of long-term saving.
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