By Ryan Joyce, Head of FinTech UK&I, Salesforce

The successful businesses of the future recognise that adaptability should not end with the innovations rolled out during the pandemic. Across all industries we’re seeing the need for digital-first businesses that are customer-centric, data-driven, and deliver fast time to value. Financial services is no exception. Intelligence, personalisation, and doing business sustainably will be at the heart of business leaders’ strategy. As we look to the new year, here are the trends we expect to see evolve in the financial services sector.

Embedded Finance

Embedded finance is expected to generate $7t of economic value by 2030, and promises to fuse financial services (e-wallets, cards, lending and insurance products) effortlessly within the customer journey of any company, within any industry. The world’s leading brands will continue to launch a variety of new propositions— in pursuit of increased loyalty, providing unique experiences and personalisation for consumers.

These new propositions embed finance as part of the customer experience, allowing these brands to collect data and insights around consumer spending behaviour— generating insights and enriching their customer view.

As with any growth market scalability is imperative, we predict a ‘space race’ amongst the different players to quickly launch products, build partnerships and continuously iterate their propositions for the greatest impact.

• Embedded  finance will release an avalanche of new financial data – curated by  FinTechs, and shared with global brands to generate insights around  spending patterns, behaviours and transactions. Creating a single source  of truth is a must.
• Agility  around marketing, e-commerce, sales, service and operations— will enable  brands to launch new products quickly— and more importantly iterate  quickly as they sense & respond to customer demands.
• API  management is crucial to enable real-time processing of data between two  organisations— fast decisioning to open an account, originate a loan or  underwrite a policy— keeping consumers ‘in-app’ for a seamless experience.

Financial Inclusion

The pandemic has illuminated inequalities across our society and laid bare the need for a new, more resilient and inclusive economy, and financial inclusion is an imperative to help reduce this inequality gap. The number of adults unbanked in the UK stood at 1.2 million in February 2020, source: Financial Conduct Authority ‘Financial Lives’ Survey, leaving them financially excluded (no access to bank accounts, savings or credit— and invariably have less than a month’s salary in savings) making them vulnerable to economic shocks or loss of work.

Since 2009 the ‘alternative lending’ market was established as a major pillar of FinTech— providing more choice, flexibility and innovation to help consumers and businesses secure finance at affordable rates. We can see this trend will continue and the rise of AI and maturity around Open Banking will improve risk management, loan underwriting and eventually hyper-personalisation enabling products that are personalised to the individual (the segment of one!)

With the customer’s success front and centre of these innovations, it’s not surprising that the likes of Revolut, Monzo and Monese have attracted some of the highest valuations in UK FinTech— and that Funding Circle, LendInvest and PensionBee were the first to successfully go public.

The last 10 years saw significant improvements around packaging and execution— finance propositions are explained in simple English, apps are intuitive and easy-to-use and rates are far more attractive with more flexibility and choice, for example buy-now-pay-later, salary finance and invoice finance.

The next 10 years promises to bring greater sophistication around risk management and personalisation to support every consumer and business— serving those that need financial support the most, but are the hardest to underwrite.

The following capabilities are crucial:

• Automation  – single platform to manage marketing leads, application, decisioning,  onboarding, collections and recoveries at-scale. Alternative lenders are  able to communicate a decision < 10mins and distribute funds in under 7  days. Demonstrated at-scale during the pandemic, lending billions to  consumers and businesses during their time of need
• AI/Data  – single source of truth to build enriched customer profiles— more data,  enables more sophisticated machine learning algorithms for lending,  investing or money management decisioning
• API  Management – combine existing data with Open Banking data to enrich single  source of truth. API’s also play an important role in embedding these  products within 3rd party platforms for greater reach

Sustainable Finance

Climate change is impacting every country, company and individual, and we all have a role in building a more sustainable future.

In the wake of COP26 we expect new financial services regulation pushing lenders, investors, and insurers to restrict capital flows towards companies that are contributing to the climate crisis— and instead allocate to companies that are radically transforming to meet their Net-Zero commitments.

GFANZ is an alliance of the 160 largest financial services companies globally focussed on aligning policy and allocating capital towards green initiatives.

Once any policy has been written into law, the challenge becomes execution, with data becoming a major dependency. Consistent metrics/taxonomy are required to track companies ESG credentials and overlay this across a financial institutions book of business, analysing their macro position in real-time, whilst also providing actionable insights to coach and guide companies around their commitments.

We predict these profound changes will encourage a new wave of entrepreneurs to build companies that are solely focused on sustainable finance— whilst existing FinTechs will also begin to pivot their propositions accordingly.

Rise of AI

Over the last decade, FinTech has changed the way people interact with money forever— since 2008 we have seen 1000’s of apps emerge onto the scene – easy to use, simple to understand and providing greater flexibility for consumers.

The next decade will see a new wave of innovation— unleashing deeper intelligence and personalisation— extending the competitive advantage of FinTech. This will be fuelled by AI. The themes discussed above will combine machine learning, big data, automation and improved API management to deliver on the promise.