One of the most transformative trends in fintech, embedded finance found the spotlight in 2021. But what is in store for 2022? Jason Ollivier, Chief Disruption Officer at Contis, looks at three key ways that embedded finance could shape the way we pay, move, and access our money in 2022.

1. Banking is no longer a two-horse race

Incumbent versus challenger. That’s the well-worn narrative that has dominated the entire fintech sector for years, particularly when it comes to banking. But while the likes of Revolut, N26, and Starling continue to chip away at the big institutions’ market share, they have gone through a fairly turbulent couple of years.

In the meantime, a third dimension has emerged. Thanks to Banking as a Service (BaaS) technology, non-financial services companies are now in a position to give their customers a full suite of digital banking services, from issuing payment cards to payments rails. A new set of challengers have arrived.

The scene is set for incumbents to double down on their innovation agenda in 2022. Innovation is once more a business imperative for firms who wish to survive and thrive in an increasingly unpredictable world of rising inflation and supply-chain crises.

Ultimately, the big banks still have their hands full with legacy systems, multibillion-dollar loan books and huge batch reconciliations. This means they are much more likely to invest in fintech to fill the gaps because they don’t have the manpower to innovate themselves.

This will in turn suit many in the fintech ecosystem who are finding the transition from shiny new start-up to serious growth player more of a struggle than first anticipated. There’s a mutual advantage here, if both parties are smart: banks can take advantage of the innovation of others while fintechs get the injections of both cash and stability that customers have been looking for but not always found.

At the same time, we can also expect the number of banks experimenting and evolving their business models towards a collaborative platform approach to increase. The pandemic has blown much of the froth off of the fintech sector: what remains is a serious commitment to workable, open solutions that put customers first while never forgetting the fundamentals of sustainable business development.

1. Instant payments will become more widespread across Europe

Banks will also need to adapt their own payments offering as demand for alternative payment methods continues to rise.

The European Payments Initiative, which aims to create a unified, pan-European payment solution based on instant payments, is gaining momentum. Already, 31 banks had signed up and the first useable applications are set to be rolled out in 2022.

Of course, as the past few years has made clear, making predictions comes with certain risks. Only time will tell whether the EPI can succeed in enabling the EU’s millions of customers and merchants to make cross-border payments in real time. Nonetheless, we can say with some confidence that in 2022 other payment networks, banks, and businesses will sharpen their own instant payments offering, either in preparation for, or in competition with the EPI implementation.

This is an area with plenty of room for movement. Yes, instant payments are widely used across the continent. But the truth is that the industry is still far from realising the full potential of instant payments. Instant salary drawdowns via payroll, emergency insurance disbursements, and real-time business-loan pay-outs are all possible – theoretically at least.

The next 12 months should therefore see not just an uptick in instant payment volumes, but also a wider range of use cases being adopted to meet business needs as they evolve.

1. Demand for spending digital assets will continue to grow

Finally, 2022 should be the year that crypto currencies go from fringe investment concept to something even incumbents and established fintechs cannot ignore. 2021 saw the first steps being taken in this direction: Mastercard announced that any bank or merchant on its network will soon be able to integrate crypto services into their products, while PayPal now allows its customers to use crypto as a form of online payment.

It is often forgotten that crypto currencies were always intended to eventually serve as a spendable alternative to fiat currencies, and not just as a niche investment vehicle. 2022 could well be the year in which innovative use cases for crypto and digital assets will become widespread.

Will you be able to pay for a coffee by drawing down on your art collection as a spendable asset? Perhaps not this year. But soon. A future in which anyone can make any payment of any value, at any time and in any location is getting much closer – and with it a virtual European, even global, economy.