Published : 4 years ago, on 11/12/2020

By Scott Donnelly, CEO, CapitalBox

What a year it is has been.  It has been tough for many – from small businesses, to big high street retailers. We can’t however ignore the fact that the pandemic certainly forced companies to adapt and learn to be agile quite quickly. To not depend on typical lines of communications, funding, and ways of working. We witnessed legacy banks and financial services push for innovation at record speeds for their own workforce, and to stay connected with customers.

The more innovative and agile fintech companies have this year explored new territories to help business operations, provide quick and easy access to capital, and better the overall customer experience, especially in times of need.

The next year will bring even more to these ever-changed industries. Brexit will of course play its part in changes to regulation and the fintech playing field itself, and there will be much opportunity to capture – from more available capital to invest in businesses, to carrying out expansion plans, this will be a significant year for fintech.

In fact, these are the top predictions for the fintech sector and what is to come in the new year.

1. Fuelling growth and expansion plans through consolidating fintech players

In 2021 we will see a rise in levels of consolidation in the space, with small financial leaders being acquired by larger players. This will be partially evident in mature areas, such as lending, alongside emerging areas of the financial market like blockchain. For start-ups, consolidation can fuel and scale international growth and also help them to rebuild themselves, and their balance sheets, after a challenging year. Consolidation offers small businesses a golden ticket to every aspect of the financial services ecosystem.

Take CapitalBox’s recent acquisition of Spotcap Global, one of the most recognized online lenders in the Dutch market. This consolidation has allowed Spotcap Global to grow their business through the combination of expertise and technology, solidifying a strong market position and translating into better funding options for Dutch SMEs.

2. The time is right … to buy and invest!

Scott Donnelly

Private equity and venture capital are perfectly placed to take advantage of an economic downturn. For investors skilled enough to act on the dry powder in the market, we expect a top buying opportunity for reasonably priced corporations in 2021 – especially as there is a considerable amount of institutional investor money sitting on the side-lines right now.

According to BDO’s Private Capital Pulse Survey private equity and venture capital managers share the same optimism, with only 15% saying they expect the economy to worsen in 2021.

3. eCommerce to succeed with better tech solutions and partnerships

With more payment options available, from mobile to pay-later, the eCommerce space has already got a taste of the profits of modern financial technology, and there is only more to come. In a world that is growing more digital by the minute due to social distancing, the COVID-19 driven surge in ecommerce is unlikely to fully subside even when rules are relaxed. The use of chatbots, biometrics and blockchain tech have revitalised the customer experience for good, therefore in 2021 fintech companies that facilitate, assist or fund ecommerce transitions will be thriving.

Many small businesses have had to learn to digitise and sell online during this time in order to survive. A report released by Adobe shows COVID-19 has massively enhanced the growth of e-commerce with a 77% rise, an increase that would have otherwise taken 4-6 years. Therefore, we expect rapid growth in SME ecommerce tools as businesses prepare for the future. To be e-commerce 2021 ready, organisations must prioritise the use of external tools, like digital payment process systems and analytics tracking platforms, that can handle the dynamic environment caused by the coronavirus pandemic. Without these, small players run the risk of getting left behind as a result of a weak consumer experience.

4. Brexit will create opportunity for those that are multilingual

The US has some really big fintech players and in the UK, there are a lot of businesses in the space albeit small to medium sized. The real opportunities in fintech however, come from targeting smaller countries rather than large markets.

With markets such as the US and UK, companies tend to trade internally as it is easier than getting to grips with multiple languages, currencies and regulations. The latter are difficult to deal with, but if your fintech business can navigate multiple regulatory ecosystems, then there are some serious opportunities to take, and have a bigger presence across the globe.

Brexit will be a benefit for continental fintech players next year, as it will add more regulatory hurdles for companies looking to enter the market. However, it will be even harder to establish as a fintech in the UK. To get past this, the UK Government needs to connect players in the UK to larger players in the environments it wants to expand and find a way to work together.

Looking beyond 2020 to the potential that 2021 can bring the fintech industry, there is not only the opportunity there, but a big role for them to play in restoring what has been impacted the hardest this year. Helping businesses and economies to rebuild and grow again. The increased focus on fintech acquisitions and the e-commerce boom, both supported by AI, blockchain and cryptocurrency, offer an optimistic start to next year.