B2B Fintech opportunities to consider in 2021
Payment companies have struggled to achieve differentiation and exit the commodity-zone for years. This might be their year to succeed.
The pandemic has led to a surge in online shopping, speeding up the shift away from physical stores by half a decade or so. According to the McKinsey Global Payments Report, the Covid-19 crisis is expected to shrink revenues from payment services by 7% compared to 2019. Nevertheless, they continue to grow faster than all banking revenues combined.
This rapid growth is not due to the introduction of new products, but to the adoption of existing technologies. However, payments are perceived to be a commodity, so many acquirers and payment providers are not playing to win with a product-led growth strategy. Instead, they rely on personal relationships for enterprise sales, prefer compliance-hammers over developing creative UX solutions, and tend to compete on price. With digitisation being essential for enterprises and SMBs alike, this might need to change.
Payment companies have struggled to achieve differentiation and exit the commodity-zone for years. The boost that the acquiring business saw in 2020 will hopefully lead at least a few of them to change their ways and seek out new areas of growth. Therefore, we expect to see increased opportunities for Fintech professionals in 2021. In this article, we are going to explore some of the most promising verticals in payments.
Contactless payments
2020 saw an increase in card payments, particularly contactless payments, even for purchases that are most commonly paid for with cash — like grocery shopping. Contactless payments are pretty much what the name suggests — a way of paying for goods without needing to touch a terminal. Customers increasingly demand expediency and physical distance, and as a response, we see greater adoption of tap-to-pay systems.
Statistics show that the overall usage of contactless payments in the U.S. has increased by 150% since March 2019. Accenture listed “a strong push towards a cashless society” as the primary long-term impact of the pandemic. Even before the crisis, contactless payments — both by RFID in cards or NFC on mobile devices — were beginning to gain traction. The pandemic only accelerated it. As customers care about how they are paying, so do the merchants who want to provide them with a good experience. As a result, the somewhat sleepy business of terminals might become exciting.
Wireless terminals, with appealing designs and seamless connections to inventory and customer databases are what merchants might be looking for when they opt to update their terminals to provide a better in-store experience.
Online payments
The repeated lockdowns, together with the fear of coronavirus transmission, led to a significant change in consumer behaviour and accelerated the adoption of online shopping. In regards to e-commerce transactions, a report by Digital Commerce 360 shows that U.S. consumer spending increased by 30% ($60.42 billion) in the first six months of the year, compared to the same period of 2019. Digital payment processing companies have grown in sync with the e-commerce spike, and there is still room for growth — especially since a new audience has just discovered the convenience of online shopping.
The spike in online payments is not bringing new requirements per se, but it is putting emphasis on the more obvious ones: a good buyer experience, including fast checkout, a variety of payment methods, taking good care of returning users, and high approval rates. A good experience for payment managers, including high platform reliability and state-of-the-art reporting capabilities is also growing in importance.
AI-based Fintech solutions
Selling products globally, fierce competition, and the need for short delivery times make traditional risk management solutions obsolete. Risk management tools that cannot adapt to fraud trends in real time ultimately lead to overblocking and lost customers. Operations that require active manual review, on the other hand, are very accurate. However, not only they don’t scale, they also slow down logistics creating a poor post-purchase experience.
As more companies shift to online sales as their primary revenue channel, there is an increased demand for machine learning solutions for payment security. The holy grail in this field is achieving human accuracy with machine scalability, and combining it with a good explanation of the models’ logic on the transaction level, getting away from the infamous black box.
According to Mordor Intelligence, the global AI in the Fintech market is expected to reach USD 22.6 billion by 2025. Payment security is naturally not the sole sector seeing a rise in AI-based solutions for Fintech: data-driven customer acquisition, due diligence, and predictive analytics are among the fields where we expect to see interesting developments. If you’d like to dive deeper into the subject, here is a list of 12 AI in Fintech Use Cases compiled by Technopedia.
Conclusion
While 2020 didn’t provide too many certainties, here’s one: the Fintech trends discussed above will continue to shape the payments industry. While payments themselves are indeed a commodity, the experience that merchants want to provide for their customers is not.
The sudden expansion of tech-friendly customers will increase the demand for better shopping experiences, creating plenty of development opportunities and strong demand for creative Fintech professionals.
