- Focus on the payroll space
One traditional finance area so far largely neglected by fintech challengers is the payroll space. But this might be about to change. Why have payments, banking and saving become so much more convenient and simpler in the past years, while payrolls remain such a static and traditional affair? With salary-on-demand, salary advances, early direct deposits and even crypto payrolls, fintechs are starting to move in on this largely unexplored market. Pioneers in this space are Dailypay and Bitpay.
- Closer cooperation between traditional banks and fintechs
Fintechs have firmly established themselves in the financial ecosystem and have shown many of the traditional players the need to innovate and align themselves with their challengers. This has led to some significant investments in fintechs by traditional banks, like the five percent stake that Deutsche Bank took in Deposit Solutions, making the Hamburg-based startup into a unicorn. But this is also leading, ironically, to the rise of fintechs specialized in helping the old banks and credit institutions to transform their outdated core systems into modern flexible ones. The increased agility enables banks to launch their own innovative products faster and survive the rapid rate of digitization.
- Insurtech goes mainstream
Another space that has long been dominated by traditional players is insurances. But at the latest with last year’s successful IPOs of insurance provider Lemonade and car insurance startup Root, raising $319 Million and $664 Million respectively, this is about to change. According to Ashley Paston, investor at Bain Capital Ventures, “there’s a lot more focus brought to insurtech as a result on not just the B2C side, but also the B2B side. I think we’re in the first innings of insurtech and insurance innovation, and there’s a lot more to go there.”
- Payment Orchestration Platforms
Last year’s Wirecard scandal had many consequences, from greatly embarrassing German regulators and top-notch auditors to painful financial losses for ordinary and trustful private investors. But it also highlighted the risks for companies to fully rely on a single payment service provider for their daily transactions. A growing number of companies, like Switchpay and Spreedly, are offering merchants a single API that let’s them connect and switch to a large variety of Payment Service Providers whenever they want. This not only protects them from events like the Wirecard downfall, but also strengthens their negotiating power towards these companies.
- Will neo-brokers continue their rise?
2020 was the year of Trade Republic and Robinhood. Making it possible for anyone with a smartphone to trade in financial products, their userbase shot up during the pandemic. With people having lots of time on their hand and rethinking their financial security because of the economic turmoil, the easily accessible apps, combined with gamification aspects, became a real hit. The big question this year will be, whether users will keep their interest when the pandemic wears of and normal life start resuming. If this is the case, then Trade Republic is on its way to becoming Germanies next fintech hope.
