Challenges as opportunities: what’s to come in 2021 in the world of fintech

“Finally! Good riddance 2020″ must have been one of the most repeated phrases at the end of the year. The whole world was looking forward to changing the calendar and starting with a blank page for 2021. However, this new year isn’t holding back on the surprises, with events that will stick in our minds.

If we talk about the financial sector (touch wood), it seems that this year there shouldn’t be any major surprises, although these are still uncertain times. What will be the main technological trends in the fintech ecosystem? How will sandbox help? What new challenges and opportunities are opening up for startups? We drew a photofit image of the Spanish fintech ecosystem for 2021 thanks to the testimonies of noted startups in the BBVA Open Innovation ecosystem, participants in the InnovaHome Festival events and the Acceleration Programme, and Rodrigo García de la Cruz, President of the Spanish Association of Fintech and Insurtech (AEFI) and CEO of Finnovating.

Established technologies

The use of technologies is always tricky to predict, but the definitive commitment to digitisation in 2020 gives us some clues – those technological developments that aid the transformation of business models will be key.

For this reason, García de la Cruz focuses above all on already advanced technologies that are approaching maturity. In first place is cloud computing. “The cloud is not new, but it is going to be increasingly widely used because of the unlimited possibilities it has to offer services”, he indicates.

There will also be a lot of technology related to biometrics, “especially to do with digital onboarding, electronic identification and digital transactions, and with a big qualitative leap forward”, notes the President of the AEFI. The omnipresent artificial intelligence (AI) and big data will end up becoming entrenched. “There’s going to be a major boom in AI algorithms to handle that data. If you’re not working on the data, you’ll definitely not have visibility” said García de la Cruz.

Using these technologies, this year the startup Bdeo, which ran a pilot with BBVA Mexico, will commit to continue promoting automation, as their Country Manager Juan Luis Torres explains: “Today Bdeo automatically detects damage to cars and offers an inexpensive assessment of repairs using photo analysis, thanks to our AI algorithm. In 2021 we want to roll out that automatic detection to property damage and the life cycle of an insurance policy with inspections, claims and repairs”.

Another of these eternal promises – blockchain – will shine bright this year according to García de la Cruz: “I envisage sustained growth in which we’re going to have more and more lines of business and more projects using tokenization. In 2021 we might see the birth of the digital euro”.

A fertile ground for partnerships

2020 closed with a milestone for the world of finance in Spain. In December, Law 7/2020 on the Digital Transformation of the Financial System came into force, a piece of legislation that paves the way for an environment in which digitisation can be tested without jeopardising the financial system. This is the already famous sandbox, a controlled testing space that provides an opportunity to test new products and services with real customers, without breaching any regulations. In other words, it’s an ideal setting for fintechs to be able to undertake projects.

“It’s the perfect space to be able to test and implement complex business models, something that couldn’t be done before. As a result, we’ll now see innovative and pioneering business models being launched”, says García de la Cruz, President of the AEFI.

At the same time, this new environment will also favour collaboration between banks and startups. “Large financial institutions have realised the need and urgency to digitise processes and reach unexpected customers”, indicates the expert. Open innovation and the sandbox framework are the ideal tool to prepare those digital transformation processes.

A challenge becomes an opportunity

Experts and entrepreneurs agree that one of the major challenges in this new year will be investment, which has been paralysed by uncertainty and the health and financial crisis. García de la Cruz points out that “the financing vehicles being created are often aimed at traditional SMEs and don’t reach the ecosystem of technological startups”. The trend also seems to be that there are fewer small funding rounds, which are the ones that often have an impact on this type of company.

Although it may seem like a contradiction, many of those fintechs are actually the ones allowing other startups to generate loans or create alternative financing opportunities. “It is a sector that is affected, and at the same time is part of the solution”, explains García de la Cruz.

The fintech Lendmarket offers an alternative investment platform that provides access to the corporate debt market. Its CEO Alejandro Villalonga believes that this type of alternative financing will be “indispensable” for the economy of the future: “The appetite for this type of asset from investors will increase exponentially. Diversifying traditional markets, which behaved with unusual volatility in 2020, will be key to bringing stability to their portfolios, breathing new life into them and providing them with liquidity”.

Focus on staying local, customers and sustainability

There are not only financial challenges on the horizon, but also benefits. “Fintechs are experiencing their most active time. It’s a sector to bet on, not just to develop products and services for end customers or financial institutions , but also for SMEs that need digital e-commerce, digital payment gateways, invoice management and digitisation of loans”, notes the AEFI President.

ÓscarAnzola, CEO of the fintech WayApp Pay, which offers its own means of payment for businesses to issue cards under their own brand, believes that among other opportunities there will be a “positive impact on business reactivation and particularly on the search for improvements for businesses”. The entrepreneur also points out that there will be “backing of local businesses, increased trader competitiveness and a return to consumer loyalty”.

Technology company Aper carried out a pilot with BBVA Argentina this year. “The opportunity will come from understanding and adapting solutions to what customers require in this new era”, indicates CEO Conrado Marturet.

2021 is also an opportunity for the environment and sustainability, BBVA’s banner and aspects that are increasingly present in the philosophy of all companies and entrepreneurs. This is what they believe at Fundeen, a platform for collective financing to invest in renewable energy projects. “We hope to position ourselves as an alternative for small investors to make their savings go further by participating in the renewable energy sector, which is as profitable as it is necessary”, says Nacho Bautista, CEO of Fundeen.

After the pandemic, society is even more aware of the threats that put our way of life at risk. That’s why the startup thinks that “collective awareness of climate change will increase and there’ll be a decided commitment to clean energy. Spain can become an international benchmark in renewables, and this is a promising horizon.” The trends are there, and although 2020 has taught us that everything can change, we’re ready to make the most of 2021.