• Daniel Belda, Head of Product Strategy at OpenPayd


• 14.12.2022 06:35 am

What are the broad trends you expect the fintech industry to focus on in the upcoming year? Why will these areas be the immediate focus for the industry in your opinion?

I hate to use the term, but it's a perfect storm. An overheated fintech market has meant many entrants and startups found it very easy to obtain investment money. The underlying technology is maturing - there’s a better understanding of what is (and isn’t) possible, leaving less room for irrational exuberance. And we now have much clearer regulatory oversight and a looming recession.

These trends will cause many initially well-funded startups to either go bust or be desperate for any type of exit. Because of this, established players will start picking off the easy targets to acquire good tech at a significant discount, compared to six months ago. We’ll see a lot more M&A, from large financial institutions, big tech, and even larger fintech firms that have built solid foundations. This market contraction cycle is normal and has happened a few times already in the last decade or two (for those who were around to remember).

The recession will also have an immediate impact on consumer behaviour. They will become pickier and more selective on how and where they spend their money, while looking for ways to improve their financial situation. That will be a challenge for companies that rely on high levels of discretionary consumer spending, and an opportunity for those that can deliver real value to their users.

What is the role of the fintech industry in supporting companies and individuals at a time of extreme need?

Fintech won’t solve the cost of living crisis in 2023. The idea that fintech can ‘solve’ the cost of living crisis is at best misguided and at worst, hubris. Fintech is not the saving grace for the deep structural issues our societies are facing - inflation, trade disruption, climate change. Fintech can’t solve all these problems alone.

Yes, fintech has been a source of great innovation that is helping consumers save and manage their finances better. Embedded finance is at the heart of a new breed of responsible spending apps, for instance. Fintech has a role to play in helping companies increase efficiencies and consumers manage their money, but these are sticking plasters for the systemic ills that influx our economies. It will take the combined forces of both industry and government to clamp down on the cost of living crisis and build back stronger. We should really be wary of fintechs claiming more.”

What's the next phase of embedded finance?

Many market watchers believed that 2022 would be the year embedded finance entered prime time. And it did, just not in the way many expected. Embedded finance may not be powering hundreds of new consumer-facing applications yet, but it is revolutionising core payments operations.

As Europe stares down the barrel of a recession, these ‘bread and butter’ embedded finance use cases will see huge uptake. After all, it’s logical: dramatically improving efficiency of back-end processes will deliver significant savings and productivity benefits for fintechs and brands. 

For example, when every point of margin matters, savvy merchants will take another look at the infrastructure and payment rails they have access to and try to nudge shoppers onto rails with lower fees. These first steps will build confidence amongst retailers and encourage experimentation.

How has the events of 2022 impacted industry focus on digital currency in the upcoming year?

2023 will be the year some central banks will start exploring CBDCs to understand them better and determine how they really want to use it. We’re still in the early days though, and regulators and central banks are moving slowly (as they should).

2024 is probably the year where we will see more movement and interesting developments in this space though. We shouldn’t expect a big bang in the next 12 months; progress will be incremental and adoption will be uneven around the world.