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Key areas that will define the new financial ecosystem

The global Fintech market has evolved in recent years, until the number of startups in the sector doubled and by the end of 2021 there were more than 26,000 new companies, that reached a financing value in the world of 20,400 million dollars. Softtek, the Spanish Cooperative Bank (Caja Rural Group), Mad FinTech, the Madrid City Council and Ecofin have analyzed the keys and main players that will mark the future of the sector in the “2022 Fintech Market Ecosystem” report.

The report sets out the strengths and the ideal market conditions for companies belonging to this sector to develop efficiently, without being left behind. The areas that will stand out are the following:

  • New Banking: digital acceleration will be the indispensable factor for this sector, since it gives it rapid growth and differentiation from its competition. The focus of this professional activity has been changing until it reaches the current one, the customer-centric, which, as its name suggests, puts the customer at the center of operations. The basic future strategy that this sector must follow, in order to maintain the accelerated pace of digital innovation and omnichannel services, will be based on creating new alliances with Fintechs and other financial providers.
  • payments: Payments through social channels and messaging, which were a great innovation in this sector, will continue to grow and will get rid of the limitations that are currently imposed on them. Payment methods will be adapted to the new needs of the market, although they will maintain their own rate of innovation linked to technology, along with payments through social channels, the use of open platforms that expand payment possibilities will be increased, and will become the main trend in the future.
  • Alternative Finance: This area had an initial boom, known above all for crowdfunding, but now it is at a certain standstill due to the growth of other payment and financing methodologies. However, contextual feedback prior to investment is beginning to gain importance and equity crowdfunding or capital crowdfunding is positioned among the main trends with the greatest future prospects. In addition, the sector is attentive to new forms of alternative financing structured as funds to attend campaigns or specific sectors.
  • WealthTech: This sector is dependent on advances in Big Data and data analytics to be able to carry out its basic functions (data control, management and protection). WealthTech is one of the trends with the greatest potential for future development thanks to the interest generated by some of its activities, such as Autonomous Finance, and the different types of Robo Advisors are consolidated as the main channel for growth, providing security and financial stability. Innovation connected to AI and ML will be a fundamental aspect in order to solve the current obstacles in the sector and will provide great opportunities for future growth.
  • regtech: This is an essential sector since it is linked to security. Data, privacy and security systems will continue to maintain the importance they have acquired in recent years. But the future in the RegTech area is marked by the ESG (Environmental, Social and Governance) approach. All areas of this sector are governed by the applicable regulations that arise and will continue to arise, innovation must find ways to improve the work following these conditions at all times.
  • RiskTech: As its name indicates, the future objective of this sector is to become an essential tool so that players can anticipate what is coming, and thus establish itself as a risk control strategy at the constitutional level. AI is back in action, which together with RiskCloud systems are consolidated as key technologies during the next two to five years. Within this sector, ThirdParty Risk Management will also be essential for the future, thanks to the growing need to control security measures in external companies, with which there is increasing collaboration in all sectors. This tool becomes an essential system for those who manage to reduce the costs of risks.
  • blockchain: Within this sector, distributed systems, DeFi, are positioned as one of the trends with the greatest growth potential due to their development during the last two years. Blockchain offers greater control and scope of possibilities for consumers. It will also create a new universe of inclusive finance, within which new systems such as cryptocurrencies or NFTs will be developed and democratized, which in turn will contribute to the creation of new and secure payment systems through Blockchain networks. Even so, the future of the sector is focused on the development of the Metaverse, which can already be seen in most economic and social sectors.

María Ángeles Prieto, General Director of Economy of the Madrid City Council, points out that, “the integration of new technologies at different levels of business processes has created great advantages for the business fabric in general, and SMEs in particular. The Fintech sector is an example of how a specialized tool can become the pillar for optimizing the financial processes of any company”.

In the case of Salvador Molina, President of the ECOFIN Forum and the Madrid Capital FinTech cluster, argues that, “The reality is that more than 300 FinTech startups born inside and outside the city fly over Madrid, but there are twice as many FinTech and InsurTech projects incubated in corporate laboratories and in the incubators of business schools and universities. Every bank, insurer, technology company, consultant or large law firm has created its own Fintech observation ecosystem”.

The presence of Fintech companies in the financial field has grown exponentially in the last five years, consolidating themselves as relevant and necessary players in the innovation of the sector. Financial institutions see Fintech companies in many cases as complementary partners with whom they can collaborate in order to develop new value propositions and more efficient solutions for their clients”, he maintains Paul Ruiz, Director of Innovation and Digital Business Strategy of Banco Cooperativo (Caja Rural Group).

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The Fintech ecosystem experienced great progress in 2021, not only in quantitative terms, but also in terms of consolidation of technological development. Without a doubt, the growth of the Fintech sector is not a geographically localized fact, since there are many countries and regions of the world that have witnessed the emergence and growth of new technological and financial players. Everything points to the fact that the sector will not stop growing and revolutionizing the market with new applications of technologies that are increasingly more advanced and therefore public-private collaboration is going to be more necessary than ever”Explain Rafael Count of the WellBusiness Development & Innovation Director at Softtek EMEA.

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