5 minute read
As 2020 draws to a close we look back on a year marked by a grueling uncertainty. But we also look back at a year characterized by great ingenuity. After all, necessity is the mother of invention. Against all odds, our team at Solarisbank went on to have our most successful year to date. We managed to raise an oversubscribed series C round, bring multiple global players live on our platform, migrate our entire banking infrastructure to AWS and reach the milestone of 750 thousand end-customer accounts. With the help of the impressive growth of our partners, we’ve come out of 2020 more flexible, more resilient and more ambitious than ever.
But what does 2021 hold for banking and fintech? We spoke to the experts at Solarisbank to help us navigate the key trends that await us in the new year.
Delia König, Managing Director Identity
One upside of the COVID pandemic has been that it revealed the glaring gap in the digitalization of onboarding processes in the banking industry. In this day and age, identifying yourself or signing a contract should not require you to visit a branch with a pen in hand.
Conditioned by instant messaging services and mobile applications, customers have come to expect the same standards when onboarding for financial services. While this trend has certainly preceded the pandemic, COVID has acted as a catalyst for it. And rightly so. Banks would do well to take the learnings from 2020 and adopt customer centric, digital identification and signing experiences. Relying on physical interaction for onboarding processes is a severe impediment to short- and long-term scalability, and will become a key differentiator in 2021.
As financial players seek to achieve this, we can expect to see an increase of collaboration within financial ecosystems, as incumbent players and fintechs embrace the fact that they can benefit more from cooperating than by competing with each other. This holds true especially for the sharing of KYC data. If your customers have already identified themselves with one bank, why should they have to go through the same process over and over again with each new account they open?
With the launch of our new KYC method, Bankident, we have reached a big milestone in 2020 for enabling businesses to offer purely digital and instant onboarding experiences to their customers. This sets a precedent for what customers can expect in 2021, and we are excited to see it unfold.
Nicolas Knecht, Managing Director Lending
The pandemic had a similar accelerating effect on the lending market, particularly in the consumer segment. With worldwide restrictions on free movement, online shopping surged in popularity; and with it, the demand for convenient and fast payment methods. This has spurred on the rise of “buy-now-pay-later” models that enable users to pay for online purchases in small installments over time, blurring the line between payments and lending. While for some the thought of taking out a loan for a purchase may have seemed cumbersome or daunting, in the form of a buy-now-pay-later product, it has now become simple and transparent.
Buy-now-pay-later is a best practice example for how non-financial companies in the e-commerce space can embed financial services into their customer journey. On the one hand, the customer is given far greater financial flexibility and choice, while on the other, the retailer can significantly boost conversion rates, increase basket size, extend their customer relationship and generate interest revenue on top. As consumers continue to habituate online shopping post COVID, retailers ought to be primed to innovate their checkout journey in 2021.
Alexis Hamel and Julian Grigo, Managing Directors Digital Assets
2020 has been a momentous year for crypto and digital assets. Bitcoin has established itself as an asset class of its own, gaining new levels of trust as the sentiment of previously skeptical Wall Street pundits took a 180-degree turn on crypto currency and institutional investors crowded into the crypto market.
As Bitcoin and co. continue to take the mainstream by storm, we can expect neobanks and neobrokers to adopt cryptocurrencies and potentially even security tokens into their offering throughout 2021. Simply offering a sexy user interface and a modern branding won’t be enough to fend off the growing competition and hush investors demanding the monetization of customer bases. Offering user-friendly crypto brokerage services will act as a key differentiator for these players in 2021, as already displayed by Paypal.
Non-financial platforms however can also emerge as winners of the crypto craze in 2021. Gaming, social media, streaming and trading platforms with many million participants transacting micropayments with each other can benefit heavily from the free and instant exchange of value that the blockchain offers.
Next to Bitcoin’s price hike to record-breaking levels, all eyes were set on decentralized finance, or DeFi for short in 2020. By leveraging smart contracts, such as those issued on the Ethereum network, core financial services such as credit, derivatives, insurance and trading can be mapped onto permissionless, non-censorable blockchain protocols and operate without the need for centralized institutions. As the hype-cycle cools off and the wheat separates from the chaff, we will see concrete and sustainable use cases erupt in the field of DeFi. This will be especially attractive as the low-interest rate era continues into 2021.
Timo Weber, Managing Director Digital Banking
It’s 2021, and cash is still alive. While the rest of Europe is embracing mobile payment, Germany is lagging behind. However, cash is nowhere close to its former dominance. Akin to how the pandemic accelerated the digital transformation in the lending and identification space, COVID has also stimulated the shift in the payment space from cash to mobile payments.
However, it’s not necessarily banks benefitting from this development. With far more customer touchpoints and strong emotional ties to the customer, brands have an advantage over banks in creating tailored financial experiences that target niche segments with far lower customer acquisition costs. This trend of embedded finance is fundamentally changing how we interact with financial services and will take center stage in 2021 as more and more brands flock into the market.
By leveraging Banking-as-a-Service platforms, global tech ecosystems such as Samsung are launching state-of-the-art mobile payment services with a rapid time to market. In 2021, incumbent financial institutions will have to walk the talk on their digitalization strategies. However, simply digitizing antiquated business models may not suffice to hold off the rising pressure from non-bank brands that are embedding digital financial services directly into their offering.