Fintech’s Hottest Trends in 2021? Privacy, Control, & Customization
For the tech world, 2021 has started off on a rather strong and unusual note.
Perhaps it was a long time coming, but the world seems to have suddenly taken a turn toward personal accountability and control over their data.
The updates effectively allowed Facebook to have direct access to data from messages that private users send and receive from businesses through the platform. Although the update does not affect the privacy of messages that users exchange with friends and family, distrust over Facebook’s handling of personal data seems to have hit an all-time high.
Therefore, when Elon Musk recommended users switch from WhatsApp to Signal, downloads of the app exploded. Downloads of Telegram, another privacy-focused messaging app, similarly skyrocketed.
— Elon Musk (@elonmusk) January 7, 2021
Additionally, the WhatsApp-Musk debacle closely coincided with major concerns over the power that big tech companies have over the distribution of information on the internet. Citing concerns of further violence, a number of social media platforms made the decision to unilaterally ban US President Donald J. Trump from their platforms.
While it may be that de-platforming Trump did help to quell further violent protests in the United States, citizens and politicians on both sides of the aisle are concerned that power over the American narrative has become too centralized and too privatized.
Desires for Privacy and Control in Fintech Present a Strong Case for Crypto and DeFi
While neither of these incidents were directly related to the fintech world, the desire for privacy and personal control over information has never been stronger.
Therefore, the case for cryptocurrencies as an actual means of transacting value (rather than just a speculative investment) seems to be on the rise.
In a series of tweets on Twitter’s decision to ban Trump, Chief Executive Jack Dorsey briefly wrote about the power of Bitcoin’s decentralized model as a possible solution for concerns over Big Tech’s centralized power.
“Yes, we all need to look critically at inconsistencies of our policy and enforcement,” he said. “Yes, we need to look at how our service might incentivize distraction and harm. Yes, we need more transparency in our moderation operations. All this can’t erode a free and open global internet.”
“The reason I have so much passion for #Bitcoin is largely because of the model it demonstrates: a foundational internet technology that is not controlled or influenced by any single individual or entity. This is what the internet wants to be, and over time, more of it will be.”
Indeed, the case for decentralization is stronger than ever. However, Douglas Horn, Chief Architect at Telos Blockchain, told Finance Magnates that the road ahead may not be an easy ride.
“The most important developments in fintech will be broader adoption [of crypto], and reduced fees by moving to chains with lower transaction costs,” he said. “Pent-up frustration about rug pulls, hacks, misrepresentations about governance and other hijinks will lead to a backlash that is likely to rage for a while then move on without really changing much.”
Additionally, Horn predicts that: “‘certifying agencies’ will pop up and become the next group of companies with their hands out to crypto projects for certification fees, similar to exchange listing fees. And by the end of 2021, at least one significant player in traditional finance will move into DeFi in a big way, leading the charge for more.”
The Power of Choice Is Stronger Than Ever
Because these themes of privacy and control are more present in the public conversation than ever, individuals may be more likely to gravitate towards fintech platforms and services that put these things at the core of their mission.
Also, as Veem CEO, Marwan Forzley told Finance Magnates, fintech users have more choices than ever in 2021.
“Fintechs will provide more choice,” this year, Marwan told Finance Magnates. “Financial technology, and fintech as it relates to payments, in particular, are expected to double down on the customization they extend to their users.”
“Whether it’s optionality in routing or more integrated services, fintechs are optimizing customer experiences intended to provide the most choice as possible through personalization, integrations and user preferences to fit their needs.”
Forzley explained that the growth in the number of choices available in the fintech sphere has largely been fueled by necessity. “COVID-19 has fueled the acceleration of e-commerce and online business services as well as remote labour markets — increasing overall fintech adoption,” he said.
“This trend is not temporary, and is expected to grow even post COVID-19 as fintech reduces friction and strengthens online buying experiences. Financial technology enables small businesses to quickly hire and mobilize their remote workforce, and set up regional supply chains, through a faster and more convenient payment and payroll experience.”
As Financial Conditions Continue to Change, Retail Traders Are Entering Financial Markets in Droves
The COVID-19 pandemic has brought an unprecedented amount of interest in retail asset trading, a trend that many believe will continue to grow and develop in 2021 and beyond.
Indeed, Milind Mehere, CEO & Co-Founder at Yieldstreet, told Finance Magnates that: “in 2020, the power of technology provided access to investments beyond the stock market, including alternative assets and digital currencies. In 2021, we believe the most important development will be the mass adoption of alternative investments by everyday investors.”
Additionally, Mehere believes that: “The modern portfolio structure for retail investors could evolve after being decades of gospel.”
“Generally speaking, the traditional 60/40 portfolio no longer provides the kind of benefits it once did. Equity markets are trading at, or near, some of their highest valuations and have become increasingly more volatile with large sudden swings.”
Covid-Induced Changes in Monetary Policy Could Drive Interest into Alternative Assets and Fundraising Models
This shift in portfolio structure conceptualization is likely in part due to the fact that monetary policy in the United States has changed considerably in response to the COVID-19 pandemic. The dollar seems to be growing increasingly weaker; many believe plans for further QE and stimulus spending could send it to its lowest point in decades.
“The 10-year United States Treasury rate is at, or near, its lowest point and becoming increasingly more correlated to equities, suggesting its benefit of being a counterbalance to equity risk may be diminishing,” Mehere said.
In addition to increased concerns about privacy and control, disillusionment with traditional assets could also be a driving force for cryptocurrencies and other alternative assets.
“We believe we will see an increase in the adoption of alternatives, which offer returns typically uncorrelated to equities and bonds and can help mitigate overall risk in portfolios,” Mehere said.
Moreover, Douglas Horn believes that blockchain-based fundraising options could become more popular as a result of changing monetary policy.
“If past patterns hold, there will be a lot of stimulus money, but much of it will be distributed through banks which will fail to deliver the amounts intended to the intended recipients,” he said. “Small businesses will be in serious financial trouble and unable to get traditional loans.”
Therefore, “for survival, a number of them will turn to new funding structures like tokenization. It won’t be a large number in terms of total businesses, but from the blockchain adoption and normalization standpoint it will be enormous.”
“This will further drive adoption and reduce the drive towards harsh regulation since it will likely save many businesses where the government programs will have failed.”
As Fintech Takes over Traditional Finance, Vcs Could Pour Big Money into Small Companies
However, at the same time, VC funding could save the day for many small fintech companies.
Veem told Finance Magnates that: “I think fintech funding in both the public and private markets will continue to trend upwards in 2021.”
“The IPO market is poised to dominate in the first half of 2021, with anticipated IPOs from Affirm, Robinhood, Better.com, SoFi and Marquette,” he said. “In addition, venture capital funding trends will likely accelerate, given the dry powder and capital raised in 2020.”
“Political and economic uncertainty weigh on the minds of many. Equity markets trading at their highest valuations raise concern for a 2000’s-like bubble burst. If that event does take place, the public markets may experience a correction, and we’ll see valuations come back closer to earth.”
“However, I would not expect private funding to be affected by a burst for 12-18 months, and we should continue to see the current deal flow trends we experienced in 2020.”
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