Like every other industry, Financial Technology (or ‘fintech’) was fundamentally changed by the pandemic. But unlike some industries that relied on face-to-face contact—travel and hospitality being the big two—COVID-19 helped accelerate financial tech adoption. If anything, the pandemic made fintech’s case more efficiently than any marketing campaign. The world suddenly needed faster, more accessible, more transparent and egalitarian solutions to common financial problems. Investments in digital payment platforms jumped to record highs. Dozens of fintech unicorns launched successful IPOs. And crypto assets moved slowly into the mainstream (notwithstanding a few speedbumps in recent months).
What will the future hold for fintech? We sat down with Matthew Sek, Associate Director of Commercial Strategy at Airwallex to look at some of the big trends we can expect in 2021.
1. Cloud Accounting
Experts believe one in two accountants will work from home this year. In fact, new data from the ABS shows that 41 per cent of Australians worked from home at least once a week in February 2021. The global work-from-home trend is real, and likely here to stay, which makes cloud-based accounting services absolutely critical. This covers everything from document sharing and data storage to video conferencing and software integration, and it opens several doors for consumers and financial institutions alike. With better cloud accounting, companies no longer need to do business locally. Moreover, better integrations with point-of-sale technology, inventory management and online stores mean the days of manual accounting are long gone. Customers no longer have to provide their accountants with a full financial picture—it’s already there.
2. Digital Business Banking
Digital banking adoption has been steadily growing for years, but the pandemic supercharged engagement with new demographics—especially those over 50. The Zelle Network, which connects banks and credit unions, actually processed a record 1.2 billion transactions in 2020, totalling $307 billion. Matthew Sek says that slow and manual banking delivery was one of the biggest pain points for customers and businesses, and we’re quickly moving towards a digital banking landscape driven by personalisation, automation and real-time transactions. “We’re looking at complete online self-service functionality, with integrations to other cloud accounting platforms like Xero,” he says. “This is great news for teams, because we’ll see powerful user access and permissions features to balance flexibility with security.”
3. Virtual Cards
Imagine a cardless world. For consumers, this is a matter of simple convenience—it helps slim down their wallets and makes day-to-day banking faster. But for companies, it’s a game-changer. “Virtual cards will be one of the big trends in 2021,” says Sek. “These are fully digital cards, complete with their own 16-digit numbers and CVV. Businesses can create as many dedicated cards for employees or expenses as they like, with no added cost and greater visibility over spending.” Shared corporate expense cards have always been an unwieldy and awkward solution to business spending. With virtual cards, companies can get full transparency over their expenses and streamline the reconciliation process. This is worth serious money. The global virtual cards market is expected to hit USD$739 billion by 2025, with a CAGR of 21 per cent.
4. Global Business Accounts
As digital businesses expand their global customer base, it doesn’t make much sense for banking to stay gated behind foreign currency accounts and punitive transaction fees. Global Business Accounts are the solution. They allow businesses with international customers to receive payments in the local currency, with a local bank account, and they’re designed to work across common digital marketplaces and payment platforms. “Foreign currency accounts aren’t enough for businesses with a global customer base anymore,” Sek says. “Expensive bank fees and the inability to set up global accounts are some of the biggest pain points for companies.” Services like AirWallex allow users to hold money in over 11 currencies, with no international transaction fees and the ability to synch transactions through common accounting software, like Xero.
5. FinTech Lending
Last year we saw digital lenders become more customer-centric, and we can expect that trend to continue in 2021. Faced with the pandemic, financial services quickly scrambled to offer digital solutions, and traditional lending (especially for SMEs) was pretty much turned upside down. “We’re seeing a much more innovative digital loan application process now,” says Sek, “with wider use of data and AI capabilities. This allows for faster loan assessment, so SMEs can quickly meet their funding needs. Traditional lending models are dead.” This is great news for business owners. Instead of laborious, paper-driven applications, they can apply for loans with a few simple clicks, and financial institutions can add cloud-based micro services one by one to further improve functionality.
Interested in learning more about how fintech is impacting the world of accounting? check out our Graduate Certificate in Accounting Advisory and Technology or browse all of our online short courses here