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3 Fintech trends in 2021

Will AI remain a big trend like last year? What are digital banks and Open Banking, and what will they mean?


Let’s pick up where we left off last year. We described how AI in 2020 would become a megatrend. We believed the approach and offering of AI would shift significantly in 2020. Has it? Yes, we think so. Not too long ago, we had Dan Rose visit to discuss how far we’ve come with AI. Dan Rose is the CEO of TodAI. During his visit, we recorded a podcast where he discussed our actual progress with AI.

This brings us to our first prediction for 2021:

AI remains a megatrend

AI is here to stay. But where will development specifically head in 2021? Especially in relation to fintech, if one wants to utilize AI?

We believe many businesses venturing into new AI territories – like deploying chatbots for customer service – will advance further in 2021. This might involve delegating parts of their finance or accounting functions to an “employee” powered by artificial intelligence. This could naturally be in bookkeeping or approval processes where data is automatically read from a document or invoice and subsequently approved and recorded.

What’s new in 2021 will be that instead of the existing RPA functions that can handle data extraction and transfer tasks, an AI function will not only extract and transfer data to predefined fields in a financial system but will also calculate how to respond to various variables in the future. This is achieved by “training” its intelligence, meaning it learns how to act by performing tasks. To get the full benefit from an AI employee, it’s crucial to have a human AI instructor to oversee and adjust the AI’s behavior if uncertainties or mistakes arise. Once the AI has figured out – or learned – how a human would process various types of documents and invoices, the artificial intelligence will determine how incoming documents or invoices should be handled, even if they are not previously known in the financial system.

Digital banks

The next big trend we foresee is digital banks. By digital bank, we don’t mean the activities traditional banks have already moved to online banking. We are talking about a completely new form of bank that operates exclusively online. These banks are also known as neobanks. Neobanks, initiated by a new generation of entrepreneurs, can compete on parameters challenging for existing banks to match. For instance, offering fee-free services, which is easier without brick-and-mortar overheads.

Generally, neobanks don’t have the baggage of historical practices, like customers being accustomed to in-person banking. It’s not that traditional banks aren’t adapting to digital realities, but there’s a vast difference between practices followed for a century and operating entirely digitally.

Another advantage of neobanks is their willingness to adopt new technologies, especially cryptocurrency. However, where neobanks might face challenges is security. With reduced costs might come a lower level of security. But with general digital advancements, access to better security systems will likely become easier for digital banks, perhaps even aided by AI.

In summary, we believe digital banks have a future. Whether they will become massive in 2021 remains to be seen, but as more bank users have never paid through traditional means or visited a bank physically, their popularity will likely grow.

Open Banking

Open Banking will revolutionize the banking sector as we know it. With the EU directive PSD2 (Second Payment Services Directive), which we’ve discussed on our blog before, competition in the banking sector will intensify. With PSD2, it’s possible to share bank data with third parties, allowing third parties access to a company’s or individual’s financial information to provide an overview and check the market for better prices on services. It’s akin to a price comparison tool for banking services.

This directive will ramp up competition in the banking sector, and we can expect banking products for individuals, as well as payment solutions for businesses, to become cheaper. It’s not just about banks reducing prices. Their profits will drop, but it will happen because new players will emerge.

On the flip side, banks can leverage the opportunity to collate the best banking products for potential customers, possibly by embracing fintech. An example could be a platform comparing bank products, owned by a bank. This platform would transparently recommend the best product for the individual customer, even if offered by a competing bank. At the same time, the platform could suggest other products the bank offers. This approach would appear credible and also secure a new customer for the bank, even if not for the full suite of services.

This doesn’t mean fintech providers or platforms have to act as traditional banks. But the customer or user of a service should always feel catered to, preferably through data. Those creating this experience will most benefit from open banking opportunities.

However, with the possibilities PSD2 brings, consumers and business leaders must be cautious about who they grant access to their bank data. New entrants will flood the market, and some might not handle your data in your best interest.

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