Motive Insights

By Motive Partners

Motive Insights: Anywhere and Everywhere – Financial Technology 2021 Year in Review

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December 19 · Issue #286 · View online
Motive Insights
2021 was a difficult year. It wasn’t unprecedented – that was 2020 – but as we navigated our second year of the pandemic, doomscrolling became our favorite pastime and languishing was our #mood.
A bright spot to the year – fintech was anywhere and everywhere. AMC, GME, Dogecoin and Ethereum landed in the top 10 global news stories in Google’s Year in Search, Elon Musk talked Dogecoin on Saturday Night Live (not to mention tweeting a few too many times about meme stocks and crypto), and to top it off, we saw a record $91.5 billion in global fintech funding through the third quarter of 2021, nearly twice as much as total 2020 funding. And based on what we see, the year will truly finish with a bang!  
Financial technology isn’t just having a moment. The pandemic forced businesses and consumers to be digital, as reported in earlier episodes, a true inflection point – advancing digital adoption at breakneck speed and impacting every sub-sector of financial services, as well as the wider global economy. In fact, the adage that every company is a fintech company has never been truer. Earlier this year Motive Insights reported that the total fintech market value is projected to reach $9.6 trillion by the end of the decade, largely driven by embedded finance and a number of other trends that have started coming to fruition in 2021.  In our last episode of Motive Insights for the year, here is a recap of some of the important trends that shaped this year and should continue to push fintech forward globally in 2022 and beyond.  
Payments: The Next Generation
The move to digital payments was happening well before the pandemic. But as businesses came back online, the adoption of contactless payments increased dramatically with global volume expected to increase nearly 50% to $2.5 trillion for the year, and we are just getting started. Looking ahead, 93% of consumers would consider using emerging payments such as biometrics, cryptocurrency, and QR codes, proving flexible and convenient transactions are no longer a perk, but a necessity.
Crypto Goes Mainstream
Speaking of crypto, 2021 has been a groundbreaking year for the industry as market capitalization reached an all-time high of $3 trillion in November. Customer demand has driven traditional financial institutions into the space and even JPMorgan Chase is offering private bank clients access to crypto-focused funds, despite Jamie Dimon’s prior public admonition of Bitcoin as “worthless.”
Washington is also warming up to crypto, and transformational opportunities it could present. This month, a pair of U.S. congressional hearings highlighted a noticeable sentiment shift on the Hill towards the asset class: The House sought to better understand the far-reaching impact of the digital asset ecosystem, while the Senate unpacked the state of the burgeoning stablecoin market.  In an opening statement by ranking member McHenry to the House committee, the congressman noted that “2021 was the year of cryptocurrency”.
Love it or hate it, it seems cryptocurrencies are here to stay.   
 
Rise of Buy-Now-Pay-Later
Consumer interest in payments innovation extended further to new areas like buy-now-pay-later (“BNPL”) in the U.S. Specifically, 52% of 18 to 24 year olds (Gen Z) reported using the service in the last year. BNPL lending volume in the U.S. rose tenfold from 2019 to 2020 to $39 billion and is predicted to grow to $100 billion by 2024 as fintech-focused firms access a new universe of consumers. These attractive dynamics, despite high valuations, led to a flurry of M&A activity in the BNPL space, kicked off by Square announcing plans to acquire Afterpay for $29 billion. The move aims to integrate two services matching millions of consumers with millions of merchants worldwide. As the sector grows on a global scale, more banks, payment providers and tech companies are expected to enter the field, driving innovation to meet rising consumer expectations. Even Mastercard moved into the space, via the new Mastercard Installments program. Late in the year, U.S. regulators announced they are going to take a closer look. We will keep our eyes peeled on this one.
Hyper-Personalized Experience
More than 50% of consumers expect banks to anticipate their needs and make relevant suggestions before they even make contact. Some digital banks are taking this to the next level by building products catered to niche markets. Daylight, a neobank built for the LGBTQ+ community has developed analytics to rate companies on categories like gender-inclusive toilets, use of pronouns, and causes they support. This data is shared with customers monthly, providing insights into how much they’ve spent at outlets rated LGBTQ+ unfriendly potentially driving changes in buying behavior. With more companies competing to understand consumers’ unique needs, real-time data and artificial intelligence (“AI”) will continue to be instrumental in delivering those insights.
The world’s largest auto insurers now offer usage-based insurance (“UBI”) policies, pricing premiums based on telematics and sensors that send real-time driving data to insurers, helping establish accurate risk profiles and pricing data. The global UBI market size is projected to grow at a 25% CAGR, reaching nearly $150 billion by 2027. While interest in UBI is growing, so are concerns regarding privacy and auto telematics as nearly 40% of U.S. motorists report concerns about cybersecurity and safety of connected and autonomous vehicles. Whether consumers are ready for this type of personalization is yet to be seen, but you can be sure that innovation will continue.
You Better Watch Out
Last but not least, cybersecurity continues to make headlines as attacks on consumers and businesses globally increased 29% in the first half of 2021 alone compared to the same period last year. This trend was largely driven by a 93% surge in ransomware events, as hackers continued to exploit vulnerabilities in the shift to remote work. To combat these attacks, spending on cybersecurity is expected to grow double-digits and exceed $150 billion in 2021. The need for safe and secure fintech products is critical as we continue to see the rise in digital and data transformation.  
While these were some of the trends shaping 2021, their impact will be felt over the next decade. Motive’s team of Investors, Operators and Innovators have the depth and expertise to identify changes in the industry and capitalize on that evolving trend. Global financial technology is our only field of play, and with our partners we play to win. Thank you for your support and readership through 2021, we look forward to bringing you more insights in the coming year.
 About the author:
Kristina Warrichaiet is a Vice President at Motive Partners, where she works in the Chairman’s Office and is a member of the Investor Relations Team. 
 

Quote of the Week
Wilshire, a global investment technology and advisory company and Motive portfolio company, this week announced the formation of the Wilshire Digital Asset Advisory Group (Advisory Group) with Blythe Masters, Founding Partner at Motive Partners, as Chair. The Advisory Group brings together the top digital asset practitioners in the world to capture their collective perspectives and insights. A crucial next step is to deliver an industry standard Digital Asset Taxonomy System (DATS).
Blythe Masters, Chair of the Wilshire Digital Assets Advisory Committee, said:
“The world of digital assets continues to develop at pace and is growing in importance, meaning it is absolutely the right time to develop a classification taxonomy to help investors make sense of it all. With Wilshire and DAR, we have the right partners involved, bringing the right experience and insights to the creation of a taxonomy, from which investors will see real benefits.”
Motive Portfolio Highlights
  • Trumid announced that J.P. Morgan will join the Trumid trading platform and client network as a strategic partner, completing the network of major banks and ensuring Trumid is the must have venue for credit market participants. Ronnie Mateo, Founder and Co-CEO of Trumid said, “This is a massive win for all of our clients. We’re eager to combine J.P. Morgan’s thought leadership and participation with our technology expertise to improve and expand our product.”
  • Global Shares has released a new podcast – Own Up – all about equity compensation and employee ownership. Join Christopher J. Dohrmann and John Bagdonas, CEP as they take a deep dive into the ever-changing equity landscape, examining the latest business trends and what they mean for your equity. See here for the first episode!
  • Wilshire announces Motive’s Blythe Masters as Chair of the new Digital Assets Advisory Group, whose first initiative is to develop a standard transparent digital asset taxonomy system to categorize the top 1,000 digital asset technologies by market capitalization.
  • InvestCloud’s Head of Digital Advisory, Dr. Boris Rankov, provides insights into engaging clients with ideas and content through the use of technology. Read more here.
  • This week LPA passed a new milestone - 100 million KIDs (Key Information Documents) generated through the LPA Capmatix software! Between the LPA clients (who use Capmatix software) and the LPA managed service team who generate KIDs on behalf of many banks, they passed the amazing milestone of 100 million KIDs generated.  
Select M&A Activity
Select Funding Activity
What We're Reading This Week
Klarna Teams With GoCardless for US Expansion
Brazilian consumer credit startup Open Co raises $115 million in SoftBank-led round
US Consumers Prefer to Send Digital Remittances
Real-Time Payments Simpler as Adoption Spreads
Value of payment transactions by electronic money and payment institutions exceeded €150 billion
Refugees in Kenya bank on their future
TPG’s forthcoming Wall Street debut was decades in the making
Bottomline sold to Thoma Bravo for $2.6 billion
34% of UK finance businesses now making crypto payments
Amazon teams up with Barclays to enable customers to pay in instalments in the UK
Leonardo DiCaprio-backed fintech Aspiration raises $315 million ahead of closing SPAC deal
Advent-backed fintech Ebanx acquired Remessa Online for $229 million
Regulation, Protection & Privacy
ECB draws up action plan to address IT outages that plagued payment systems in 2020
Paytm Shares Plunge to Lowest Level Since November Mumbai Market Debut
JPMorgan to pay $200m over staff messages on personal devices
EU financial watchdog says banks can continue to use UK clearing houses
Clearview AI to Stop Facial Recognition and Delete Data, Says French Regulator
Australia drags fintech into regulatory future
Key Hires & Talent
Natwest Mettle chief quits to join blockchain outfit Near
Failings in HSBC's AML System Lead to $84M Fine
Credit Suisse executive tied to Greensill funds in talks over exit
Food for Thought
“Man cannot discover new oceans unless he has the courage to lose sight of the shore.”
~ French author Andre Gide
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