The last two years have been a rollercoaster of ups and downs for financial services companies — from the incumbent giants to the smallest, most agile startups. Remote working caused an upheaval of native tech systems, consumer expectations for digital services soared, and a new breed of nimble, tech-driven startups emerged.

But the pandemic has also created myriad opportunities — causing businesses to become more proactive, question their long-held assumptions and become more adaptive and innovative.

The race is now on between financial services providers looking to differentiate themselves in a fast-evolving landscape – and these are some of the biggest trends that we think will impact the industry over the coming months, and years.

The shift towards open finance and open data continues

The adoption of open banking is picking up speed in the UK, with recent data from the CMA9 showing that open banking users jumped from four million in September 2021 to five million in January 2022. This is a testament to the ongoing innovation and collaboration between fintechs and open banking product and service providers — and the vibrancy of the ecosystem.

At Tink, we have been talking about the positive impact that open banking will have on the financial services industry for the best part of a decade. But the pandemic has accelerated the shift to digital, and changes that we expected to take another decade are happening now.

In the months and years ahead, the shift from open banking to open finance and, in time, open data will continue to accelerate, to a place where any data can be accessed within seconds to receive cost-effective and highly personalised services, from any company you’ve explicitly given your consent to. This will encourage a healthy and competitive industry and a vibrant ‘open’ financial ecosystem, giving consumers and businesses more choice and control over how they manage their affairs.

Increasing focus on financial wellbeing and inclusion

Financial inclusion is another major theme which is increasingly gaining attention. And it’s no surprise as to why; according to the World Bank, almost 1.7 billion people across the globe are unbanked.

Advances in fintech and open banking have the ability to open up access to financial services — creating more personalised and cost-effective products for underserved communities. Over the course of the year, and beyond, we will likely witness an increased flow of investment directed at third-party providers (TPPs) that enable the underbanked greater access to the financial system.

Open banking also offers the opportunity for greater inclusion in risk decisioning, by using account data to get a more holistic view of people’s finances, particularly for those who are self-employed or have irregular patterns of income.

Not only will more initiatives in this space serve the UN’s financial inclusivity aims, but it also expands the customer base of traditional banks – a reflection of how fintechs and financial institutions can work together to achieve a common goal.

Open banking payments will boom

Open banking payments is a rapidly growing market which presents a huge opportunity for businesses to turn previously neglected user experiences into a competitive advantage.

The most important thing for any business is the experience they offer their customers, and we see that the ones who can offer the slickest and smoothest onboarding or payment experience will be able to generate more revenue and have happier customers. The great thing about open banking payments is that it’s the first-time businesses can properly control the user experience. They don’t have to have a separate payment brand involved or redirect someone to a different log-in, which creates unnecessary friction.

With open banking payments, people don’t need coins, notes, cards, or a good memory for long numbers. All a payment needs is their permission. Businesses retain control of the checkout experience, and users simply link to their account, authenticate their identity, and pay with a brand that they already trust the most – their bank. This leads to high end-to-end success rates and heightened customer convenience and satisfaction.

So, it’s no surprise that the adoption of open banking payments is on the rise. The more that individuals and businesses use this method for payments — be it to pay bills or facilitate account top ups — with a positive end experience, the more likely they are to embrace them in the future. This is resulting in a veritable snowball effect, cementing open banking payments as a mainstream transaction option.

The year of sustainable innovation

COP26 was a lightning rod for consumers and businesses across the globe — signalling to all of us that we need to do more to reduce our impact on the environment. But with over seven months to go now until COP27, the pressure is on for countries and companies across the globe to come up with concrete ways to reduce their carbon footprint.

As such, I expect to see an increasing number of fintechs developing products and services to help consumers and businesses meet their environmental and social obligations. From green loans and mortgages to checking accounts with sustainability and carbon-tracking features – we are now firmly in a period of sustainable innovation.

Open banking itself will play a huge role in how businesses meet regulatory requirements for sustainability, such as mapping investments against ESG ratings, understanding the risk profile of customers, and accessing or providing loans to fund change throughout society. At the retail level, by aggregating and enriching account data, open banking powers consumer apps that enable individuals to track, understand and change their behaviour to improve their carbon footprint.

Final thoughts

Change is happening faster than ever before. The public’s expectations for financial services companies have been rising steadily over recent years and the creation of innovative products and services from fintechs have raised the bar.

As we increasingly move towards an ‘open’ ecosystem — which is being facilitated by open banking — there is a clear opportunity for financial services providers to drive real, meaningful change for people and businesses across the globe. These trends should be at the top of companies’ investment agendas, as they will help provide a leg up on the competition and strengthen their position in the market.