research

Fintech Trends: 

What to Expect in 2021
In this study, Digital Horizon experts analyzed global trends that
were unfolding in the European market and tried to predict how
they would develop and reinforce each other.

Alan Vaksman Vlad Tropko

Founder, Managing Partner 
 Managing Director 

of Digital Horizon
of Digital Horizon VC

Victoria Dmitrenko Geoffrey Nicholson

Head of product consulting 
 Managing Partner 

of Digital Horizon Venture Builder
of Nicholson Partners
Contents
Introduction

01 Embedded Finance

02 Smart Real-Time Data

03 Hybrid Products

04 Self-Driving Finance

05 Account-to-Account Payments

06 Low-Code Fintech

07 Digital Assets

Summary

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Fintech Trends: What to Expect in 2021

Introduction

Trends that had started earlier were accelerated even more in 2020. 


The year also highlighted certain systemic financial problems that the

market has not found the solutions to yet.

The main factors that affected the global financial markets were:

economic instability;

changing balance between online and offline payments;

new stress-related behavior patterns: spending less, investing more,

switching to installment payments;

open banking development.

The changes in the global financial industry are going to take place

gradually. At the same time, they will be deep-rooted and systemic.

We will see changes in the value chain, new business models, types 


of players, and product types.

Forecast experts Advisor

Alan Vaksman
Geoffrey Nicholson

Founder, Managing Partner 
 Managing Partner 


of Digital Horizon of Nicholson Partners

Vlad Tropko

Managing Director 


of Digital Horizon VC

Victoria Dmitrenko

Head of product consulting 


of Digital Horizon Venture Builder

© 2021 Digital Horizon digitalhorizon.vc

Embedded Finance 01
In 2020, this trend gained tremendous speed and is not going

to slow down in the near future. Financial services are starting

to operate behind the scenes, becoming an integral part
of non-financial products.

Embedded finance tools allow businesses to integrate payments, debit

cards, loans, insurance, and even investment instruments into virtually any
user experience. For example, you can get a loan directly on an online store
or supplier company website without filling out any forms. In turn,
applications that seemingly have nothing to do with finance now enable
money-sending features. This approach will be profitable for banks and
fintech companies, as it will allow them to compete with players pulling
customers into their banking applications.

For software companies, embedded financial tools can increase the

revenue per user two- to five-fold.

For financial institutions, embedded finance essentially implies

attracting users at zero cost and obtaining additional contextual data,
including real-time data.

2021 will drive banks further away from customers, thus demonstrating the
limited value of banking apps. 


In Europe, financial institutions focus on distributed development and seek

to integrate their services at a different, deeper level. They are encouraged
to do so by open banking development.

At the same time, the UK market is known for the requirement of obligatory
user consent for any data processing. In this context, fintech products
need to clearly show their value to the user.
© 2021 Digital Horizon digitalhorizon.vc
Embedded Finance 01

In 2021-2023, the trend of embedded finance development will lead

to lower marketing and branding costs for traditional banks since
aggressive promotion will not be necessary. As a result, some banks can
become truly invisible.

Starling Starling became the first profitable neobank in Europe, 


in part, thanks to a hybrid business model: the solution
works both as B2C and BaaS.

Railsbank This year, Railsbank not only bought out the British
business Wirecard but also raised $37 million to enter the
American market.

Shieldpay Shieldpay facilitates large transactions using digital escrow

accounts, for example, for purchasing art, branded
clothing, or used cars.

Bsurance Bsurance integrates custom insurance products, including

claims settlements, into any digital platform.

Sberbank Sberbank has launched an online service, «Business

purchases on credit.» From that point on, the bank’s SME
clients could raise financing directly on the suppliers'
websites, for example, on the car manufacturer’s
B2B portal. All it takes is adding the goods to the cart and
selecting «Buy on credit.»

Wildberries Wildberries marketplace is buying a small bank 


to implement card loyalty programs and settle accounts
with suppliers based on their license.

© 2021 Digital Horizon digitalhorizon.vc

Smart Real-Time Data
02

2020 undermined predictive analytics models based on historical

data. Both people and companies have seen rapid changes

in their financial situations: this was the period of financial

trauma and recovery alternating at unexpected times.

Information was becoming outdated so quickly that it needed

to be tracked in nearly real-time for decision-making.

The client’s financial stability as a whole has become an important

consideration for financial institutions. In addition to credit history, they

also started looking at current income and expenses as well as any

additional factors that may affect the solvency of a person or company.

However, more data leads to an increased load on data departments,

driving up computing costs.

In response to the growing need for up-to-date information, the

development of analytical and scoring products will include real-time

insights and the ability to calculate historical scoring and make predictions

based on big data.

Open banking solutions enable banks to react more quickly to changing

income and spending dynamics. This includes the lack of normal wages

and an increase of smaller payments from freelancer income.

Credit Kudos Credit Kudos helps lenders not only determine the exact

time and extent of a borrower’s income decline but also

forecast how the situation will change in a particular

industry.

© 2021 Digital Horizon digitalhorizon.vc

Smart Real-Time Data 02

Upstart Upstart takes into account the quality of education and

career achievements when assessing the users’
creditworthiness. For example, the university the person
graduated from, academic degree, and work history are all
considered.

TrueLayer TrueLayer introduced the Insights API service this year. 


It collects and analyzes user financial behavior based
on open banking data.

Cuvva Cuvva specializes in time-based car insurance for short

trips. For risk assessment, insurtech also uses telematics
based on real-time data.

Wrisk Wrisk offers usage-based car insurance: customers switch

to a mileage-based car insurance type, with an additional
flat fee when cars are parked.

DueDil DueDil builds connections between affiliates, their

management, and owners in a similar manner as social
media. This helps banks and insurance companies
to identify not only financial but also, for example,
regulatory risks.

Aggregion Aggregion’s decentralized databases allow users

to securely compare information from different companies
while maintaining control over the data and without
centralized storage.

© 2021 Digital Horizon digitalhorizon.vc

Hybrid Products 03
The economy has forged into developing new user scenarios
fueled by basic human insights. Firstly, people do not like (and
often are not capable of) paying for high-value goods or services
in one installment. Secondly, having already made a purchase,
many are worried that something wrong might happen. Thirdly,
most people want someone else to take responsibility for solving
the problem if the purchased item breaks down, gets lost,
or is stolen, but no one likes to pay for insurance.

These scenarios force us to look differently at traditional financial products:

insurance is going in the direction of loans, loans are integrated into areas
that were dominated by insurance, and there are also hybrid models that
combine credit and insurance components.

This paves the way for subscriptions, installments, short-term insurance,

and other solutions that allow users to pay a set fee for guaranteed access
to goods/services, an apartment, or a car. Meanwhile, users do not deal
with large one-time expenses or risks.

Improvements in the risk assessment service and forecasting models have

a positive effect on product distribution. Hybrid solutions are starting
to cover segments that were not reliant on such services.

Obligo Obligo finances security deposits to relieve landlords and

long-term renters. The service assesses
a tenant’s reliability by analyzing their bank accounts using
open banking technologies and data from traditional credit
bureaus. Payments are made monthly.

© 2021 Digital Horizon digitalhorizon.vc

Hybrid Products 03

Qover Bicycle manufacturer Cowboy, together with insurance

company Qover, offers a subscription service that includes
not only insurance but also real-time notifications on theft
or damage sent to owners.

Ozon Online retailer Ozon added supplier lending to its

Ozon.Invest platform. The marketplace shares supplier data
with lender partners who use their scoring for borrower
evaluation.

© 2021 Digital Horizon digitalhorizon.vc

Self-Driving Finance 04
2020 has rocked our financial discipline even further. It goes
beyond the loss of a job or income. The crisis has forced people
to look for new ways to maintain and increase their savings.

The growth of investing among unskilled investors has led to a rise

in solutions like Robinhood. At the same time, it led to substantial losses for
those that have invested in securities without the necessary knowledge.

On the other hand, the rise of hire purchase services has increased
consumer debt. According to Afterpay and PayPal, customers spend more
money ― sometimes by 20% or more ― if the store offers different ways
of purchase financing. As a result, this caused an influx of criticism of Buy
Now, Pay Later solutions. The Swedish authorities even banned installment
plans as a default payment method.

A year ago, we noted that fintech companies are beginning to answer the
need for improving financial health. However, until now, there has not been
a service with a successful solution to this issue. The reason is simple:
people have a need, but there is no suitable business model for it yet.

Perhaps in 2021, the financial industry will have «its own Facebook.»
At first, it might have unclear monetization, but it will improve rapidly,
helping users maintain financial health.

Most likely, such a product will be developed in automated finance. The

first step is a form of round-up apps that take a percentage of the
purchase and transfer it to a savings or investment account.

But for finance to become truly self-driving, fintech products must

transition from a closed model to an open one. Then, they will be ready
to facilitate transfers between accounts in different services guided by the
user’s benefit and not their own. It is not only individuals that benefit from
it: the business sector also needs an self-driving treasurer to distribute
© 2021 Digital Horizon digitalhorizon.vc
Self-Driving Finance 04

funds between bank accounts in the best terms.

We expect a rise of services automating independent financial advice and

making it more accessible. The development of niche products will also
take place.

Canopy Canopy helps users analyze rental and maintenance costs,

budget, and improve credit history.

Zilch Zilch offers a hybrid of a credit card and BNPL service. The
credit limit takes into account the user’s open banking data.
Upon purchase, users must pay 25% of the cost; the rest
is paid back in equal interest-free installments.

Moneyhub Moneyhub analyzes user purchases, automates the

selection of products/services for a lower price, and gives
an option to move money to savings, or make pension
contributions.

© 2021 Digital Horizon digitalhorizon.vc

Account-to-Account 05
Payments

The pandemic has led to a sharp increase in online payments and

exacerbated the issue of transaction costs. While businesses
complained about Visa and Mastercard’s excessive fees,
next-generation payment providers picked up steam.

Thus, the third quarter of 2020 saw an increase in new active PayPal
accounts by 15.2 million, while the volume of payments rose by 36%. And
the number of transactions on Checkout.com has increased by 250% since
the pandemic started.

The development of integrated payments is a long-term trend. This implies

payments that are facilitated by software companies rather than traditional
financial providers. The business sector brings the need for alternative
methods of online payments, including electronic wallets, QR codes, and
cryptocurrencies, to the forefront. .

International payment systems are unlikely to disappear over the course

of 2021. However, we will see the development of solutions that
don’t require Visa, Mastercard, or acquiring banks. They will
be implemented by both fintech companies and consortium of banks like,
for example, the Scandinavian P27 platform.

Banked Banked has partnered with British Airways to offer airline

customers Avios points for purchases through the platform.
Banked also helped charity projects GoFundMe and Heroes
reduce transaction fees from 2,9% to 0,1%.

© 2021 Digital Horizon digitalhorizon.vc

Account-to-account payments 05

Modulr Modulr offers financial and non-financial companies

innovative payment elements that can be embedded for
different use cases.

Clear Bank Clear Bank is a British «bank for banks,» connected

simultaneously to all payment systems available in the UK.

Anna Money After integration with the TrueLayer platform, Anna Money
enables small and medium-sized businesses to accept
QR-code payments.

The Faster The Faster Payments System of the Central Bank of the
Payments Russian Federation includes not only commission-free
System transfers between individuals but payments for goods and
services using a QR-code.

Cloud Cloud Payments enables payments without switching

Payments to a third-party payment gateway.

© 2021 Digital Horizon digitalhorizon.vc

Low-Code Fintech 06
The past year forced tra­di­tional fi­nan­cial in­sti­tu­tions
to ac­cel­er­ate in­fra­struc­ture up­grades and the switch to dig­i­tal
sys­tems. This re­sulted in sim­pli­fied cus­tomiza­tion and
in­te­gra­tion of the dig­i­tal in­fra­struc­ture. In the short term, this
trend in­cludes low-code de­vel­op­ments (i.e., re­quir­ing lit­tle
cod­ing knowl­edge), and in the long term ― no-code so­lu­tions.

We are al­ready see­ing spe­cial­ized sup­pli­ers of­fer­ing low-code plat­form

ser­vices to banks in­stead of mod­u­lar so­lu­tions. This en­ables easy and
quick ad­di­tions of the needed ser­vices: from pay­ment so­lu­tions to more
com­plex prod­ucts with ma­chine learn­ing al­go­rithms and ready-made
trained mod­els.

In the fu­ture, banks will be able to put to­gether cus­tomized so­lu­tions

to max­i­mize their abil­ity to meet cus­tomer needs in­stead of only
con­form­ing to stan­dard use cases.

Thought Thought Machine provides its services on a core

Machine banking-as-a-service model to giants like Standard
Chartered, Lloyds, and Swedish SEB.

Tide Tide uses the core infrastructure of Clearbank and Xero

and focuses on independent developments of only those
solutions that stand out in the market, such as automated
invoicing or app-based lending.

Dextcloud Low-code startup Dextcloud helps integrate existing

application components that are distributed across
companies' internal infrastructure.

© 2021 Digital Horizon digitalhorizon.vc

Low-Code Fintech 06

Railsbank Visa has invested in the Railsbank platform, making

it possible to reduce account maintenance fees from £45
to £10.

Aventus Aventus develops low-code insurance solutions and offers

10 core modules.

© 2021 Digital Horizon digitalhorizon.vc

Digital Assets 07
Following China, in 2020, dozens of countries announced were
developing their own digital currencies or exploring this option.
At the same time, regulators tightened control over
cryptocurrencies, requiring crypto services to identify users the
same way as banks do. As a result, many financial industry
players changed directions and focused on creating a hybrid
model with digital assets.

Entering the cryp­tocur­rency mar­ket is an op­por­tu­nity to quickly mo­bi­lize

a spe­cific, highly prof­itable au­di­ence and sig­nif­i­cantly in­crease rev­enue.

In the up­com­ing year, it is highly likely that in­cum­bent play­ers will not only
de­velop their own crypto prod­ucts but also in­te­grate third-party ones. The
abil­ity to sus­tain high loads, scale the so­lu­tion to the en­tire client base, and
of­fer tra­di­tional prod­ucts of the fi­nan­cial world (e.g., li­censes, cer­tifi­cates,
au­dits) will be im­por­tant cri­te­ria for choos­ing part­ner so­lu­tions.

Digital as­sets are be­com­ing eas­ier to un­der­stand for reg­u­lar users and
en­ter­ing the mass mar­ket seg­ment. However, cryp­tocur­rency adop­tion
di­rectly de­pends on how quickly op­er­a­tions be­come avail­able in each
tra­di­tional bank or pay­ment sys­tem.

PayPal PayPal started offering cryptocurrency transactions

to American users.

Facebook Facebook has done a tremendous job in transforming Libra

into stablecoin Diem to still launch its own cryptocurrency
in January 2021.

© 2021 Digital Horizon digitalhorizon.vc

Digital Assets 07

Visa Visa has accepted Coinbase as the principal member

status: the crypto company can now issue cards and enter
into acquiring agreements on its own. Visa has also
partnered with Circle, which issues USDC stablecoins,
valued at nearly $3 billion.

BBVA BBVA launches a crypto service in Europe. The bank

decided to start in Switzerland because of the
well-developed digital asset regulation.

Binance One of the largest cryptocurrency exchanges, Binance,

offers payment cards that cashback based on the number
of tokens the user has.

Revolut Revolut offers users the ability to buy cryptocurrency CFDs

(contract for differences). However, the contracts do not
grant ownership of digital assets. At the end of 2020, this
neobank expanded its list of available cryptocurrencies.

© 2021 Digital Horizon digitalhorizon.vc

Fintech Trends: What to Expect in 2021

Summary
2020 acted as a stress test for prod­uct in­no­va­tion and busi­ness mod­els.
And European fin­tech com­pa­nies passed the test with dig­nity: they
man­aged in­creased load in on­line ser­vices well, pro­vided the in­fra­struc­ture
for gov­ern­ment sup­port, and con­tin­ued to eval­ua
­ te and pro­vide risky
prod­ucts, de­spite the eco­nomic un­cer­tainty.

The lessons of the COVID-19 pandemic re­vealed bot­tle­necks as well as the

most promis­ing ar­eas for fi­nan­cial de­vel­op­ments. Embedded fi­nance,
ac­count-to-ac­count pay­ments, smart real-time data, low-code fin­tech,
hy­brid prod­ucts and dig­i­tal as­sets ― European tech com­pa­nies are
suf­fic
­ iently ex­pe­ri­enced in these ar­eas. But there is still a lot of work
to be done to fos­ter a fin­tech ecosys­tem that helps in­di­vid­ua ­ ls and
busi­nesses make bet­ter de­ci­sions.

© 2021 Digital Horizon digitalhorizon.vc

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