Historians will undoubtedly look back on 2020 as a turning point in world history. It was turning point in global health conditions, in business dynamics, in the direction of markets and industries and in how and where people live and work.
2020 will also be remembered by business historians, and finance professionals such as yourself, as a turning point in the fintech industry.
Important strategic directional shifts happened and set companies up for an amazing opportunity to revamp and rethink all operations and technology investments. Key turning points in 2020 occurred across two broad dimensions:
- business and market shifts upward; and
- technological progress in applications and integrations.
From a business standpoint, the fintech market reached critical turning points in annual market growth. This included disproportionately high middle-market spending on the tech and finance industries.
In technology, 2020 marked a turning point toward widespread use of, or plans to use, digital technologies more broadly. These included cloud computing to cut infrastructure cuts, machine learning and data analytics to generate more insights and make better decisions, and cybersecurity tools to detect and prevent more fraudsters from stealing corporate and employee data.
Read more: Expert Insights for Peak Performance in 2021
So as we close the books on 2020, it’s important for finance pros to know these major turning points will reshape the fintech market next year and beyond. Here’s a closer look at these trends and how to capitalize on them for business growth.
Business Turning Points for Fintech Industry
There are many ways to measure busines performance and overall market health. But one stands out as a central concern: growth metrics.
“There is one industry that has been nothing less than a blessing during times like these – the fintech industry,” according to a Techtic report. “The industry has not only managed to stay afloat but show growth as well.”
Several key segments of the fintech market have grown. The Techtic report found, for example, that the online payments market will grow by 25-to-30 percent between 2019 and 2025.
The latest survey of 330 accounts payable pros from the Institute of Finance & Management revealed 66 percent of invoices were processed electronically in 2020. Next year, the organization expects that number to rise to more than 70 percent.
The survey also found 74 percent used an automated AP software system in 2020. That number is up from 66 percent in 2019 and 45 percent in 2018.
All these numbers are striking – and uplifting – because they show strong and steady market growth amid challenging overall business conditions.
Strong Spending Rates In Fintech Industry
You’ll be glad to know that there’s plenty more to add to this undeniably positive story. We reviewed middle marketing spending trends across the AvidPay network and found that spending rates grew much faster in the technology and finance industries than in construction, accommodations, and travel industries.
Because demand for advanced technologies and online financial services – which often go hand in hand – grew with the sudden and rapid growth in remote working. By contrast, spending rates on the airline and hotel industries turned out to be much lower because fewer people flew on airplanes and stayed in hotels because of the health crisis.
Big Challenges in 2020 for Fintech Industry
While there were positive changes in the fintech industry, there were still plenty of challenges. Business continuity planning, process inefficiencies and technology integrations rose to the top of the list.
Business continuity challenges
In 2020, companies put their business continuity plans to the test.
Once the pandemic hit, businesses had to quickly execute their plans and set up full-time home offices to keep the business running smoothly during the disruption.
While over 60 percent of businesses had a continuity plan in place, only 37 percent had the necessary technology to enable employees to work from home as part of their strategy.
The massive increase in remote working, while positive in so many ways, created invoice processing challenges for many businesses.
More than half (52 percent) of business professionals in our survey got delayed in processing and paying invoices received from their vendors. And 52 percent said the number one cause was difficultly getting approvals while working remotely.
These slowdowns – often when using manual paper processes – lead to late payments, revenue declines, cost increases and strained customer, vendor and supplier relationships.
A technology challenge this year — which will persist next year – is technology integration. It’s difficult to write the software code for these integrations and then execute and require widespread industry collaboration. Yet they’re vital because they help companies deliver more financial services faster and easier at lower costs.
In the electronic payment and invoice markets, for example, this year showed that integration of AP software with accounting software is a non-trivial task. Businesses that master these integrations will be well positioned to excel in 2021.
Technology Turning Points for Fintech Industry
The shift to digital technology became a big priority in 2020 due to the massive shift to remote work.
Companies needed digital technology to improve employee productivity, generate more insights from data and protect data from cybersecurity attacks. Digital technologies also became more important to enable contactless payments.
How widespread will digital become?
According to our recent survey, nearly two-thirds (62 percent) anticipate at least half of all internal operations will become fully digital in 2021, and 46 percent expect at least half of AP and payment processes will go digital.
From any vantagepoint in the fintech industry, cybersecurity technologies became crucial in 2020. RSM, a network of accounting firms, released a Cybersecurity Special Report highlighting the challenges with cybersecurity among middle market companies.
The report shows that more than half (55 percent) of respondents said it was likely there would be an attempt to illegally access their company’s data or systems in 2020, a dramatic increase from 32 percent just six years ago.
2020 brought more profound changes and paradigm shifts – such as remote working – than ever before.
As a finance professional, how can you take advantage of all this change and make the right decisions at these pivotal turning points?
First, focus on efficiency. Your business will need to become more productive by accomplishing more with fewer resources. How do you do this? Go all-in on digital transformation. Automate key processes like AP automation. Eliminate paper. It’s vulnerable to fraud and too time-consuming to use.
Second, strengthen your cyberattack detection and prevention capabilities. This means so much for so many reasons. Fewer cyberattacks translates to fewer business disruptions, less reputational damage and lower financial losses.
Third, emphasize integration. The entire fintech ecosystem is becoming much more interconnected with different types of software. For those softwares to “talk to” each other and share data smoothly and quickly, there has to be well-thought-through technology integration. This was the year, and it continue next year, when integration became – more than ever – a crucial engine for fueling fintech industry growth.
Onward and upward towards 2021, finance pros. Be liberated to take to the next level all the terrific turning points we encountered this year.
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