Top 5 fintech disruptors to be aware of in 2022

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On any given day, a quick Google search for “Fintech” will produce thousands of articles about how financial technology is disrupting the banking industry. While using technology to create a faster, better experience for customers isn’t a groundbreaking idea (ATMs were once considered the gold standard of financial technology when they debuted in the early 1970s), it certainly evolved over the past few years. At first it was associated with startups, but now we see it as a crucial component for the financial industry’s business model.

Fintech is about a digital-first society—a consumer-first society. Traditional banking is leveraging this disruptive technology through acquisitions, partnerships or even self-implemented advances—all so they can stay in the game. To be part of this future, those in digital banking need to stay up to date with the latest Fintech companies entering the market and understand what this technology mean for their customers and business model. Because if there’s a want or a need for it, consumers will get it—if not from your financial services, then someone else’s.

When considering how you can use disruptive technology for your company’s financial services, think about how you can:

• Revitalize your products and services through digital transformation
• Personalize product recommendations based on the customer’s needs
• Continue to build relationships with customers without face-to-face interaction at branch locations
• Automate manual processes such as mortgage approvals, customer onboarding and lending
• Educate customers on financial literacy using easy-to-use technology

When building your plan of action to provide customers with the products and services they want, it’s imperative to explore the impact of technology and how key players are leveraging it.

Let’s take a look at which Fintech companies are making waves and discover what we can learn from them.

1. Robinhood

Robinhood has made headlines in 2021 that may have proved the theory no press is bad press. Regardless, it remains on our list of Fintech companies to watch. In September, Robinhood expanded its platform capabilities in cryptocurrency and investors were pleased to see Robinhood reaffirm its strategic emphasis on it as a key growth driver. And the lack of added fees on crypto trading gives customers a competitive advantage over using other platforms, most of which still charge commissions.

Looking ahead, Robinhood plans to add Wallet functionality in 2022, deepening their advantage with their target audience—the “everyday investor.” Robinhood’s products and features are geared toward younger audiences, with 70% being between ages 18 to 40, who enjoy the gamification of trading.

This kind of technology certainly disrupted the financial industry, forcing traditional brokerages to eliminate fees. And while Robinhood successfully aims to be young investors’ gateway into the stock market, we should also take note of their challenges. From rapid, unmanageable growth to the $70 million penalty for lack of due diligence and misleading customers. Balancing ethical practices with innovative approaches helps businesses overcome these types of challenges and continue to thrive.

2. Chime

A so-called challenger bank, Chime is a direct competitor to traditional banks. Chime’s mission is to provide quicker and easier banking completely online. The Fintech’s perks include zero fees—even for overdrafts—early paydays for those with direct deposit and a user-friendly app to help customers save, send and receive money, build credit and more.

What’s interesting is that Chime isn’t a bank. They partner with Bancorp and Oklahoma-based Stride Bank to offer FDIC-insured accounts and small loans. Practically all their revenue is from fees merchants pay each time a Chime customer uses their credit or debit card.

You’ll want to take notes on what Chime has been doing since being founded in 2013, especially following the pandemic. With focus on lower and middle-income families, they created an easy-to-use app and partnered with banks while being paid by merchants so they wouldn’t have to charge consumers. Clearly, they understood the marketplace and rose to the occasion at a time when people wanted and needed to bank online.

3. Klarna

Online shoppers (so, basically everyone) have surely come across Klarna as a “shortcut to shopping.” This Stockholm-based buy now, pay later app became Europe's leading Fintech by providing interest-free payment solutions for consumers buying from online retail shops. Their mission is to be a "healthier, simpler, and smarter alternative to credit cards.” Currently, they’re working to roll out an end-to-end shopping app so consumers can shop in one single place while discovering new products and stores to purchase from. Klarna shared that retailers using its service see average order values increase by 40%. And with more than 90 million users, that’s a big profit for everyone involved.

But Klarna isn’t the only one in the point-of-sale loan business. Afterpay, Affirm, Sezzle and PayPal are more popular companies with the same or similar benefits for consumers. A study from McKinsey & Company reported that credit originating at the point of sale is projected to continue growing from 7% of US unsecured lending balances in 2019 to 13-15% of balances by 2023. On top of that, about 60% of consumers say they’re likely to use POS financing over the next six to 12 months.

The buy now, pay later concept is top of mind for most banks, as it is essentially an interest-free, unsecured loan that doesn’t require a credit check. Which means there’s always the chance of risky financial behavior among consumers. It’s something to ponder as you think of how to provide this type of service to your customers in a safe and secure way.

Through making buy now, play later an interest-free global system and continuously surveying their current or potential consumers, Klarna (and the similar Fintechs listed) makes our top 5 Fintech disruptor list because they are quick to release new, flexible features for both the end user and retail partners.

4. Soul Machines

Fintech meets the metaverse with a little help from Human OS—a cloud-based Autonomous Animation Platform. But let’s just call them Digital People.

Soul Machines created life-like Digital People who can read expressions and resolve your customers’ problems. It’s the answer for anyone who has ever muttered that they “just need to talk to a real person” when they’ve gotten the runaround from an automated chat bot. What this does is create a brand experience unlike anything customers have seen before. The human-like connection customers get from Digital People make them feel secure in discussing banking issues at the convenience of their own home. They are built to listen, perhaps even better than a real human.

Aside from the customer, A.I. plays a big role internally as well. It can assist—or even take over—creating financial plans, credit scoring, collecting, protecting and analyzing data, facilitating transactions and streamlining processes. These areas will see major changes within the next five years, according to Daniel Johnson, Director of Automation at FutureWorkForce. And it’s not just the finance sector that can benefit from A.I., almost all industries are investigating how to leverage this technology. Which is a sign that it’s an advancement banks should be looking into as they create better customer experiences and improve their own processes.

5. Brex

A startup that has other startup’s backs. Brex was founded in 2017 and grew its customer base by 80% in 2021. They offer a software platform for business owners to manage their finances and credit lines, a high-limit credit card for startups and lending.

What we find interesting and different about Brex is what they understand about their customers and what they do with those insights. They know most startups unfortunately fail—projecting that every couple of years, about 70% will go out of business. Brex doesn’t let the amount of churn get in between them and their customer partnerships. They use real-time data to make smart, dynamic lending decisions.

Brex is using financial technology and disrupting the way startups have been treated before. Not only are they making it easier to get financial support, but they also bet on startups by continuing to study their behavior and release new products that support them in their ventures.

What can you do next?

The Fintech companies that grow quickly and maintain that growth understand who their customer is and exactly what they want (and that they want it fast). They invest in their customer, putting them at the center of their innovation, and use technology to drive growth instead of viewing it as a byproduct.

As you consider what’s next for your bank’s digital transformation and product development, one thing is for sure: Fintech cannot be ignored. Think creatively about your business challenges but look at them through the lens of your customer. Use consumer knowledge and data to better serve and solve their needs. With financial technology, you have a platform for breaking through and fueling your own evolution.

Remember that each of these companies started small, and many started in recent years. Which means you could be the next to go from traditional banking to groundbreaking disruptor. For more industry trends, marketing advice and updates, subscribe to our newsletter.