Fintech has already changed financial services forever. It’s set to have an even bigger impact through the 2020s.

Fintech has had a revolutionary effect on financial services over the last ten years – and it isn’t slowing down any time soon. In the next decade, its impact will only grow. New technologies such as blockchain are creating new business models all the time – and enabling fintech businesses to tackle some of the biggest opportunities, and biggest challenges, facing economies around the world.

There are three critical trends which are shaping the future of fintech.

1 Embedded finance

The first trend is the extension of embedded finance, where payments are built into non-financial brands’ services to deliver a more seamless customer experience. Think of the experience of taking an Uber: when you get out of a taxi, you don’t have to pay. You don’t have to do anything – the payment happens in the background.

That makes embedded finance incredibly attractive for business. Its growth potential is clear: it is immensely scalable, with the potential to reach an enormous user base while maintaining a low cost base. Embedded finance has been exploding in front of our eyes: Forbes forecasts that embedded finance payments will grow from $16 billion to $140 billion by 2024.

But embedded finance is about more than immediate payments. Embedded lending services make it simple for consumers to defer payment – Swedish fintech Klarna reported 300% sales volume growth in the first half of 2021, while its Australian rival Afterpay has also posted record sales figures.

Embedded insurance is increasingly common, for example from Tesla. And embedded banking is increasingly common too: ride-share company Lyft provides embedded banking to enable drivers to get paid instantly, to take a debit card or set up a savings account, while online retail platform Shopify provides dedicated accounts for small businesses.

2 Green finance and responsible fintech

The second trend is green finance and responsible fintech. The financial sector, including fintech, has a huge role to play in delivering the transition to a net-zero economy. Environmental, social and governance (ESG) issues will be increasingly prominent in the years ahead, combined with the latest technologies, innovation platforms and business models.

Green finance is already a huge sector. Green bonds have been estimated to be trading at about $2.36 trillion (CNBC, July 2021); the top three green bond issuers are the US, China and France, but other nations are also expanding their green financial commitments, especially in the wake of the COP26 climate summit. Every area of green targets are powered by finance – from protecting biodiversity to ensuring water sanitation, from developing renewable energy technologies to delivering adaptation to the effects of climate change. And green finance will be crucial to hitting several of the UN Sustainable Development Goals by the target date of 2030: on climate action, on ending poverty, delivering good health and wellbeing, decent work and economic growth, and more.

Responsible fintechs can play a critical role over this period. They are a powerful tool for green investing and help prevent ‘greenwashing’ through increased transparency and accountability. There are platforms that focus on ESG investing, such as the UK’s Clim8, which only lists companies with a clear commitment to tackling climate change. Other innovators include CarbonChain, which offers carbon accounting products that support industries in accessing green financing; ReGal 38i83, which uses a ‘green blockchain’ to curb fraudulent activities and enable clients to invest in sustainability initiatives; and German start-up Tomorrow, which provides sustainable banking services and enables the financing of specific climate change initiatives.

3 Global financial inclusion

The third key trend in fintech is delivering financial inclusion. We typically think of this as an issue in emerging economies – in fact, it is a truly global issue, affecting millions of people in the world’s developed economies too. In the UK, 4% of the population – more than two million people – do not have a bank account: they are in effect completely excluded from financial services. It’s a similar situation in the US, where about 35 million Americans have no bank account. That’s almost unbelievable in the modern economy. What’s more, according to the US Federal Reserve, some 40% of Americans don’t even have as much as $400 in a bank account, meaning that they can easily be financially wiped out if the smallest thing goes wrong, like a washing machine breaking down.

Globally, more than 2 billion people are unbanked. Fintech has a huge opportunity here, via mobile technology, to empower those who may not even have a fixed address. Being able to access micro loans, build up micro-savings or access micro-insurance options can be transformative.The starting point is often in supporting traditional economic activity. Singapore-based InfoCorp Technologies, for example, is supporting farmers in Asia by using blockchain technology to ‘tokenize’ livestock to support financial inclusion. By tokenizing live animals, their app allows farmers to prove that they have the assets on the farm to secure the financial support they need – perhaps a microloan to buy additional animal feed, or to expand their herd.

There are also opportunities in ‘refugee tech’: there is a desperate need to empower people fleeing conflict, who have often lost everything, who may be living in camps, who have no ID. They need help to access government support and financial services in a safe way, to help get them back on their feet.

There is much to be excited about in the evolving role of fintech. It is an incredibly innovative and dynamic sector: a small start-up with ten people today could be rolled out tomorrow to millions of people around the world. Through embedded finance, green finance and inclusive finance, fintech businesses can ease the financial burdens affecting people around the world. They have the potential to deliver a more sustainable future – and change all our lives for the better.