Founder of World House Capital, a new-generation investment bank, and long-time ambassador for DigiTribe, Thomas Bayart has a broad perspective on the global economy and the fintech landscape. He identifies several promising innovations that are emerging across Europe.
1. Instant Payments on the Rise
The Instant Payments Regulation, which came into effect in April of this year, aims to streamline payments across Europe. While instant payments have been possible since 2019, they often come with an additional cost.
New initiatives like Wero, a European alternative to PayPal and the major credit card companies, are set to commoditize instant payments. This Brussels-based fintech, part of the European Payments Initiative, unites European banks to enable real-time money transfers. Users can connect their phone number to their bank account, and funds are delivered to the recipient in under ten seconds. Thomas Bayart predicts that instant payments will be democratized and widespread by 2027.
2. Buy Now, Pay Later (BNPL)
BNPL, which allows consumers to pay for purchases over time without interest, is becoming increasingly popular, particularly for online shopping. In Belgium, banks such as KBC offer pre-financing for online purchases up to €1,250, with no fees if repaid within 60 days.
This trend has also entered the B2B space, particularly in e-commerce. BNPL allows businesses to acquire goods or services in installments, helping to maintain healthy cash flow. Unlike traditional business loans, BNPL typically involves fewer credit checks, making it more accessible. Alternative, non-bank lenders have also entered the market, with companies like Klarna leading the way.
3. Virtual One-Time Payment Cards
The virtualization of bank cards is another growing trend. Virtual banks like Wise and Revolut now allow customers to generate unique credit card numbers for individual transactions. This reduces the risk of fraud by limiting exposure through one-time card details for each purchase.
These virtual cards use tokenization, a technique that encrypts the account number with a token, ensuring account details are never shared during transactions.
4. Biometric Recognition
To enhance security, banks are increasingly incorporating biometric recognition into payment cards. Instead of relying on the relatively insecure 3-digit CVC code, these cards use fingerprint recognition. This method not only boosts security but also simplifies transactions by eliminating the need for PINs or inserting cards into terminals.
This advancement raises the question of whether the limits on contactless payments could be removed entirely in the future. Could this lead to a cashless society?
5. Artificial Intelligence in Banking
AI is becoming an essential tool for banks, especially when it comes to staying ahead of cybercriminals. In the fintech sector, AI is being used to strengthen security measures. To comply with EU regulations such as Anti-Money Laundering (AML) directives, banks must continually assess customers and sift through massive amounts of payment data—tasks AI can complete in seconds.
Additionally, AI allows for the hyper-personalization of banking services. By analyzing data on customer behavior, financial goals, and status, banks can offer tailored financial products or savings plans.
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These fintech trends, alongside regulations such as the PSD2 Directive, have opened the door for non-banking actors to enter the finance industry. This trend will likely intensify as more open banking providers enter the market, creating competition for traditional banks that operate under stricter regulatory frameworks.
In the face of New York's financial might and Shenzhen's technological innovations, Europe appears to have found its niche in fintech. Strict EU regulations help ensure security in this sensitive sector, fostering promising unicorns such as Bunq, Wise, Revolut, Mollie, and Klarna.
Fintech is at a pivotal moment for Europe's economy. Now is the time to invest in infrastructure, quantum technologies, training, and public cloud services to solidify the continent's position on the global stage.
