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Key trends and news: fintech investment and embedded finance

25 August 2021

As summer draws to a close and the world gears up for a busy September, these are the three key trends and news you need to know.

UK fintech investment second in the world behind the US

Long established as a leading global hub for fintech, the UK hit a record high for fintech investment (M&A, private equity and venture capital) in H1 2021. According to KPMG’s bi-annual Pulse of Fintech report released this month, investment in the UK fintech industry has reached $24.5bn in deals, placing it behind the US globally. This includes the $14.8bn M&A deal by Refinitiv. The City of London, home to 3,000+ fintech companies, continues to attract global investors and acquirers.

According to KPMG, global VC investment in fintech has reached a record high of $53.2bn in H1 2021. Valuations remain high, and corporates have also been actively partnering with, investing in or acquiring fintechs.

KPMG’s report predicts the payments space will continue to drive fintech investment and that revenue-based financing solutions, banking-as-a-service models, B2B services and cybersecurity solutions will attract increasing levels of investment.

Embedded finance is a significant trend for businesses and consumers

If you asked random people on the street, they probably wouldn’t be able to tell you what “embedded finance” or “banking-as-a-service” is. However, the odds are that many of them have probably used embedded payments at some point without realising it. Whether paying in-app (for Uber or Deliveroo, for example) or on retail websites with PayPal, Apple Pay, Samsung Pay, Google Pay, Stripe, or utilising Klarna for “buy now, pay later”, embedded payments have become mainstream and so invisible that consumers don’t even notice this trend.

Fuelled by the pandemic, consumers have embraced ecommerce and digital services, and their expectations for seamless customer experience – with frictionless checkout and payment – have increased exponentially. This is a significant shift that has raised the bar and expectations for the business world, and this is why embedded finance is one of the most exciting and promising trends.

In Finextra, Ignacio Javierre, Co-founder of HUBUC, even declared 2021 as the “year of embedded finance”, with the pandemic driving fundamental lifestyle and behavioural shifts which have forced businesses to streamline operations and redesign their value chain to create new revenue streams.

In his op-ed in AltFi this month, our CEO Richard Prime looks at embedded finance and lending-as-as-service. He argues that it’s challenging for SMEs to navigate the complexities of a fragmented lending market. Businesses with a contingent workforce need access to simple, flexible finance on demand to grow and pay their workers on time.

Just as consumers now expect a frictionless experience when using their favourite apps, businesses want access to finance to scale and pay their workers easily, and contractors and freelancers expect to get paid on time. With businesses suffering from late or non-payment of invoices, this can’t happen seamlessly. This is where Sonovate steps in, providing tech-driven finance to help businesses unlock working capital and ensure their workers get paid on time.

By using Sonovate’s APIs, businesses can provide credit risk, funding and partner services within their own websites, apps and systems, giving users the frictionless, on-demand and all-in-one experience that they have come to expect.

Knowledge workers seek freedom and are considering freelancing

According to a survey last month by Braintust, a blockchain-based talent platform working with global enterprises, 85% of knowledge workers are open to freelancing. Braintrust surveyed 800+ skilled knowledge workers and analysed 150,000 open knowledge work jobs and data from 600+ enterprises in the US for its ‘Knowledge Work Demand Index’. Braintrust refers to knowledge workers as the “cognitive glue inside global businesses”.

The report  highlights the talent shortage given the plethora of open roles, with the average US enterprise hiring for 66 knowledge worker roles. 23% of enterprises are hiring for 200+ knowledge worker roles. Rather unsurprisingly, the report finds that 55% of the remote roles in the US are related to the tech industry.

Braintrust’s three key findings arguably resonate with global workers: knowledge workers have adapted rapidly with 85% learning a new skill in the past year, freedom of location is their top priority, and traditional employment benefits don’t appeal to them. The report recommends that organisations need to embrace distributed teams and rethink the rigidity of their polices around hiring permanent employees versus contractors since talented workers want freedom.

Want to contribute to Sonovate’s research on the future world of work?

At Sonovate, we are currently conducting our own research on the future world of work, connecting with business and thought leaders, businesses, contractors and freelancers to gain their insights about the future world of work, their challenges and opportunities, and how this work will be financed.

Sonovate has funded nearly £2bn in over 40 countries, working with thousands of businesses from startups to enterprises.

If you would like to share your perspective and collaborate with us or learn more about how we provide tech-driven finance for the global contingent workforce, please get in touch.

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