Much has been already written about how traditional banking information services are asynchronous, asymmetric and their infrastructure expensive, non-differentiated and low on employing tech capabilities. Also, banking products have a very long development cycle and banks have traditionally struggled to innovate at pace worthy of the times we are living in. Advent of fintech has shown the potential to transform that landscape rapidly. And while some enthusiasts believe that fintech will eventually eat into conventional banking as we know it, the fact is majority of fintech companies right now are serving banks as their customers. So, it might be a little premature to pass a clear verdict on the future of banking right now. But certainly, the fintech industry is evolving beautifully and there are some early trends that suggest the outcomes this disruption will cause in the banking and financial industry. In this article, I have talked about some fascinating upcoming fintech trends, seeds of some of which have already been sown.
Blockchain will see life, and life beyond bitcoin
Blockchain technology has obvious merits. Its ability to comprehensively store transaction data is a money saver, risk reducer and an optimizer of resources and procedures. It is being considered as a huge enabler for the bitcoin or other cryptocurrency. I think blockchain certainly has a bigger potential than merely specific bitcoin or cryptocurrency use case. It can extend to the Internet of Things (IoT) as well. IoT, as part of the network infrastructure, will be the pivot for extensive data transaction among devices. And encryption of this data and its secure management will be of high importance for the stakeholders. Filament, a Nevada-based startup is seeking to use the bitcoin blockchain and Ethereum to enable Internet of Things (IoT) devices to be tracked and transact using a public ledger system.
Simplification will be the focus of startups in crowded segments
As more and more startups will mushroom in the fintech space offering indistinguishable services, the ones offering the most simplified protocols for data storage, data retrieval process and consumer interfacing will gain attention. Simplification will be tied to the dual intents of investing to increase business value and also to optimizing business costs. For e.g., technology driven P2P interaction has simplified peer-to-peer lending. Investments in technology to simplify the process steps and information network will remain a key focus theme and keep the fintech market on its anvil. Some examples of early stage startups in the segment include Israel based AlgoValue (algorithm that simplifies valuation process) and Singapore based Call Levels that simplifies the real-time financial monitoring process.
Fintech offerings will eat into some conventional banking and financial products
Particularly in the developed economies, plastic and ATM driven banking might suffer. International money transfer is another segment that has scope for efficiency gains, optimization and simplification. Mobile first generation might see no value in real estate driven branch banking and instead prefer fintech providers. Even if banks come around and mimic fintech models, some of the conventional products might just find no takers. Examples of startups already making some headway in the segment include GoCardless (SMB focused direct debit), Coin (smart payment cards), Coinbase (bitcoin wallet), Transferwise and Xoom (both money remittance).
Cybersecurity will dominate as a specialist domain
I recently highlighted the trends of cybersecurity startups getting privileged attention from the investor community. Rightly so, with greater need for fintech, cybersecurity will emerge into a specialist service and both banks and fintech companies will see merit in engaging with specialist providers to get best in class solutions at optimized costs.
Collective powers of machine learning and connected devices for fintech will be leveraged
We are already witnessing how default and bankruptcy prediction is going majorly into the hands of machine learning. In times to come, tech powered fintech companies will leverage the platforms of IoT, mobile OS and cloud data storage to sync with advances in data records analytics of healthcare, road safety, etc., rendering insurance related decision-making completely driven by predictive analysis decision-models.
Startups will keep innovating to bridge social media consensus and financial decisions making
Fundraising from Kickstarter and other similar startups is a great example of this model. Going social for buying insurance or other financial products, stocks, etc. will go mainstream. However, which social platforms will be preferred is a big question right now. I expect we will see a number of startups enter this field with only a few of them succeeding. Examples of active startups in this segment include eToro, Nvestly and Covestor (allow users to see top investments from real portfolios).
Financial advisory will go the artificial intelligence way
Financial advisory, be it fund management, consulting, risk assessment or anything else, will become cost optimized, readily available and standardized (free of human biases), when controlled by machine learning. And that will be the future. We are already seeing that happening with startups such as FutureAdvisor. Also, machine learning will make luxury personalized solutions such as wealth management services (offered by a specialist advisory) as a mass product service – delivered to every customer via robo-advisors.
RegTech, or regulations on tech will also mobilize itself
But all this growth for fintech won’t be a smooth ride. At the core of the future fintech market landscape design will be the competing themes of complexity and transparency. While on one hand, technology is powering companies to global operations and helping them build increasingly complex asset classes, the simultaneous emerging regulatory focus on transparency and data security will aim to check those complexities. Also, an equally important change we will see is the fact that ten years from now, any service that is not accessible online and from everywhere, will not be of interest to the consumers.
Fintech will ride the consumer demand wave from the mobile only generation
Among the stakeholders, the fintech segment’s future will mostly be driven by the entrepreneurs to build new business models. There are vast patches of the financial services ecosystem, ranging from small businesses to money remittance business models that are currently being not served adequately to the customers. There is also a section of the consumer segment that has generally stayed away from banking investments but now carries a smartphone and will not mind hanging their neck out to a fintech service provider. Needless to add, the young generation as consumers will propel the fintech segment.