This year has seen great advancement in financial technology– digital means of offering financial services in a more useful, more convenient and faster ways by combining channels, technology and platforms. Terms such as APIs, Accelerators, Blockchain and Unicorn have become part of everyday conversation Shaping the Fintech Ecosystem. As the year boast of more focus on fintech, it is important to identify the trends and opportunities that are shaping fintech today.
First, the discovery of the Blockchain by banks is one of the greatest fintech successes. The banks have woken up to the realization that a decentralized computer network is not only effective at validating ownership but also cheaper. In 2015, about 42 banks in the world came together to work on Blockchain’s common standards to be used in global financial market.
The infrastructure of blockchain was reinforced last year, with strengthening involving exchanges, mining, processors and wallets. This year is just innovation on it. For instance, start-ups like Abra.com are creating a low cost remittance product.
The growth of the fintech ecosystem is also shaping fintech. Start-ups, challengers, accelerators and corporate innovation form the network of players that is driving the growth of financial technology. The growth in investment is a sign of the financial technology ecosystem heath, bank spending on innovative technologies is projected to amount to $19.9 billion in 2017. Private investors are getting encouragement from the public market’s need for fintech as proven by the IPOs of companies like Square, Aldermore, TransUnion, FirstData and Shopify.
The closer links between banks and alternative lenders are also proving to be a trend and opportunity in fintech. The Lending Club or OnDeck that use algorithms and technology to make more accurate and effective lending decisions have been dominant in the lending industry. Nevertheless, the deal between OnDeck and JP Morgan is part of a larger trend of alternative lenders and banks partnering one another.
There is a lot that is gained for both online lenders and banks when they work together. Banks are trying to improve their services and reach new customers. Online lenders benefit when banks bring capital and customers to their platforms. For the banks, affiliating with the right alternative lender does not only provide helpful learning but also good and healthy competition fort its products.
The millennial wave is going to affect the fintech industry. Millenial wave is characterized by businesses that are trying to do things differently in financial services. These businesses have a common feature– they focus on mobile. To stand any chance of viable success, digital financial services businesses have to be established around smartphones. According to The Financial Brand report, 87% of millennials have their phones on their side, day and night,
Lastly, new categories for disruption are shaping fintech. While lending and payments have been main segments for modernization in financial services, digital disruption has being extended into new categories such as mortgages and insurance.
The effect of price comparison sites on the insurance area in terms of competition and price transparency is becoming common. What is interesting is that businesses like Lemonade and Guevara are using crowdsourcing to cut costs.
Though mortgages is a market that is not easily disrupted, given the length of loans, regulation and amount of capital involved, innovation is taking place in the market. Digital is very in creating new categories for investors– for instance, loan to businesses via peer to peer platforms. This is also taking place in mortgages market.