What’s Next for Fintech?
The Fintech revolution continues to thrive. With global Fintech community collectively raising $2.56 billion in January 2018 alone, it also stays as the hottest sector on VC’s radar to invest in.
New breakthroughs in financial technologies are disrupting the traditional financial ecosystem. As a result, financial services incumbents are in hurry to embed Fintech into their business models – be it via acquisition, partnership, or in-house digital transformation.
In the highly dynamic Fintech space, it is crucial for incumbents to constantly rethink their business by keeping up with what’s latest in the field. So, let’s see what lies ahead for financial services.
Blockchain and Cryptocurrency
With bitcoin’s price soaring and falling wildly throughout 2017, many industrialists remain skeptical about the concept of cryptocurrency. Nevertheless, the adoption of blockchain continues to rise with the emergence of new cryptocurrencies. According to a survey by International Securities Association, 55% financial service providers are researching about or developing solutions using blockchain.
By eliminating the need of a centralized authority for online transactions, and at the same time offering enhanced security, blockchain has found many applications in the financial sector such as faster payments, seamless clearance and settlement systems, smoother fundraising, and loans and credit with lower interest rates. For these benefits, 2018 is largely seen as the year when blockchain/distributed ledger technology will receive mainstream adoption.
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Retirement Wealth Management
According to ici.org, assets held in retirement accounts (IRAs, 401 (k)s, pensions, etc.) in the US amount to $27.25 Trillion. Interestingly, despite such a huge market value, the segment is said to be rather underused – as only 41% workers contribute towards these retirement accounts. This is caused by the drawbacks of the current system – high fees, poor customer experience, lack of know-how of its benefits, difficulty in accessing and navigating plans and so on.
After significantly improving asset management with robo-advisors, a new generation of Fintech startups (Forusall, FeeX, Human Interest, to name a few) is eyeing this potential segment, which so far has been virtually untapped. It is also a wakeup call for incumbents to redesign their retirement wealth management products. For now, the wave of ‘Fintech for retirement wealth management’ has just begun to form in the US. But like any other trend, it is set to spread out globally.
Related Read: How AI Is Driving the Next Phase of Growth in Fintech
Tech Giants Entering the Financial Service Sector
A recent Wall Street Journal article revealed that Amazon is in talks with big banks like JPMorgan Chase and Capital One to form a so-called ‘Amazon Bank’. Although later labeled as a rumor, it won’t be surprising if it actually happens. The year 2017 saw a huge number of partnerships between Fintech startups and banks. So, it makes perfect sense for tech giants like Amazon, Google, Facebook, and Apple to enter the financial services and accelerate the technological innovation in the sector.
Additionally, Amazon’s Chinese counterparts Alibaba and Tencent, which combined make over 90% of China’s mobile payment market may also step in to push forth the Fintech growth in the country. And similar initiates can be expected to rise in other big markets like Western Europe and India.
All in all, 2018 is set to be an interesting year for Fintech. New startups will be born, new financial solutions will emerge, new partnership and acquisitions will happen, and most importantly the financial services landscape will continue to get better. So, for incumbents who so far have been reluctant to move ahead with the change, it’s about time they begin to rethink their business and services to stay relevant to customers and to keep their market position intact.