We witnessed one of the most revolutionary years of the fintech, or financial technology, era in 2017. After years of expansion and consolidation, and the disappearance of some startups, we have experienced a year of disruption and change.
And the disruption shows no sign of stopping in 2018. One of the clearest trends is the consolidation of China as the world’s fintech leader. It is home to six of the seven largest fintech companies in the world. Every day, however, more countries are getting involved in the fintech game. This is because decentralized technologies like Blockchain have influenced this industry like never before; the democratization of these technologies empowers anyone, anywhere in the world, to use them.
Looking at the most exciting technologies, the latest trends and the most revolutionary activities of this sector, here are predictions for the top seven trends in fintech in 2018.
1. Neobanks and challenger banks
In 2017, more than a thousand neobanks, also called “startup banks,” and challenger banks (which are startup banks with bank licenses) were founded. Although the United Kingdom is the home of more than half of these initiatives, there are lots of great neobanks elsewhere, such as Brazil’s NuBank, Spain’s 2gether Bank and Germany’s N26. These banks are conducting most transactions via smartphone, and are using data and technology to provide customers with an incredible engagement experience.
2. ICOs: Financing for the 21st century
During 2017, more than $4 billion was invested in Initial Coin Offerings (ICOs), surpassing traditional venture capital. This trend will increase further in 2018 unless regulators put the brakes on it. But it’s clear that governments are currently analyzing how this market should be regulated, while the sector itself wants to look into self-regulation and create a code of best practices. In any case, the ICOs have democratized access to financing regardless of what country you live in, the project you are building, the nature of the organization you are founding or the team developing it.
3. AIs and Bots: The revolution continues
One of the most revolutionary technologies in financial technology — and in general — is AI. With the rate at which it is advancing, its impact on our world as we know it is still not fully understood. In my previous article, “How artificial intelligence is reinventing the fintech industry,” I covered some examples, but the real success of AI technology is in the number of solutions to various problems currently being developed, and those that will come in the future.
Projected capabilities of AI within the next few years include:
- The enhancement of investment and risk analysis algorithms.
- Improvement of chatbots to the point where customers will not know if they are speaking with a customer service agent or AI.
- The creation of superior money-managing assistants, which will be engineered by AI.
4. Regtech: Technology reaches the compliance world
Regtech, a portmanteau of the words “regulatory” and “technology,” is considered one of the most promising fintech trends of the next few years. Why? Very simply because these startups collaborate with banks and insurers to improve and optimize their often frustrating internal processes, such as compliance, identification, risk, and cybersecurity.
The additional expenses of complying with new regulations applied to the banking industry following the last financial crisis are pushing banks to find ways to automate and increase efficiencies within these compliance processes. The good news: a number of initiatives are coming to life all around the world. For example, there are almost a hundred regtech startups in Spain alone, according to the last Finnovating Regtech Map.
5. Quant advising
Move over, robo advisors, the quant advisors are here to take over.
A robo advisor is an automated manager of passive investment funds that balances long-term profitability objectives with an investor’s risk profile. Quant advisors, on the other hand, are focused on the implementation of active management strategies and search for positive, stable and independent returns from financial markets.
This last characteristic is very important, as financial markets have had continuous growth and very low volatility for many years. Quant advisors may be better prepared to face the market’s inevitable change. Companies such as Accurate Quant, based on IBM Watson, review a client’s profile before performing a digital onboarding, then offer them an optimal strategic algorithm correlated with the market and tailored to their profile.
6. Proptech: Real estate innovation
Soon, the days of blindly trusting a local real estate agent or property management firm when you purchase land in a region different from your own may be over. Property technology, or ‘proptech,’ is technology that refines, improves or reinvents the process of buying, renting, selling, building, heating or managing properties. These startups raised almost $2.7 billion in 2016. In Europe alone, more than a thousand initiatives began in Germany, the United Kingdom and Spain with companies like Housers.
7. Blockchain: Fintech becomes FinTeX
And last but certainly not least: Blockchain technology finally has real use cases! Startups have begun to use this technology to develop new, decentralized business models that claim to be the next Google, Facebook and Amazon of the future.
Between decentralization, the new collaborative economy and new uses of technologies such as AI, 2018 is bound to be a very exciting year for financial technology, but only time will tell which part of the finance sector fintech will disrupt next.
Article published in (27th December 2017):