If 2017 has shown us one thing, it’s that the technology revolution has finally come to the financial services industry. With the spotlight firmly fixed on the transformative impact Fintech can have across the entire value chain of banking, we take a look at the top 5 Fintech trends that will continue to redefine finance in 2018.
Before we dive in, let’s put into context the some of the key events of 2017 that underpin why Fintech is here to stay and why everyone connected to finance needs to understand it’s significance:
- Bitcoin has done a Bitcoin. In 2017, the king of cryptocurrencies saw its value soar like an eagle from $700 to over $16,000. It’s undergone a slight correction but don’t bet against it rising once more (Check here for latest price).
- ICOs have financed more companies than venture capital!
- Revolut, the UK challenger bank, has become the fastest growing “bank” in the UK (also now sells cryptocurrencies), and
- Tencent – through its social media app WeChat – has become the biggest payment platform in the world
These are just a few of the highlights from 2017 but what about 2018?
We peak into our crystal ball to highlight 5 trends that will make 2018 the biggest year yet for Fintech, where established financial institutions, just as much as the Fintech upstarts, will start to wield Fintech sorcery to gain the competitive edge.
Join us as we gaze into the future…
Top Five Fintech Predictions
1. Increasing focus on RegTech solutions
Two important pieces of regulation come into force next year that is going to impact firms operating in financial services, both Fintech startups and incumbents. MiFID II will put increased emphasis on firm monitoring activities while GDPR will seek to enhance data protection requirements.
Thus, with mounting pressure on compliance with new regulations, the scene is set for RegTech startups (which take complex regulation and translates them into API code using Machine learning and AI) to come to the rescue and reduce the workload (and costs) for both startups and FI’s alike.
2. Financial institutions will undergo a wave of structural changes
In order to remain competitive, incumbent financial institutions will embrace digital.
First, they will invest more in simplifying legacy systems to be more responsive in a world of rapid change and reduce the burden of sky-high IT operating costs.
Second, they will launch new innovation initiatives that have an organisation wide perspective as opposed to singular innovation teams being the cheerleaders of change. And they will do all this to better serve and engage customers in a way that replicates the success of the Fintech startups.
This means integrating technologies like AI and Robotic Process Automation to drive efficiencies in back-end processes and better understand customer behaviour. Not only that but to be more responsive, incumbents will utilise agile working methodologies to enable new products to go to market faster.
Exciting times ahead.
3. Fintech to go stratospheric
New banking regulations in Europe, such as the Payment Services Directive 2 (PSD2) and Open Banking in the UK, will put Fintech on steroids in 2018. The regulations, designed to open up customer data to third party service providers, will benefit both Fintechs and incumbents.
For Fintechs, the barriers to entry will be significantly lower and for incumbents, the opportunity to partner with Fintechs to offer new services and accelerate the digitisation of their business models offers considerable value.
4. Fintech to continue to expand in developing markets with Africa gaining momentum
African economies are on an upward trajectory with key hubs including Nigeria and South Africa showing signs of promising growth. This combined with the continued growth of mobile phone usage means a lot of homegrown and foreign Fintech players are investing more and more in the opportunity to bank the under-banked.
As with other developing regions, such as Asia, a lack of formal financial infrastructure puts access to basic financial services at a premium. However, new Fintech solutions are making banking more accessible. From remittance to payments services, alternative financing is coming on to the market fast. Watch this space.
5. Move to digital will bring cybersecurity into the spotlight
As finance moves to digital, it poses new risks for startups and incumbents alike.
Young Fintech startups with less secure code to protect their businesses from attacks are a prime target for hackers. For example, there have been notable hacks on ICOs and cryptocurrency exchanges in recent years, none more exemplified than the Mt Gox hack, where over 850,000 Bitcoins were stolen from the Japanese cryptocurrency exchange.
For incumbents, a new security model is needed in response to a rapidly changing environment where the interconnectedness between different entities in the financial ecosystem is increasing. The resultant third-party dependencies and increased data flow will, therefore, pose new risks to the stability of the financial system.
No surprise that 2017 will see record levels of investment in cybersecurity startups, a trend that we see continuing in 2018 as technology and the associated risks become even more prevalent in financial services.
Want to make sure you’re ready for the Fintech revolution?
Then we’ve designed an online course, Around Fintech in 8 Hours, to give you a 360 perspective of exactly how Fintech is transforming finance.
We understand there is a lot of noise around Fintech and it can be difficult to make sense of it all.
That’s why we’ve teamed up with 4 senior Fintech lecturers to develop a course the explores the fundamentals Fintech concepts in a structured and easy understand manner.
Between them, the four lecturers have taught Fintech at Singapore Management University, Imperial College London, Said Business School, Oxford University and The University of Hong Kong.
That’s not all.
The course is broken up into four chapters and each chapter has 4 industry experts (16 in total who are who are CEOs, Fintech entrepreneurs, investors and heads of innovation) to give you their first-hand experience, using real-life examples, on exactly how Fintech in creating a new type of finance.
So don’t wait for the predictions to become a reality, be part of the change.
Visit aroundfintech.cfte.education for more information.
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