Fintech covers any provider using technology to deliver financial services. This includes not just niche independent startups but tech firms, telcos, and adjacent verticals entering banking, alongside incumbent efforts to digitise through acquisition and/or transformation.
Listed below are the top fintech predictions, as identified by GlobalData.
Payments has seen the most sustained attack from new entrants. Because it’s the most frequent day-to-day transaction, whoever builds up engagement there can easily deepen that relationship with other products and services such as money management and credit. In 2020, that next step will happen in ever-greater numbers as more payment firms move into deposit-taking, digital lending, and money management.
In lending, fintech will continue to disrupt the market by offering much faster approval times, deeper understanding of customers to identify underserved segments or accurately price risk, new models to bypass regulation, and more competitive rates. Companies will continue to move away from FICO and traditional credit scoring for lending to consumers and rely on more informal (big) data. This will open underserved segments, not just unbanked, but SMEs, gig economy workers, and the under-banked and de-banked in the US.
Venture capital funding will continue to focus on a smaller range of more established and proven players, with less flowing into unproven startups. While investors used to be happy tracking download activity levels, they are now far more interested in cold, hard cash. So-called pre-profit fintech will be under growing pressure. London’s fintech scene, already strong, will see more supporting government measures to re-establish fintech credentials.
Incumbent fintechs will continue to hinge on adoption and integration. Skills in architecture, mobile application development, cloud, and integration, will become increasingly scarce. This will create opportunities for systems integrators and platform vendors. Innovation will also be offered by new fintechs such as Glue and Bibox, offering banks common onboarding processes for new fintech partners to expedite time-to-market.
This will be particularly important for fintech in wealth, where micro-services architectures and inoperability layers are far less common, but where firms are also under pressure to integrate specific fintech to improve services. These include pieces of robo solutions, such as KYC-as-a-service, aggregation-as-a-service, or enabling discrete sub-systems of advisory tools for individual advisors.
Integration will also matter on the D2C side of fintech. The sheer quantity of different fintech players and apps will see more focus on super-apps or the ‘re-bundling’ of services akin to what you see with Grab, Alipay, or WeChat in Asia. These apps are also easy to use and take up relatively little memory. Facebook’s Messenger has begun to integrate several apps within its system, but this model is yet to truly take off outside of Asia.
This is an edited extract from the Banking & Payments Predictions 2020 – Thematic Research report produced by GlobalData Thematic Research.