Disruption, not destruction: three FinTech trends to look out for
The FinTech industry promises to shake up the financial world. But commentators might have a few misconceptions about exactly how.
Supporters of the Occupy movement will no doubt have dreamt of digital white knights riding in to challenge the ancien regime of Wall Street and the City. But, while FinTech startups have certainly been disruptive, they’ve yet to prove destructive, many even entering into partnerships with these more established institutions.
But enough about what’s not happening. Here are a few things we can expect to see in the second half of 2016 and beyond.
- Frenemies with benefits
Far from taking swipes at one another, mainstream and alternative lenders look set to get even cosier in the coming months, with deals like JP Morgan Chase’s investment in OnDeck becoming common practice. And while this may not be a whirlwind romance, it’s certainly a marriage of convenience.
The proprietary technologies developed by FinTech startups give banks better ways to serve their existing customers and reach news ones. In return, banks bring capital and customers to these platforms and enable alternative lenders to surmount financial and regulatory hurdles that may otherwise constitute significant barriers to entry.
- Hooray HENRYs
In every industry, we’re seeing consumer demand shift more and more towards special experiences rather than just products. And the FinTech sector is no different.
Last year, we met HENRY – an acronym for High-Earning, Not Rich Yet, applied chiefly to millennials in the fast lane to fortune. No sooner was it coined than a range of companies – like Earnest, Number26, Osper and SoFi – materialised to meet the needs of this new market segment, and we expect many more to swell their ranks.
Since HENRYs are used to doing everything online, they seem a natural target audience for FinTech startups. But high-tech breeds high standards, and these guys expect swift, smart and intuitive service from their chosen brands. So cultivating an exceptional customer experience will be key.
- Overgrown ecosystem?
The FinTech ecosystem flourished in 2015 and is showing no signs of slowing down. But from the investor’s point of view, this will make it increasingly difficult to spot real value. And for every TransferWise that pushes through, there will be several Powa Technologies vying for sunlight.
Powa is a British mobile payments startup-turned-cautionary tale. Praised by David Cameron and assigned a stratospheric $2.7 billion valuation in 2015, its ‘unicorn’ investment status quickly proved every bit as mythical as the name suggests, and the company was unceremoniously shunted into administration earlier this year.
Not that there isn’t plenty of genuine value out there. But before investors loosen their purse strings, they should do their due diligence to weed out the opportunities from the opportunists.
In light of recent news of a 12 per cent fall in FinTech funding last quarter, it would seem they’re doing just that. But, with experts commenting that this is in line with the wider economic trends, FinTech is still very much a sector to keep your eye on in the coming months.