The first week of January each year I make a range of predictions about what’s to come. The last week of December each year, I look back at my predictions and call myself out as to whether I was right or wrong. So here were the predictions made back in January:
PayPal will be a primary acquisition target in 2016.
Urmmmmm …. no, although many pundits propose that Apple, Amazon, Google, MasterCard, Visa and others should buy them. Meanwhile, PayPal entered the Fortune 500 in 2016, and continues its global expansion with acquisitions and partnerships with Visa and MasterCard.
Facebook will launch basic banking and payments as part of their mobile app services.
Launched in September, but only in the USA right now.
Alibaba starts to expand its payments, lending and wealth management operations to Europe and the US.
A number of key mergers and acquisitions will take place with banks targeting to absorb the Betterments and Stripes of this world into their own operations.
Well, I suppose Sumitomo Mitsui Card Company investing in Stripe, Group BPCE buying Fidor and BBVA acquiring Holvi and taking a 29.5% ownership of Atom Bank could be examples of this.
Whilst UK and USA remain global leaders in FinTech in 2016, China, Hong Kong, Singapore, South Korea, Japan and Australia will show strong offerings, whilst Africa, Israel, Luxembourg and the CEE region will also have an impact.
Confirmed, but rather obvious. Nevertheless, I’d say that China and Singapore have been the stand out countries for me this year. China due to its leading role in FinTech investments and innovation in 2016; and Singapore because the MAS has done a stellar job of creating leadership in this space for South East Asia culminating in the FinTech Festival in November, where over 10,000 people gathered. Not bad for its inaugural meeting.
The P2P lending model expands into new asset classes of credit risk with LendingClub announcing a new P2P mortgage lending offer.
P2P firms are expanding, as evidenced by Zopa announcing that they’re getting a banking licence, but the sector has been suffering somewhat this year, as evidenced by Zopa saying they’re taking no more deposits as people aren’t borrowing enough. The problem with the P2P model is that nearly all margin is made on originations, which means they must focus upon generating as many lenders as they can. That’s a treadmill that is exhausting when the market becomes testier. Hence it’s not just Zopa that needs to become a bank, but Lending Club too, as the pure P2P model doesn’t work. Oh, and in case you’re wondering, there are several companies offering P2P mortgages.
Insurance has been a quiet Fintech area so far, but a raft of new startups appear in 2016 with at least 100 digital insurance startups funded throughout the year.
InsurTech has certainly become mainstream in 2016, with CB Insights stating that $4.74bn (470 deals) has been invested since 2011, most happening in 2016. As in banking, peer-to-peer is hot in insurance with older players like Friendsurance and newcomers such as Lemonade, InsPeer, InSured, and Teambrella. Another interesting area in InsurTech is item-specific, event-specific, and on-demand coverage – “smart insurance” such as Trov, who have recently partnered with AXA to create on demand insurance. Aside from InsurTech startups, the Internet of Things (IoT) is also poised to change the insurance industry in the coming months.
RegTech will become a big area of focus, aligning regulatory technologies with Fintech areas, particularly Peer to Peer Lending and Crowdfunding.
Again, pretty obvious, but the RegTech realm has been hot, hot, hot in 2016 with sandboxes appearing everywhere from London to Sydney. It’s not surprising really as the potential market is huge. Big banks, such as HSBC, Deutsche Bank and JPMorgan, spend well over $1bn a year each on regulatory compliance and controls and BBVA recently estimated that 10% - 15% of all bank staff are dedicated to this area.
Bitcoin will be overtaken by a large corporate-backed digital currency, fully hedged by traditional assets.
This didn’t happen, as bitcoin has flourished in 2016 thanks to Brexit, Donald Trump and general uncertainty about economic and political developments around the world. Nevertheless there have been many developments in digital currencies from the launch of zcash to Sweden aiming to be the first country with a fully digitalised currency.
Identity management startups built on consensus ledger technologies begin to flourish.
This is one of the major use cases, as I blogged about in August. Again, it’s not surprising as the average bank spends £40 million a year on KYC (Know Your Customer) activities (bigger banks spend as much as £300 million a year) and still do it really badly. According to a Thomson Reuters survey, 89% of corporate customers had not had a good KYC experience, and 13% changed their bank as a result.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...