Fintech: What Comes Next?

The old adage that progress doesn’t happen in a vacuum is a little misleading. First, while some technological advances came about without much monetary support, most got some VC backing along the way. However, it’s also true that many of the greatest technology innovations didn’t meet a need, they created one. Remember, most of us who grew up using the telephone only to talk didn’t ask for two-and-a half million mobile applications. But that’s what we have today, and we’re dependent on at least a few of them. (Apropos of nothing at all, Instagram just passed 1 billion installs on Android devices alone.)

So with that as the premise, what do we see happening in technology development today, and what does it tell about either a lot of money coming in, or not as much as before, or both.

We know the first half of 2016 brought in record investments for fintech, which is exactly what was expected. In fact, it’s quite normal for the market to just about double every year. Sure, it might slow down at some point, but that hasn’t happened yet. But then again. . .we’re told that much of the 2016 growth came only in the first quarter; the second, it turns out, registered a big drop. Specifically, funding only reached $2.5 billion in Q2. That might sound like a big number, but it represents a 49% dip from Q1 2016, and an even ever grater fall, 52%, from the same period last year.

So that’s the big picture, but it helps to drill down a little. While macro trends are surely fascinating, it’s the micro stuff that affects us the most. Ok, one level down: Asia is getting more funding than any other market, and German fintech companies are getting more than their UK counterparts, both for the first time. And those changes are just the tip of the iceberg.

The undeniable reality is that our industry is going through a massive transformation, perhaps greater than ever before. A few decades ago, the changes took the form of ATMs and index funds; now, every aspect of every operation is potentially prone to disruption. Retail banks are under siege from online-only providers, peer-to-peer lenders are outpacing their traditional rivals, and robo-advisors are actually a more viable option than beings with experience, empathy and instinct. If the process in place is more than a few years old, we wonder why it hasn’t changed.

Sure we can accept that more such changes will keep coming. We also understand that rather than just fix things that ain’t necessarily broken, technology-driven advances move the process forward, enabling greater capabilities with lower costs. And that’s a good thing.

But how about if we flipped the equation just a little bit?

All those billions going into research and development will inevitably lead to (some) products that drastically alter the way we do our jobs. While waiting for them to get here, can we speculate what they might be, or at least which areas they’ll affect the most? Here’s a few questions to get started. (Remember, we’re going to get what we get; these are just to ascertain personal priorities, and test our ability to forecast the future.)

  • Where do we need technology developments more—at the back end, enabling smoother banking operations, or at the front end with customer-facing tools?
  • Do you think the number of mobile apps available for banking functions—either from financial services providers or technology vendors—has reached saturation levels? Do we need to take a break and give both institutions and individuals a chance to catch up?
  • If you think the answer is no, and that we need more, which particular areas would you like to see a focus on? How about cashless payments, geo-location-enabled transactions, or advice from virtual advisers?
  • Which kinds of new hardware do you think should become, or will become, more prevalent? In particular, do you see ‘wearable’ technologies such as Apple Watch (and its rival offerings) or Google Glass gaining traction for financial services? Or might there be an entirely new form factor?
  • Despite the relatively high barriers to entry, there will surely be more online-only options for customers to choose from? Should there be a different set of regulations for these competitors?
  • Rather than just churn out an endless supply of tools and apps, should the industry focus more on technologies that enhance integration and security for the options currently in place?

Again, those technologies will keep coming—with innovation, that’s just the nature of the beast. But conjuring up a wish list might help prepare us for those that do get adopted.

Written by Jack Dougal

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