In 2017, the FinTech sector again drove technology innovation around the globe. An industry which has been traditionally driven by heavy processes and systems is finally catching up and is now leading many other industry sectors with exciting technological advances.
Trends such as Artificial Intelligence (AI), Digital Banking, Data Automation, Big Data and Analytics, really started to take hold in the Financial Markets leading to the creation of many new job opportunities across Financial Technology Sector. These trends will continue to gather pace and gain a stronger foothold as an increasing number of firms in the Financial Services Sector need to stay current and up to date on the latest emerging technology.
With the increasing pace in innovation, we will see unprecedented change over the coming years in how customers and businesses work with money, investments, trading and asset management. This is a snapshot of what we could see in 2018.
Business applications of Blockchain technology are increasing combined with confidence and trust in this new technology. Smart contracts and ICOs (Initial Coin Offerings), will continue to grow and 2018 could mark the year of change. Platforms such as BlockEx are making ICOs an accessible funding route for any start up, including any who have little understanding or knowledge of Blockchain.
There is still, however, much uncertainty around ICOs as continued understanding and adoption increases, ICOs will be here to stay. The third quarter of 2017, ICOs’ raised more than $1.3 billion for start-ups. This is about five times more than funding raised through Venture Capital in the Blockchain space.
PSD2 - Collaboration between Banks and Start-ups
The Banking landscape is going through enormous and ground-breaking change. Financial products and services are now available immediately online in real-time. To date, development has been due to disruptive technology start-ups offering customer-focused services, now the banks have felt the pressure to innovate to remain competitive in an increasingly demanding digital market.
From January 2018, PSD2 (Revised Payment Service Directive) will ensure banks comply in making customer data and ‘’payment initiations’’ available to all third parties through APIs. This will drive more start-ups and banks to work together in providing increasing added value to their customer base.
Banks will continue to be seen as an important foundation in the financial world, protecting and managing the infrastructure, customers, data, and trust that keeps the financial world moving. The implementation and compliance by Banks of PSD2 will change our relationships with Banks, which will increasingly be driven to continue to develop new products and services.
2018 will continue to drive technology disruption and innovation by banks and start-ups who share a passion and desire to provide customers with ‘’best of breed’’ solutions and ‘’real added value’’ services.
In 2017, French start up Yomoni raised $5.4 million for an automated portfolio management service, thus demonstrating that the sector in Europe is now growing following success stories in the US with companies like Wealthfront and Betterment. Here in the UK, Moneyfarm, Nutmeg and Scalable Capital, have proven their success in a group of companies who are leading another new industry sector where Algorithmic Automation is outperforming human expertise.
Business Insider forecasted in a recent report that AUM (Assets Under Management) by Robo-Advisors could potentially reach $4.6 trillion by 2022. Business Insider did also add that many start-ups are and will continue to struggle in this sector which is now becoming overcrowded, it’s highly likely that the traditional players in the market will succeed as their own products go live,
2018 will be a game-changing year where the added benefits to customers will become better understood and the marketplace will be increasingly competitive.
FinTech Start-ups Funding rising
Over recent years FinTech Start-up funding has been nothing short of stratospheric! From $2.6B globally in 2012 to $13.5B in 2016. In 2017, we saw more than $16B in funding, and in 2018 this is forecast to increase further. This is great news for companies, customers and the hiring market, as this constant stream of funding for new ideas, disruptive technologies and innovation has made FinTech the hottest sector and is paving the way for new business opportunities and jobs. Increased Funding in Blockchain, Insurance Technology and Wealth Management Solutions, which did not slow down during 2017, will only increase in 2018. .
Bitcoin hitting the mainstream (again)
We now know that 2017 was an extraordinary year for the most heavily traded cryptocurrency. During December it reached the dizzy heights of $17K, although is now appears to have settled around $8,500 (as I write this article), with investors creating their own mini bull and bear market
If in 2018 the market proves that Bitcoin had reached its peak in 2017, Bitcoins stratospheric run in 2017, propelled Bitcoin into mainstream media attracting more investors, users and credibility. Perhaps Bitcoin will eventually become just another asset class, it has however paved the way for it to become a potential alternative currency in time. This activity will help to drive adoption and acceptance, of ICO (initial coin offerings), funding and Blockchain technology, making them all the more palatable across business leaders and decisions makers across FinTech. .
Mobile-First Banking Platforms
Many big players in mobile-first banking are now or imminently obtaining banking licences. These disruptive start-ups are becoming legitimate and adoption is increasing tenfold! Revolut have reached one million users across Europe, and are continuing to sign up between 3,000 and 3,500 new users every day. Revolut have claimed they have saved their users over £120M in Foreign Exchange fees. In addition they revealed that over 42% of their customers users are aged 25-35, a strong indication that traditional banks do not meet the needs of younger, more tech-savvy generations. This target market will make time to entertain heavy apps, delayed transaction reporting and lengthy setup administration.
These digital banks have grown mainly through word of mouth and super-efficient member network connection tools. Their user acquisition rate has proved to both economical and highly effective compared to traditional banks. As Revolut expands into the US and Asia in 2018, they will heavily disrupt the banking landscape, thereby increasing the pressure on traditional banks to either revolutionise their customer experience or risk losing significant market share. Money could finally find itself becoming a globally portable commodity, and possibly too late with the risk of being overtaken by crypto currencies!
Chatboats are accelerating in their growth and acceptance by customers. An increasing number of businesses and leading brand names are managing customer communication and interaction with automated chat and primarily via Facebook. Although much of this communication is actually built on logic trees – effectively online versions of automated telephone menus, where the user is provided with several limited choices to direct them to a service point. This is frequently referred to as AI, actually this is not, this may be artificial, however it is not intelligent.
ML (Machine Learning), uses the same logic trees and can add new options and possibilities which are created every time customers use it. This allows the system to ‘learn’ and will take us to the point of engaging with true conversational technology. Attempts in early 2017, like the chatbot from Facebook, this develops its own language and actually learns to negotiate and lie…… will start to show impressive results in 2018. We can expect all retail products from Banks becoming more engaging with us with vastly improved conversation via chatbots working with customer data and recorded inputs to provide a personalised, responsive and positive experience.
The Financial Markets, in particular Capital Investment and Asset Management, are benefitting from algorithmically-driven decision-making processes. In 2018, we will see platforms responding more ‘conversationally’ to the user’s requirements, e.g. voice alert to an error or investment/trading opportunity and with a recommendation on what action to take. If the results prove that trading will be faster and lead to more profitable results, it will take hold fast!
Anand Rao – Innovation Leader at PwC, in a recent report stated that “AI can help people make faster, better, and cheaper decisions. But you have to be willing to collaborate with the machine, and not just treat it as either a servant or an overlord.” Our current expectation is that AI will do everything for us……tell us what to do with clear and decisive authority. That vision, however, of advanced AI technology, is decades away and is unlikely to threaten many jobs. For now, Rao added that, ‘’AI is merely a tool for us to wield, backed up with our own insight and expertise.’’
Continuous Adaptive Risk & Trust Assessment (CARTA)
According to Gartner, Continuous Adaptive Risk and Trust Assessment (CARTA) will be a leading strategic technology trends in 2018 and beyond. CARTA is an adaptive security approach which will help corporations to overcome barriers between application specialists and security specialists worldwide. In a global environment where hackers continue to remain an enormous threat to businesses, infrastructure, and communications, this adaptive security approach will provide organisations with effective and much needed proficiency in risk management.
In June last year, at Gartner’s 2017 Security Summit, the company introduced a new charter aimed at transforming information security (infosec) in businesses. This methodology, as the name suggests, is about addressing the ever-moving issues related to a constantly adaptive solution. ‘’At its core is the idea of going beyond basic binary security decisions within systems e.g. block/deny, as these are prone to zero-day and targeted attacks, credential theft and insider threats.’’ (Source www.gartner.com)
In addition to access protocols, risk and trust must be fluid too. For example, how systems profile a user must change with every interaction or communication. The user will need to be reassessed on a continuous basis. This increased fluid approach to security will be powered by ML (Machine Learning), and will become the only in the future to prevent security breaches such as the Equifax incident earlier in 2017.
As I mentioned earlier in my article, 2018 looks set to be a ‘’game-changing’’ year in many areas, with many business and hiring opportunities in Fintech increasing rapidly. Here at Harrington Starr, I will be watching closely as these trends develop, to uncover new opportunities for our clients, partners and candidates.
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