Last year, I boldly predicted 10 Fintech movements that will take place as Earth makes another perfect rotation around our Sun. It’s always fun to look back and see how wrong I was, so let’s stump the chump! Here are my original predictions.
Let’s score myself from 2017!
10 – Sensors (Right).
I predicted that insurance companies will eventually link up with Wearable, Smart Home Devices and Smart Cars to lower insurance premiums and provide greater transparency will payout and further eliminate the middle man. In July 2017, a company called Notion teamed up with insurance companies to lower homeowner’s insurance. Their smart home device works with Nest to provide up to the second data points around your house.
9 – The End of Privacy (Right).
Personally I never put a whole lot of weight on privacy, trolls can disagree but everything about you (from how your heart beats to how you drive) is all recorded and analyzed in real time. In 2017, we truly witnessed the End of Privacy. I predicted that privacy as we know it is dead. The FCC under the leadership of Ajit Pai killed Net Neutrality rules and thus ending your privacy. Every website, every tweet and your personally identifiable information all can be auctioned off for the right price. The central argument that the FCC used to overturn net neutrality is that the internet is not a public utility like water and electricity that are essential for basic living and cannot be hampered by private for profit companies.
8 – Mobile Everything (Meh).
Mobile gaming is hard, especially in lending, but MoneyLion, amongst others, has taken on this challenge head on. With their newly minted $42 million B round. MoneyLion is fueling the growth of their mobile game with MoneyLion plus. A small dollar, low cost solution to bring more people to mainstream credit. We also see Dave, Acorn, Robinhood and Betterment vying for your bank account and be your personal finance butler. I am giving this prediction a “Meh”. Perhaps 2018 would be the year that mobile is the first choice for banking, investing, finance and lending.
7 – Rebirth of Trust (Right).
If you haven’t witnessed the explosive growth of Bitcoin, Ether and most recently Ripple, you might be living under a rock. No one (at least the general public) could have witnessed the growth of the new backbone(s) of a brand new internet. In some ways, FCC killing off Net Neutrality is not that interesting because these new networks are essentially FCC/Corporate proof, meaning that no one can regulate it (at least in theory). Bitcoin grew from $800 to $13,000 over 1,600% growth. Ethereum grew from $10 to $1,400, over 14,000% growth. Download CoinCap on your phone and watch them go.
The wake up call for what these things truly came when the founder of Ripple (original founder of Prosper Marketplace) Chris Larsen became wealthier than Zuckerberg. I think that’s when people really took a serious look at what this technology is truly capable of.
6. Shared Risk (Wrong)
When Lemonade launched late 2016, there was a communal understanding that it would be more of a peer to peer insurance platform and less of a digital marketing funnel for other insurance companies. Most of the Insurtech startups are basically a User Experience uplift and not a truly disruptive shared-risk platform as I was hoping for. Insurance regulation in the United States is vastly outdated with the way we live today. Unless we move away from having to have insurance licenses in every state and jurisdiction, it might be hard to work around the insurance legal framework. But then, we said the same thing about LendingClub.
“It’s always seems impossible, until it’s done” – Nelson Mandela.
[clickToTweet tweet=”Insurance regulation in the United States is vastly outdated with the way we live today #Insurtech” quote=”Insurance regulation in the United States is vastly outdated with the way we live today #Insurtech”]
5. Vertical Integration (Meh)
I am border line on this prediction. On one hand, we just saw LendingPoint acquiring LoanHero, and Alibaba’s failed attempt to buy MoneyGram. On the other hand, we did see OnDeck and Upstart starting to white label their platform and underwriting for other banks and financial institutions to acquire customers cheaply. We also witnessed Goldman Sachs getting into personal lending/credit space with Marcus and PayPal and Square getting into working capital lending. I am giving this prediction a strong “Meh”. I am still wishing Snapchat, Facebook will start offering a lending product to their audience.
4. The Death of FICO (Meh)
We certainly saw the rise of Tala.co, an alternate credit provider based in Los Angeles and lending in Africa. They use mobile data to underwrite customers without a strong banking and credit bureau system. We also witnessed the vision of Nova Credit, a San Francisco-based International credit bureau that fills the gap and connects people’s credit worthiness from their home country when they migrate to another country permanently or temporarily. We also saw a Senate Bill in the US to end the FICO Monopoly called “Credit Score Competition Act” to allow other scores such as Vantage to be used by Fannie and Freddie.
I have no dog in this fight but more competition is always good and from my personal experience, Vantage works just as good as FICO, however it’s hard to change the minds of bank partners and secondary markets to think in terms of anything but FICO. It’s going to be hard transition for a lot of folks.
3. Generation Z (Right)
Gen Zs are sometimes defined as people born between 1996 to 2010. They are the children of most our readers (GenXers or Millennials). The oldest Gen Zs are just graduating college and the youngest are sitting in your living room playing on their iPads.
This Google search trends for the past five years give us an indication that Generation Z and Millennials are now spoken in the same term and the way they interact with technology, let alone banking and finance, would be vastly different than us.
Chase is rolling out Advice-driven “Express” branches in 2018 with Digital Advice Bars (Are they paying homage to Apple’s Genius Bar? At least they are trying) to help customers engage with more faceless transactions.
We also see other startups such as Varo Money, Simple and Aspiration breaking ground to have a complete mobile/digital experience for the next generation of consumers.
2. Digital Democracy (Right)
I predicted that some of the more prohibitive regulatory actions will be rolled back to allow more innovation to compete with India and China and provide more lending liquidity for the “not-allowed-to-bank” population due to Dodd-Frank and the CFPB – Consumer Financial Protection Bureau. In recently months, the Trump administration installed a new CFPB director and by all accounts will be more innovation friendly. The Trump administration has also indicated its intent in rolling back some of the constraints placed by Dodd-Frank to allow more lending by banks. In this dramatic turn of fate for the Fintech industry, we will see a lot more products and startups in 2018.
1. What’s your Advantage (Wrong)
I was hopeful when SoFi started getting into banking in a serious way with a bank charter, but they rolled back that vision after the departure of their founder and CEO. LendingClub, Prosper and OnDeck are still mono-line players. Marcus, from Goldman Sachs, quickly replicated the successes of the existing lending platforms but doesn’t offer anything else ground breaking. No one in 2017 broke out from the pack, SoFI was so close!
My record so far is 50/50. Let’s see how I do in 2018.
Here are my Top Ten Fintech Predictions for 2018
10. Resurgence of Peer to Peer Lending and the Emergence of A New Asset Class
We’ve seen coin-backed lending such as Salt Lending. There will be many more platforms that will attempt to solve solvency and liquidity issues with lending in fiat currency backed by coins. This highly volatile commodity unlocks a lot of opportunities for owners and lenders to create another kind of “trading” and “exchange” platform. I am very interested in seeing the development of this space. People that may have a certain distrust sending money to South Korea (Hurry!) or Lithuania might be able to “lend” or perhaps “trade” on these coin based lending platforms. Perhaps we will see the resurgence of P2P lending… Maybe this is what Chris Larson was thinking about all along when he started Ripple a number of years ago after he left Prosper Marketplace.
[clickToTweet tweet=”Predicting a resurgence of #P2Plending backed by digital currencies ” quote=”Predicting a resurgence of #P2Plending backed by digital currencies “]
9. Alternative Internet
There will be an emergence of an alternative (fill in the blank) internet in 2018. Private ISPs and Carriers have already expressed their intent to hike up prices and throttle content. The cost of a simple PayPal transaction might go up dramatically because it was routed through Comcast’s fiber. You may have to pay an additional $3.99 a month for an “Online Banking” package if you want to do online banking… I am sure the ISPs and Carriers will promote fake features such as security and speed etc. Whether the new net is developed via blockchain or some other type of technology, we might never know. Google and Facebook predicted this a number of years ago with their own fiber optic network and balloons…right? The content providers might lead the way to provide their own private network or access point. It will get very interesting very soon.
8. Banks will rule again
Most of the online platforms (payments or lending) plus secondary markets are at the mercy of banks. Without a bank charter, you are simply limited on growth. What happened in the past 15 years was a brain drain from the banks (they stopped lending after the recession and Dodd Frank) to the Fintech space. Now all of this talent, equipped with new skillsets, is being absorbed back into the larger banking system to bring large banks up to speed with the latest technology, data processing and analytics. The only difference between Fintech companies and Banks is regulation. Banks can lend to certain class of people not because they don’t want to, it’s because they can’t. They know that they’ve been loosing opportunities on acquiring the next generation of customers for the past 10 years (since Dodd Frank), but they will catch up in a few years with the relaxation of Dodd Frank and a defanged CFPB.
7. Everyone will be rich.
Well, homeowners, at least. Whether you own a home for the past 10 years or 10 Bitcoins, congratulations! You may have access to at least $20 to $150 thousand dollars to fuel your next adventure. There will be more innovative products created around this “new” or “renewed” asset class. Most people, mortgage banks or retail banks, have completely forgotten about this since the recession. Now homeowners are looking into unlocking their newly found wealth and those that capture their attention will be winners in 2018. The amount of “tech” that was utilized when the home equity market was red hot can’t compare to the amount of data we have now to quickly improve someone’s life.
6. Baby Boomer Financial, Inc.
The youngest baby boomers are approaching retirement age. The baby boomer generation is about 75 million people (on par with Millennials) in the US and represents a vast amount of wealth in this country. They want to transact, invest, bank and most importantly transfer their wealth in a responsible way. I predict that there will be Fintech startups specifically addressing the needs of this generation of folks. Are we going to leave it all up to AARP? These folks are on Facebook, riding Ubers and hosting AirBnBs like the rest of us, but when it comes to banking and credit options, the banks still have most of their attention. The Fintech community, such as the investment side of LendingClub, or the investors on RealtyMogul, might need to divert their dollars to an often over looked population.
5. Shared Risk Platforms.
I am bringing this one back from 2017 because I still believe that the insurance industry needs a massive transformation. The laws and regulations are wrong with respect to the times and how these products are sold need to change in a major way. I was wrong about wishing for a startup that truly tackles the issue of risk and I still believe that shared risk platforms are the future.
[clickToTweet tweet=”‘I still believe that the insurance industry needs a massive transformation’ #Insurtech” quote=”I still believe that the insurance industry needs a massive transformation #Insurtech”]
4. Mass Adoption of Zero Latency Payment Clearance/Credit.
Over the past few decades, we went from a cash society and in-person / in-branch interviews to “same-day” ACH (direct deposit) and next day loan funding. I predict that in 2018, we will see instant credit approval and funding. Maybe someone is already doing it? Please comment below.
3. Social Networks Venture Into Credit.
I am making another prediction that Facebook or Snapchat will venture into extending credit. I’ve said on multiple occasions that their amount of data outweighs any credit bureau on the planet. If they can monetize eye ball time into advertising dollars using their massive amount of data, the can make a good decision on extending people with credit. Tencent’s WeChat (WeBank) is already doing this. Why are we sitting on our hands?
[clickToTweet tweet=”Tencent’s WeChat is already doing this. Why are we sitting on our hands? #Fintech” quote=”Tencent’s WeChat is already doing this. Why are we sitting on our hands? #Fintech”]
2. Vertical Integration.
This was a hit and miss from 2017. But let me be more specific this time for 2018. I predict that Faraday Future, Tesla or Uber will enter the auto-insurance business. AirBnB will enter the home insurance business. WeWork will get into the Working Capital lending business. And dare I say Indeed, Monster, and LinkedIn, will start lending money based on your resume and activities within your professional connections?!
1. Gen Zs.
Every card is stacked against one of the most technologically advanced segments of our population. From the Dodd Frank’s Credit Card Responsibility Act that forbids banks to talk to university students, to the Fintech community’s lack of response and readiness to the rise of Co-Working, Co-Living and Ride-sharing trend for the next generation. Gen Zs are out for themselves. How do we prepare for the next 77 million people coming online with the gig-economy mindset?
See you guys in 2019 and have a fantastic 2018. You can always find me at [email protected]fluidfi.com
Timothy Li is a Senior Contributor for Crowdfund Insider. Timothy is the CEO of Kuber and MaxDecisions and has over 14 years of Fintech industry experience. He’s passionate about changing the finance and banking landscape. Kuber launched Fluid, a credit building product designed for college students to borrow up to $500 interest free. Kuber’s 2nd product Mobilend is a true debt consolidation product, aiming to lower debt for all Americans. Li also the co-founder and President of P2P Protect, an Insurtech platform that offers P2P insurance products. Li sits on multiple advisory boards including Rocketloans.