‘Tis the season for decking halls, lighting candles, spending time with family and friends, reflecting on 2018 and thinking ahead to 2019 and new trends in the global Fintech market.
Crowdfund Insider reached out to the Fintech community members to look into their crystal balls and make some predictions for the upcoming year in their respective sectors. Their predictions cover a wide range of topics including crowdfunding, social missions, regulations, open banking, capital markets, AI, blockchain and community bank.
Jon Medved, OurCrowd Founder and CEO, predicts:
“In 2019 there will be more than one crowdfunding exit of a company worth in excess of a billion dollars in which crowdfunding participants were able to invest through platforms.”
With regard to Fintech, Medved believes that “money will continue to roll in to the Fintech sector in a wide range of companies including blockchain, payments, alternative investment platforms and more. Banks will increasingly join the funding of this disruption.”
“Fintech can expect new quality in 2019,” shared Robocash Group CEO Sergey Sedov. Sedov predicts that when several different trends — specifically the social mission of Fintech and new markets and new quality and legislative race — are combined can result in solutions facilitating the new quality of the industry.
“Earlier this year at the Forum in Bali, the International Monetary Fund and the World Bank released the global program for the development of Fintech. The key direction is to facilitate access to financial services for 1.7 billion working population living in low-income countries. These are Africa, Latin America, Southeast Asia and India,” explained Sedov. “Until now, the Fintech industry in these countries has been limited by obstacles at the state level: the lack of regulation, compulsory currency conversion at the non-market rates, high inflation, etc. All issues have been determined in the development program and will be solved under the guidance of the international organizations. The World Bank’s working groups are already preparing roadmaps for the selected countries.”
Sedov indicated that payment services and online lenders have received the greatest emphasis, but the purpose is not to scale the business of the Internet giants. He cited Christine Lagarde, the Managing Director of the International Monetary Fund, who outlined the points for the basis of Fintech development: “We need greater international cooperation to achieve that and to make sure the Fintech revolution benefits the many and not just the few,” nothing that Lagarde has repeatedly mentioned the future without banks, when central banks act as the center for the issue of digital currency, and Fintech companies serve the population.
“Perhaps, developing countries will be the first to enter this future,” Sedov predicted. “However, there is a serious hurdle as the majority of potential users are unfamiliar with financial services. It will require companies to localize products and work with customers additionally. Operations in seven different markets in Europe and Asia enabled our company Robocash Group to develop significant expertise in this direction. We had the own project for financial literacy in Russia and there are plans to apply its experience within our footprint in Southeast Asia: the Philippines, Indonesia and Vietnam. Surely, this task can be attributed to the social mission of Fintech globally. We are confident that this direction will have a broader scale in 2019.”
With regard to new quality and legislative race, Sedov explained via email that in 2018, the EU adopted the directive PSD2, one of the most progressive legislative act regulating Fintech:
“New rules have boosted the development of the whole industry. By now, the European Union has outperformed the United States more than twice by the number of financial companies that had IPO in 2018 (69 vs. 28) and five times by their total capitalization growth (222% vs. 42%),” shared Sedov. “Some legislative provisions of PSD2 will come into force in January 2019. Fintech companies will get access to the API of banks and impersonal data of customers. Today, companies are actively investing in development of necessary solutions in order to introduce game-changing financial products to the market in 2019. Individual underwriting will appear first, but this is only an initial step. For example, a bank has data about a client’s car and fuel costs. This information will allow insurance companies to calculate how often the person uses the car and offer personal rates.”
Sedov reiterated that other regions have also appreciated the impact of qualitative legislation on the development of Fintech:
“An array of laws governing the work of non-bank financial companies and cryptocurrency have been already submitted to the US Congress. It is expected that new Fintech products will be able to increase efficiency in such traditionally problematic areas as healthcare too. The SEA countries are also working on incentive legislation for Fintech. Singapore that is considered the world’s leading Fintech hub along with London and Indonesia where Fintech brings more than 0.5% of GDP hold the leading roles in the region. The inflow of investments and technologies from China, where the authorities have imposed severe restrictions on alternative finance should positively affect the dynamics of Fintech in Southeast Asia. We expect the EU, the US and Southeast Asia to become the points of growth for fundamentally new financial technologies.”What
What’s the scoop on P2P?
UTRUST Global Partnerships VP Sanja Kon avers that there will be an increase of P2P payments in 2019:
“Peer to peer payments will continue to grow in double digits next year, driven by the widespread adoption of smartphones and convenience offered by the P2P apps. Venmo reported that it processed over 35Billion USD worth of transactions in 2017, resulting in a 95% increase in growth of payment volume vs the previous year.”
She also foresees more shits to Artificial Intelligence and biometrics technology:
“Issuers are using new tools to fight fraud — machine learning, automation, cloud technology, among them. Using AI, usually, through machine learning, will significantly improve fraud detection in traditional financial systems… Payment companies are already beginning to make use of biometric technology like fingerprint scanning and facial recognition. The use of the technology will grow exponentially, driven by mobile adoption.”
Funding Options Managing Director Ryan Edwards-Pritchard focused his predictions on Open Banking:
“In 2019, we anticipate the use of Open Banking in the UK will allow us to grow even further. By using Open Banking data we will be able to ‘fast track’ small business credit approvals and cost-effectively help small businesses to access the right lenders, at scale.”
“Armed with insights drawn from up to 40 Open Banking data points, our process detects quickly how a small business is performing and their likelihood to default based on a number of factors including current account performance, cash flow and behaviours. Using this data, we have already helped a small business in Kent, UK, to receive a £10,000 loan in just 1 hour 23 minutes.”
“There is a challenge in that Open Banking is still not widely known in the UK. We should work together as an industry to educate small businesses on the value of sharing data for Open Banking and help them understand there are now options available that are much quicker and more personalised. Small businesses should know they no longer need to put up with the status quo.”
Aditya Narula, Head of Customer Success at Kabbage, focused his predictions on trust and synergy between banks and fintech platforms:
“Companies that win their customers’ trust will win over companies that only provide a superior product or experience… There will be further convergence of physical and digital – brick and mortars will invest disproportionately in digital initiatives and digital natives will disproportionately invest more in physical presence.”
When looking ahead to 2019, Craig Mc Gregor, Co-founder and CEO of DSTOQ, addressed the global financial markets and blockchain:
“In 2019, we will begin to witness an even greater shift toward financial inclusion in capital markets globally. Today, 6 billion – or 84% of the world’s population – live in emerging markets, and 2 billion of these individuals have been financially excluded from traditional financial institutions. I believe that as more people begin to embrace and invest in Blockchain solutions, we will see that this technology has the unprecedented capability to reach these markets, giving investors large and small access to the real global economy.”
When asked about his Fintech predictions for 2019, Brent Jaciow, Head of Blockchain Affairs at Utopia Music, a blockchain-powered music tracking and attribution platform, shared:
“In Fintech, which most customers see as a commodity, firms will leverage technologies such as Big Data, AI, and IoT to drive operational efficiency, as well as provide more competitive pricing and client-centric, niche offerings. The main obstacle the industry will deal with in 2019 is regulation playing catch up. With Fintech innovation moving at warp speed, the industry must adapt and have an open dialogue with regulators to ensure progress does not grind to a halt. In Capitalism 3.0, innovators must see regulators as their partners, and include them early and often in discussions in order to establish a sense of understanding and get the guidance from said regulatory bodies on a pathway forward which makes sense for all parties.”
What will happen to SMEs next year?
“Small business financing will face the ultimate test in an economic downturn. During the Great Recession ten years ago, community banks subsequently led the recovery in small business financing. But following a wave of consolidation, marked by community bank closures and acquisitions, community banks are no longer in a position to play a similar role in another downturn when traditional banks are also expected to scale back small business lending dramatically,” BlueVine CEO & Founder Eyal Lifshitz told Crowdfund Insider. “There’s been a lot of talk about small business lenders not being tested yet, so that test may come with the next recession. Those that were able to raise adequate debt financing capital and put in place solid risk underwriting systems will not only survive — they will actually come out of a recession stronger and better-positioned to meet demand.”
The BlueVine team shared several predictions for Fintech in 2019, concerning AI, regulations and brick and mortar banks:
“Artificial intelligence and machine learning will lead the way; Banks and Fintech companies will deepen their collaboration, allowing banks to deploy more advanced models,” predicted BlueVine Chief Risk Officer Ido Lustig. “Regulation will start playing a more significant role in defining which data points/models are allowed for use. Lastly, with the economy starting to turn, we will see how well these models, which have worked well in the past few years of prosperity, will perform in a less supportive economical environment.”
With regard to Fintech and banks, BlueVine VP of Business Development & Strategic Partnerships Charles Amadon told Crowdfund Insider,
“Partnerships between Fintech companies and Banks will move from headlines to the frontlines: As the early adopters of the Fintech partnership model (e.g., JPMorgan Chase, American Express, PNC) fully deploy new Fintech-partner-driven solutions for payments and lending, banks across the board will be re-evaluating their longstanding dependence on core technology providers (e.g., FISERV, FIS, and JackHenry). Executive teams at smaller banks will begin investing in Fintech partnerships, in a bid to maintain their local competitive edge as new national digital banks encroach on their territory.”
“Older, more traditional SMBs will broaden their lending horizons: In 2017, 30% of business owners look for a small business loan online. The 70% who didn’t are predominantly older, and more traditional in their approach to seeking financing. In 2019, we will see a more aggressive push by SMB lenders to tap into a more mainstream audience of business owners who have not been looking online for financing options. This will be driven in part by increased competition between the SMB lender, and a larger push by those lenders to market themselves to a broader audience of SMBs.”
When Everest co-founder Brad Witteman looks into the crystal ball for trends occurring in 2019, he sees an Ethereum upgrade:
“The Casper Proof-of-Stake consensus algorithm will be implemented and sharding [a type of database partitioning that separates very large databases the into smaller, faster, more easily managed parts called data shards] speed improvements will allow the network to accommodate sufficient traffic to become a mainstream infrastructure for applications.
Witteman said the Lightning network and speed improvements will lead to additional software and services being built:
“… and “a breakthrough DApp will capture the mainstream attention and introduce distributed computing to the masses like Pokémon Go, but a distributed app.”
Last but not least, Kevin April, SportsCastr and FanChain CEO, shared his prediction for Fintech in 2019:
“Globalization 2.0 will begin, in which the estimated two billion unbanked will emerge as a population that can no longer be ignored. They will give rise to entirely new markets and truly international platforms.”