Fintech enthusiasts welcome back to my 5th annual “Top Ten” Fintech prediction series. This year I’ve met a lot of powerful movers and shakers in the Fintech space. My take away from these meetings and interactions is how little do I know about this ever-expanding space.
The “big bang” movement happened about 15 years ago when big banks started moving their services to the worldwide web. I remember that I made my contribution to help get chase.com up and running and all the issues we faced when we opened the flood gate.
Looking forward to 2021 and beyond, I have to take a moment to thank everyone who works in this space. Your resiliency amongst political and social upheaval should be commended. Good job guys!
Secondly, our lives have been changed forever by COVID-19. This virus killed millions of people around the world and many more suffered from the virus. On a lighter side of this seismic event, it was the shining moment for Fintech. Payment, Credit, Cryptocurrency dominate international headlines daily.
We are and have always been “essential workers” for humanity. To those Fintech companies such as Lendio, Kabbage, Cross River Bank that helped SBA deliver millions of dollars to Main street America, “Thank you!”. I’ve worked with some of the firms in the past few months and I personally vouch for these “front line” Fintech workers that poured their heart and soul into helping everyone that needed help.
With all of that out of the way, let’s keep the tradition going and “stump the chump” and see how my predictions did in 2020.
Fintech will be everywhere and Big Techs will get into Fintech in a major way. Facebook, Amazon, Apple, Netflix, and Google are all getting into Fintech. These companies have all created products and/or invested in the finance sector, including Netflix‘s (NASDAQ:NLFX) latest move to invest over $100 million into the commercial banking sector that serves the Black communities.
#9 (2020) “Biometrics” (TRUE)
Your day-to-day conversations have been mined and used for all sorts of transactions including financial transactions. Your smart-speakers, phones, headphones are listening to you constantly and collecting valuable information to help advertisers to present you with the right product and services.
#8 (2020) “Subscriptions everywhere” (TRUE)
Just about every service or even product are and can be sold as a subscription service. For a small monthly fee, you can listen, watch, order products, and services. This phenomenon creates a whole new line of business for payment Fintech companies everywhere.
#7 (2020) “Everything is financed” (TRUE)
Buy Now Pay Later, BNPL. Need I say more? Everything from tattoo removal, breast implants, to shoes and gadgets are all financed at a record pace. Sezzle just became a unicorn with a massive billion-dollar valuation!
#6 (2020) “Monoliths” (TRUE)
Alibaba (NYSE:BABA) is making headlines. The company is becoming a giant monolith that concerned their local government. Not only was their blockbuster IPO pulled at the last minute, but their local government is also “forcing” them to break up and focus on their payment services roots. The Google, Amazon, and Apples of the world all have ambitions to dominate other markets and lawmakers will be stamping them out. Think about the amount of data these companies are collecting on everyone as a private company?
#5 (2020) “United Nations of Credit” (NOT TRUE)
This is one of those New World Order types of predictions. However, I believe blockchain or something similar will be used to collect data on everyone. How we govern and use this data might take decades to decide and with the disintegration of the European Union and a renewed focus on data privacy, this might not see the light of the day. However, there’s a lot of good that could come out of a system that measures something like “Identity” that all nations might agree on.
#4 (2020) “New Rails” (NOT TRUE)
Are we ever going to break away from ACH/NACHA/VISA/Mastercard/SWIFT? Well yes, Blockchain and cryptocurrency. However, the decentralized nature of these platforms means that no one company is pushing larger agendas such as replacing the decade old payment rails. However, with some of the countries testing their digital currency, there could be some resurgence of new rails. But they are centralized and political. We need true democratic payment rails where everyone can send money to anyone in our solar system without harassment. Terrorists and criminals are excepted of course.
#3 (2020) “Regulations” (TRUE)
Regulators around the world are reeling Fintechs in. Alibaba, Ripple (XRP) are just some of the latest headline-grabbing victims of government regulation. We will see a lot more actions from the regulators in the coming years. There is positive news as well. PayActiv just got accepted to the CFPB’s sandbox for their employer-sponsored payroll advance product.
#2 and #1 (2020) Rise of Fintech in LatAm, Middle East, and Africa (Becoming TRUE).
A Brazilian lending company Creditas just raised a massive $255 million round, valuating the company at $1.75 billion after five successful rounds.
What’s in store for us in 2021? Here we go! And let’s stay on the wild side with our 2021 Fintech predictions!
With all the SPACs and IPOs out of the way, mergers are for the rest of us. We will see billion-dollar mergers in the coming months. Some of these will be head-scratchers and some will make all the sense in the world. RAC (Rent a center) buying Acima, makes sense. Amex buying Kabbage makes sense… but there will be some chin strokers.
#9 – Central Bank Digital Currency (CBDC)
Governments around the world will be issuing digital currency in an effort to collect data and solve the last mile issues of the difficulties of tracking paper cash and a slew of other societal and political issues that plague nations like China, India, Brazil, etc.
#8 – Disintermediation
There are still too many hoops to jump through for many Fintech startups. Banks and government are two of the biggest obstacles for true innovation. Some may argue that regulation is needed; but with today’s technology, the government should become micro-services that Fintechs would call if their need something to be looked at. OFAC list is still a searchable database without a government-sponsored API guide. And there can’t be true Insurtech innovation until we revoke prohibitive regulations that prevent innovative solutions.
From your heartbeat to energy consumption of your apartment. All of these data will be collected with the likes of Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN). Information will be stored, chained and analyzed to offer all sorts of financial products from travel to babysitter subscriptions. However, FAANGs have a monopoly on data, our personal data, we need to allow personal data to be owned and shared by individuals and let smaller startups to purchase and use this information to unveil more innovative products and services.
#6 – Data Ownership
I am predicting that Facebook (NASDAQ:FB) (as a strategy to get the government off of their backs for a while) will provide an API endpoint for users to download all of their personal data. Twitter provided an API endpoint called “Firehouse” which you can download all your conversations, I don’t think that’s available anymore. The point of this prediction is that banks, medical services, and governmental agencies should make our data available and let the individuals choose who could use that information however they want.
#5 – 5G and LiDAR
Bigger bandwidth and the ability to use LiDAR (Light Detection and Ranging), will forever change how we look at the world. From car and home insurance to mortgage and home improvement financing, datasets collected through this new technology will enhance underwriting and various other types of assessments. The possibilities here are endless. Small business lenders might even have devices monitoring foot traffic and sales receipts for fraud detection purposes.
#4 – BaaS and LaaS
Banking and Lending as a Service will dominate our conversations in the coming years. In the early years of FinTech, one of the mantras we keep repeating is that banks move too slow. We need to parse this further. Banks, like all other businesses, want to evolve and move fast to adapt to the changing environments. Their technology and some might argue that their regulators are not letting them move as fast as they would hope to. However, banks are catching up in a big way, some banks are now offering banking as a service to help other banks and even Fintechs to get up and running quickly. Some Fintechs such as LendingClub (NYSE:LC) are buying or becoming banks themselves to instill changes within to leverage technology and already well-understood regulations to bring more products and services to market.
#3 – Collision with China
The rest of the world needs to address these issues head-on. China’s dominance and ambitions are well documented. A few years ago I predicted that China/Russia will create their own internet and move away from the rest of the world, I still believe that they are working towards a new world order in terms of data collections. The new “Belt and Road” initiative is a massive data collection network, a new internet perhaps. This is something that we can not ignore and it will have generational impacts. Imagine that you can’t get a “multipass” because your “social score” is too low…
#2 – Delivering Energy
One of the biggest issues that we face today is infrastructure. I am not talking about roads or modern sewer systems. I am talking about electricity. Without electricity, none of our Fintech gears work. You might wonder how many people don’t have access to electricity? A billion people, yes, a billion people do not have access to electricity today. That’s about 13% of the world. And about 3 billion (40% of the world) people don’t have access to clean fuel energy for cooking (think burning wood or cow pies). Most of the population without electricity are in central Africa and places like North Korea and Haiti. There is an intricate play between microfinancing and solar energy and I predict that companies that figure out delivering energy to the rest of the world will be a dominant player for banking and financial services for a billion people.
#1 – End of Retail Banking
COVID-19 accelerated everyone’s digital strategy. Physical branches, ATM machines are a thing of the past. There’s no reason to ever go into a branch if #9 comes true. Ha, made you look.
Thanks for reading through this list and you can find me on Linkedin and Twitter. Until next time, have a brighter 2021 and I am looking forward to writing my next sets of predictions in 2022!
Timothy Li is a Senior Contributor for Crowdfund Insider. Li is the Founder of Kuber, MaxDecisions, an Alchemy. Li has over 15 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. MaxDecisions provides financial institutions with the latest A.I. and Machine Learning algorithms and Alchemy is a state of the art end-to-end white-labeled lending platform powering some of the best Fintech companies in the world. Li also teaches at the University of Southern California School of Engineering.