The Year Ahead: FinTech Predictions for 2017

With the year off to a flying start, we take a look at the predicted front runners in the FinTech race

As January comes to a close, we have looked at the predicted front runners in the race to become the hottest FinTech trend in 2017. Despite there being no clear odds on favourite, we will be watching very closely how the race progresses.

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FinTech trends predicted in 2017

BLOCKCHAIN


“The form sheet for Blockchain/Share Ledger Technology has been getting stronger and stronger as many financial institutions investigated and trialled the technology over 2016 to understand its use cases and quantify its value as a commercially viable tool.  We expect to see even more trials get underway and for some trials to turn into small scale pilots. Cross-border payments are likely to remain a key focus but we expect to see more activity in paper and labour intensive areas such as Trade Financing (Invoice Discounting, Factoring, Supply Chain Financing, etc.) but also potential commercial roll-outs of digital/crypto currencies – this is likely to be consumer focused but we expect that this could well be rolled out into the B2B settlements space in the near future as trust, regulatory support and acceptance improves – we will be watching the developments in Japan very closely given the activity by MUFJ and Mizuho, alongside the Japanese Government’s recognition of digital currencies as real money.”

Chris Holmes, Senior Vice President, KAE

ARTIFICIAL INTELLIGENCE


“Once reserved for academics and science fiction writers, Artificial Intelligence (AI) has seen increased adoption in the FinTech space. The combination of improved computer processing, out-of-the-box machine learning algorithms and data collection on an unprecedented scale has energised banks and start-ups to develop highly personalised services. In 2017, we expect to see banks deploy more powerful chatbots and voice-mediated AI to reduce costs and improve the customer experience by reducing the time between first interaction and resolution. The main question will be whether customers will share the same enthusiasm as the banks?”

Alexander Young, Consultant, KAE

REGTECH


“Despite being a relatively new trend, RegTech is rumoured to be the new FinTech. Whilst still fairly obscure at the beginning of 2016, we saw traction in the RegTech space towards the end of the year. KAE expects that this momentum will accelerate further and therefore 2017 will be the year of RegTech as companies will overhaul their middle and back offices. Within the space itself, we might see more collaboration between RegTechs as corporates typically prefer to use one single service provider rather than contracting a range of single use RegTechs.”

Denise van Wijk, Research Consultant, KAE

DIGITAL PAYMENTS


“There is still a great deal of apathy towards mobile NFC payments despite a growing number of solutions being launched worldwide. Lack of clear customer benefits vs. traditional card payment remain the main hurdle to widespread adoption and usage. In-app payments will continue to grow with popular services such as meal deliveries becoming popular in many countries. There is a great opportunity for retailers to build deeper connections with their customers through dedicated mobile wallets and we expect to see more high profile brands invest in mobile wallets.”

Arnaud Le Saouter, Senior Vice President, KAE

BIG DATA


“Recent technological advances have provided new incredible approaches to big data analytics and utilisation that were barely dreamt of just a few years ago. We expect to see banks leveraging the intelligence introduced by data analytics beyond improving customer targeting for marketing to changing the relationship with their customers. Banks have the opportunity to deepen their relationship with customers through real-time access to their customers’ ever-evolving financial profile, anticipate their needs and help them make better financial decisions; achieve their financial goals, improve their ability to budgeting and saving, increase their knowledge of options available to them. At the same time customers expect their bank to offer them an enhanced experience across every point of interaction similar to what they receive from their non-financial partners. Partnerships with FinTechs will be the catalyst in this relationship enabling banks to utilise Big Data smartly to improve customer experience.”

Anna Pantazi, Senior Consultant, KAE

BIOMETRICS


“As the use of mobiles as a banking and payments tool increases and developments in wearable technology continues to gather pace, we expect biometrics to become an increasingly hot topic. We have seen successful applications within the retail banking space and expect wider user participation as we become more familiar with the technology and benefits in our everyday lives. Facial features, finger prints, vein recognition, etc. can already be captured by smart phones and wearables. The ability to increase payment security and reduce fraud will be very appealing in the corporate space and we expect to see commercial roll outs hitting the headlines very soon.”

Shona Sabah, Consultant, KAE

ROBO-ADVISORS


“Robo-advisory services can be defined as a truly disruptive innovation. By broadening wealth management provision to traditionally under-served customer segments, Robo-advisors fill consumers’ unmet needs. Services like Nutmeg (UK), Wealthfront and Betterment (US) are pushing the boundaries of automated investing away from human assisted service. Where costly professional advice once excluded the majority of consumers from diversified, personalised, dynamic investing, now Robo-advisors allow providers to offer this solution at minimal marginal cost. We expect to see these services continue to increase in overall volume and use. With Robo-advisors continued iteration of technology, marketing and investment methodology, we expect to see the erosion of incumbent wealth and savings products positioned at both the high and low end of the market.”

Josh Barbour, Research Consultant, KAE

MOBILE BANKING


“Mobile banking will continue to transform the customer experience and create a profound shift in how customers interact with their banks and how banks consider this channel over their branch networks.  As mobile banking becomes the main touch point for many banks, they need to consider how they can optimise this channel and enhance customer engagement.”

Arnaud le Saouter, Senior Vice President, KAE

OPEN APIs


“As more countries start to move to an open banking standard, APIs (Application Program Interface) will be crucial in facilitating effective and secure communication amongst different financial services providers. While US FinTechs have just started pressuring incumbents to open up their customers’ financial data, MAS is actively encouraging Singaporean banks to publish open APIs on their datasets and the E.U. has already mandated its banks to share their data with third party providers by early 2018. This year, we expect banking services providers to focus on developing their APIs to ensure that they remain competitive and comply with upcoming regulation. From 2018 onwards, open banking will improve choice for customers as well as foster innovation and competition amongst banking services providers.”

Matyas Fekete, Research Consultant, KAE

ALTERNATIVE LENDING


“Alternative Lending has become an increasingly mainstream trend, both in the consumer and commercial spaces. Yet, despite this we feel there are still many areas where Alternative Lending is yet to disrupt the status quo. We expect the trend of FinTechs and incumbents partnering to continue, although some will also go it alone and become credible threats – a trend likely to be supported by pro FinTech regulation (including PSD2) and numerous countries’ support of FinTechs in their ambitions to be become leading global FinTech centres.”

Chris Holmes, Senior Vice President, KAE

INSURTECH


“InsurTech has been emerging over many years looking to breakdown the inefficiencies of the traditional risk assessment and buying process as well as minimising products so they are more affordable. Access for standard products that developed markets take for granted are being innovated with the help of technology for countries in the developing world, for instance Micro-insurance in Myanmar using smartphones as the route to market. Instead of the household being worth hundreds of thousands of dollars they are valued at a maximum of a few thousand dollars which means the risk assessment, purchase and servicing needs to cost the insurer fractions of normal policies. Even in developed countries, for instance the US, Life Insurance is still not accessible for all and InsurTech businesses are developing the business model and technology to capture the premiums and an under-served segment of the population. Commercial insurance is behind the technology curve largely due to the complexity and established expertise that is required from brokers and insurers but the development of Crypto-contracts in personal lines may be a technology that could be implemented for improving customer experience and claims settlement. However the traditional customer experience elements of insurance still exist in all markets globally and will be the focus for InsurTech businesses striving to advance and digitise in 2017.”

Richard Lintern, Managing Director, KAE

INTERNET OF THINGS


“The Internet of Things is helping to completely transform the way we manage our finances with increasing access through devices such as smartphones, wearables, connected cars and smart homes to name a few. From identification to risk management and payments, we expect financial services providers – incumbents as well as FinTechs – to rapidly utilise IoT to deliver customisable, disruptive and innovative solutions to consumers.”

Baber Ahmed, Senior Consultant, KAE

PERSONAL FINANCIAL MANAGEMENT


“The combination of AI, Big Data and Personal Finance Management will see the world divided into two populations. One would comprise of wage-earners whose finances are so straight-forward and so similar to other people that AI can advise them on most questions. The other would comprise of people whose finances are much more complicated – their wealth spans across different asset classes and across different jurisdictions; very likely each wealth portfolio of the second group would be unique and immune to AI analysis. However, we expect activities for the first group to gain significant traction this year.”

Henrietta Katsuki Wu, Consultant, KAE

SME BANKING


“We are in the era of total business digitisation and yet a large number of small businesses still manage their business finances in an old-fashioned way. However, SMEs are increasingly willing to work with alternative, technology-focused providers. FinTechs are increasingly challenging established financial institutions across the board, from launching innovative and ‘low-cost’ mPOS solutions to offering a wide range of small to medium term loan products. This year, we expect FinTechs to identify further needs of SMEs and deliver creative and customised products to them.”

Juan Zafra, Consultant, KAE

As 2017 progresses, we will be keeping track of who is leading the field.

To find out more about our work or to leave your comments, please email us at enquiries@kae.com

 

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