THE DRIVING FORCES
The X, Y and Z generations were born into a world of mobile internet and apps. They are used to consuming content and services via smartphones and tablets. For these young people, most of today’s financial services are almost inaccessible. They don’t want to meet at the Bank’s branch and they don’t want an insurance agent. More importantly, when they need to make a decision, all of the pieces of knowledge are at their fingertips. They are clearly in need of a new breed of banks that feel more like Paypal and not like their parent’s bank.
The majority of adults on this planet still do not have their own bank account. The global figure, including Africa and Asia, is over 2.5 billion. This huge segment of the population is in need of financial services and again, it seems unrealistic to believe that today’s banks could possibly satisfy that need. New mobile services, such as peer-to-peer payments, lending (and soon, also, insurance) will become more and more popular. A new breed of international wire services will replace the legacy of high-cost systems.
A TECHNOLOGY REVOLUTION
The technology “tectonic” movements of the past three decades have resulted in a few powerful vectors joining forces to change the financial world: the Internet, mobile technology and cloud computing. Mobile technology and the Internet are perhaps much easier to appreciate, because we consume them in everyday life; however, it is really the high power of cloud computing that has laid the foundations for big data analytics. The Internet, mobile technology and high power computing on public or private clouds are the enabling technologies behind the Fintech and BFSI revolution. The data revolution caused Tim Cook, CEO of Apple, to declare at the Google Analytics User Conference: “If your user doesn’t pay, then he is not the customer, he is actually the product”.
THE AREAS OF DISRUPTION
The smartphone and the tablet have de facto become the new PC – and more! It is hard to imagine any personal, or productivity task that is carried out today without a mobile device. All kinds of payment services, including bank transfers, or peer-to-peer payments, have transitioned to mobile.
PEER TO PEER LENDING
Not so long ago, only banks could lend money to people and businesses. Their relative advantage was the information that led to understanding risk. In the past few years, we have been witnessing new ventures that offer lending based on new breakthrough models. These models are based on a new kind of data, such as: social footprint, employment pattern, education, etc. The ramp up of these new lending services is phenomenal.
ROBOTIC INVESTMENT TRADING
In the past few years, another area of innovation has emerged that is poised to reshape a major sector of the Fintech scene – Investments & Trade. Robotic trading platforms (low frequency) are the new big thing. In the USA only, tens of billions of dollars are transacted by robotic platforms that either provide advice (the Robo adviser) or run the entire show, including selling and buying stock automatically, based on a given set of rules.
One area that has begun to witness major change is the international money market. It used to seem as though nothing had changed since the SWIFT systems were installed 40 – 50 years ago, to interconnect banks. And yet, these institutions are still moving trillions with no automatic routing, no on-line reporting, no free market and no choice of international wire providers. We are seeing more and more currency exchange and international wire providers on the cloud and these are poised to become a source for innovation
THE INSURANCE TECH IS NEXT
The wave of disruption that has hit the banking industry over the past few years is gaining momentum and is now set to impact the insurance industry as well. Insurance companies may benefit from multiple sources of innovation such as: new sensors (mobile technology) that will monitor the client’s lifestyle and provide on-line reports (at least in cases where the clients are offered a decent discount for allowing on-line monitoring). New big data analytics may revolutionize the way that risk is calculated and result in new models for policy pricing and new products. The number of startups pertaining to the insurance technology has been growing exponentially since 2015 and it is only a matter of time before this becomes one of the leading trends in Fintech.
CBInsights, March 2016: “Hundreds of new startups that claim to disrupt the insurance industry have been created and funded since 2015. This is clearly bigger than Fintech for Banks”. TechCruch, January 2016: “A change is coming to the insurance industry. And the opportunity is too big to be ignored for long. Beginning in 2016, we’ll start seeing established companies and newcomers alike move to fill insurance coverage gaps being created by new technology and industries”.