I was staring at this blank piece of paper and I was thinking, “What an ambitious title for a blog.” However, 2017 and 2018 were so busy and transformative for financial services, I feel another blog on this topic will not hurt. Before I start, I want to address important comments from all the naysayers. People do not like change in the essence. To a certain degree, I have to agree with this fact; but we always forget that today, we are building companies and tech solutions to be used by tech-savvy, young, new generations that are slowly stepping into the scene and carrying the legacy of inheritance of the baby boomers; and here, we are talking about serious trillions of dollars. That is why the financial services are going to change inevitably. Even today, we can see the discrepancy between the clients who prefer online advice – a staggering 60% per EY research of 2016, and those working in financial services that prefer face-to-face interaction - 66%. Both clients and service providers agree that execution should be digital – more than 70%.
With all this in mind, I have to say that users warming up to technology are pushing financial service companies deeper into Fintech’s territory. I strongly believe that financial service providers of today and tomorrow are technology companies, per se. Customer pull with lower fees, better user-experience and performance combined with regulatory changes — like GDPR, MiFiD – and higher transparency of fee structure. All this is inevitably drawing us closer towards the technology push, including but not limited to: Platformization of the services, Robo-advisory, and two stars of the new Fintech trends: Blockchain and AI.
The new technologies changing the face of the financial services and being integrated by Fintechs are:
famous for its peer-to-peer currencies, came into the focus of financial service companies some time ago due to a long list of business benefits. These benefits are too long to be summed up here and do not only include cost savings, but the efficient and lean processes, immutability of records, built-in cryptography for secure transactions and tamper-proof transfer of value, and also, the automation of processes and validation. Blockchain moved a bar from the Internet of information to the Internet of value.
is another technology that is bringing enormous change to financial services and is defining clear Fintech trends. The advanced AI technology helps us automate existing processes — something I am sorry we did not have while I was building my decades-long career in financial services. The technology that automates mundane, repetitive, error-prone processes would have saved me many headaches and made back-office processes seamless, in return, making clients’ lives easier, too. Due to multiple levels of added value, AI is seen as even more transformative for financial services than blockchain.
are the next big Fintech trend or even the current, big trend. I cannot leave them out, as they are bringing new angles to the term “financial services.” And I have to be honest, that’s to my satisfaction. Let me mention here only: Yu’e Bao Alibaba’s asset management arm is the world’s biggest money market fund with US$ 50 billion of assets under management bigger than the second one - JP Morgan. Almost all significant platforms now offer financial services of some kind: from payments to wealth management, such as for example, Chinese WeChat.
There are many growing, new technologies, like Internet of Things (IoT), virtual or augmented reality (AR or VR), etc., that will find their way into Fintechs’ world in the near future. Many new trends are clearly growing, thanks to the push from customers, competitors and regulators. Markets seem to be ripe for the shift and deep change.
An important change in the world of finance that is fuelling new blockchain or blockchain & AI ventures is a new form of crowd investing – using blockchain and enabling peer-to-peer investing – is popularly called Initial Coin Offering or Initial Token Offering (ICO or ITO) which mimics the Initial Public Offering (IPO). Apart from cutting out the proverbial middleman, bank or arranger of the funding, the ICO brought a novelty in the investor’s ownership, or even new asset class. In the case of the ICO, the investor actually owns a token that is funding product development, but does not own the part of the company which is developing the product. This was a major shift in the field of financial services offered in this area. As the ICO market matures, the shift towards so-called security token offering, or STO, is significant. Depending on how the security token is structured, the offering can continue circumventing the investment in the management company of the product.
To sum up, let me mention a few trends that we have identified as the latest Fintech trends:
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