These are the boom years for Fintech. Between the years 2010 to 2016, investments in the Fintech sector jumped. From $1.8 Billion in Fintech investments in 2010 to an investment of $5.2 Billion in the first quarter of 2016 alone. Investments ranged from seed money for Fintech startups to takeovers by traditional banks, to banks’ internal research and development. So far, the industry’s primary focus has been P2P lending and P2P wire transfers, which have enabled dramatically lower wire fees to crowd funding platforms. But as technology in those key areas mature, and as regulation across the world differentiates, a new era has begun to emerge. With that emergence, the landscape for Fintech could begin to change. Check out Forbes’ 2016 Fintech 50 here.
Thus far, growth in the Fintech sector has been exponential, but that has largely been the result of many years of under-development and a general absence of regulatory hurdles. That has left many other segments within the Fintech sector underdeveloped. Those areas include insurance, wealth management and corporate finance, which require a “friendly” regulatory environment. As a result, those sectors have seen much less innovation, but that, of course, leaves plenty of growth potential.
And this spells change for the industry in two significant ways. The first is the increased focus on new technologies. The second is that sector growth will concentrate in geographical areas of the globe where the regulatory environment is Fintech friendly.
The Frontier Technologies
So, what are the new frontier technologies that will push for the next hype in Fintech? Here are some of the more interesting ones:
Robo Advisors: Robo Advisors are online investment services that assess a user’s risk profile and match it with a diversified and low-cost investment portfolio. Algorithms keep managing the investments to optimize returns and taxes. The first wave of robo-advisors is selling model portfolios only, but the future looks much more personalized. Swanest calls itself an investment assistant and recently completed a round of $800,000 in seed funding. The startup uses robo-technology to redesign the brokerage experience. Interestingly, Swanest co-develops the solution together with its community of self-directed investors.
Smart Contracts: Smart Contracts involves the use of Blockchain technology to validate, negotiate and enforce digital contracts from a distance. Those contracts could be for essentially anything, ranging from insurance policies and pensions to asset management and real estate contracts. In fact one of the most notable cooperation in the field of smart contracts started earlier this year between BNP Paribas, France’s largest bank and smart contract startup CommonAccord to standardize a protocol for smart contracts.
Colored Coins: Colored coins is a new technology that puts another layer of information on digital currencies and will allow to easily mint new types of digital currencies for different uses as well as transfer ownership of assets through an extra layer in the blockchain. In fact colored coins start-up Colu has already been able to digitally “mint” currencies such as the Camden Pound. And this may very well be only the beginning. According to Amos Meiri , CEO of Colu, “It’s a picture of an entirely new way of thinking about money.”