Unlocking Fintech Potential: Top 7 Opportunities to Transform Financial Industry with the Use of Technology

From paying for a cup of coffee with your iPhone to handling complex financial data at work, you deal with fintech every day. The explosive growth of the technology, that we have been witnessing recently, triggered major changes in every aspect of our life, especially such fundamental one as finance.

With $31.6 billion of investment in the US, with additional $18.1 billion invested globally over the last five years, fintech is currently one of the hottest technology sectors. Both accomplished players like Intuit, PayPal, or Square, and disruptive startups like Plaid, Kabbage or Robinhood are reshaping financial industry.

Fintech market is far from being saturated. The top industry trends include lending and payments. Yet, more opportunities remain to be taken. Here is the definitive list of fintech opportunities that both established businesses and entrepreneurs can use to their advantage.

1. Personal Finance and Banking

With the rise of fintech, you don’t need a degree in business or finance to do your accounts. There are lots of great tools on the market, offering online banking, automatic budgeting, financial planning, and asset management services. The undisputed leader in personal finance niche is Intuit Inc. One of its core products, Mint.com, allows its users to keep track of bank accounts, credit cards, investment, loans, and transactions, all within a single app. However, there is still substantial opportunity for better, smarter personal finance and banking. Just look at the impressive equity crowdfunding campaign that Mondo (mobile-first bank startup) ran recently: it raised £1 million in just 96 seconds.

2. Mobile Payments and Transfers

Providing transparency and low cost that most of the bank transactions lack, payment processing has seen significant growth over the last years. Due to the exponential growth of the eCommerce and mCommerce, it is predicted that over 5 billion people will be making payments using their smartphones by 2019. Be it a mobile payment system (Stripe), a hardware device that can process credit card payments (Square), or alternative money transfer service (Transferwise), any product that meets the need for cheaper, faster and easier payments processing has a great potential. Moreover, the fact that giants like Apple and Google bet on mobile payments, speaks for itself.

3. P2P Lending and Microfinancing

Peer to peer lending companies solve a problem that banks often cannot solve. They disintermediate the process of crediting, simply by connecting loan providers with prospective borrowers through specialized P2P platforms (LendingClub, Prosper). Thus, consumer and business credits are easy to access; the process becomes simple, convenient and fast. The potential that lies within this area is yet to be discovered. The expected launch of the Innovative Finance Individual Savings Account (IFISA) in the UK, will foster growth in P2P lending sector due to the favorable tax conditions it grants. Dominating mostly in the developing countries, microfinancing is another significant area of opportunity in fintech: it is expected to show the steady growth of 10–15 percent in 2016. All in all, the loan and lending market is a highly promising industry that is expected to reach $1 trillion by 2025.

4. Simplified Investing with AI Advisors

Similar to banks, markets and exchanges are experiencing significant digitization. Online trading has become much more simple and accessible, thanks to the products like RobinHood, the app, as Business Insider puts it, “makes stock trading cheap, intuitive, and mobile”. Another trend that emerges in this area is the “robo-advisors”. They combine smart algorithms and human touch to help the users make better investment decisions (e.g. Wealthfront, Betterment). As machine learning and AI technologies currently gain momentum, this tendency is yet to see widespread adoption. Automated and personalized service, deep data-backed insights, and smarter financial decisions are just several possibilities that these intelligent algorithms open up for fintech.

5. Crowdfunding the Venture Capital

The amount of total funds raised every year on the crowdfunding platforms, like Kickstarter and Indiegogo, is close to $3 billion. This was made possible with the adoption of the “Jumpstart Our Business Startups” (JOBS) Act (Titles I-VII), in 2012. The legislation regulates the equity crowdfunding in the USA and creates a friendly environment for a large number of startups and small companies. With the Title III coming into effect in May 2016, the non-accredited investors (i.e. regular citizens) will be able to participate in equity crowdfunding projects and invest in any venture that offers such possibility. This is seen as a massive breakthrough for early-stage startups and will lead to the further growth of the crowdfunding industry.

6. Better Ways to Use Financial Data

The advance of Big Data and predictive analytics continues to revolutionize the finance industry. Established financial institutions, like Goldman Sachs, Morgan Stanley or Bank of America, are currently looking for the new ways to apply the data they have accumulated over the decades. Actionable business insights, sourced with the help of the innovative technologies, is what major enterprises use to keep up with the challenges industry disruptors are setting. Thus, their interest in advanced analytics and big data finance startups (Context Relevant, Kensho Technologies, Dataminr, and Antuit) is easy to explain. This also means great chances for successful acquisition for a number of other B2B fintech projects.

7. Accessible Insurance

The US insurance industry is the largest in the world, with $696 billion revenue. Yet, the market is also extremely difficult to enter: it is highly complex and capital-intensive, with a number of regulative constraints. One of the most notable products in this area is Oscar — a health insurance startup, considered one of the top fintech companies in 2015, according to various industry experts. It uses technology, data, and design to improve health insurance experience and make it accessible to anyone. However, a number of other insurance areas haven’t yet seen any transformation.

Final Word

Last year, the fintech investment has increased by 106 percent, reaching $13.8 billion globally. The numbers sound even more impressive when compared to $2.1 billion in industry funding raised in 2011.

With more regulatory freedom, advanced technologies, and innovative business models, opportunities in fintech still have a strong potential. While both established financial institutions and emerging startups strive to seize the moment and get their piece of the fintech pie, the market will continue to expand in 2016 and years to come.

You can find the original at AltexSoft’s blog: “Unlocking Fintech Potential: Top 7 Opportunities to Transform Financial Industry with the Use of Technology”.

Being a Technology & Solution Consulting company, AltexSoft co-builds technology products to help companies accelerate growth.

Being a Technology & Solution Consulting company, AltexSoft co-builds technology products to help companies accelerate growth.