[Updated] Unlocking Fintech Potential: Top 10 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. Mobile Banking and Financial Inclusion for Underserved

Another promising market player is Monese, a mobile banking tool providing expats and immigrants in the UK with the main banking services, regardless of their address and credit history. With the total transactions value of £12 million (about $14.6 million) processed by the company this July, the startup shows a steady month-over-month growth.

This clearly indicates not only a great opportunity to enter mobile banking, but also a major potential of catering to the underbanked population. As stated in a report by DeNovo, a PwC strategy consulting platform, “… an estimated 2 billion adults, or 42% of the global adult population, are absent from the formal financial system. Therefore, even modest strides in achieving economic inclusion present the single largest addressable opportunity in FinTech.

2. Smart Personal Finance Management

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. Namely, another personal finance management app, Level Money, allows the users to connect their accounts in any of 2,500 available U.S. banks, making it easy to manage their finances.

In 2015, the company was acquired by Capital One, a Fortune 500 company and one of the top 10 largest U.S. banks. As the company representative explained, this was only “one of many steps that Capital One is making to deliver a next-generation banking experience.” This clearly indicates the digitization trend among enterprises.

3. Affordable and Easy Accounting for Small Businesses

However, the real revolution has just begun: With the transition to cloud SaaS technologies, accounting has become easier, more secure, and affordable. For example, Wave provides tools aimed to simplify accounting for small businesses and freelancers, free of charge. Providing an alternative to heavyweight enterprise solutions, the company offers a complete set of financial tools, from accounting and invoicing to payments and payroll services.

4. Innovative Payment and Money Transfer Processing

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.

5. Peer to Peer Lending and Microfinancing

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.

Affirm, a startup, founded by the former PayPal CTO, Max Levchin, combines lending and payment services, offering alternative financing options. Namely, the product offers installment loans allowing the users to buy goods from a number of selected online eCommerce platforms, including Expedia and Eventbrite.

All in all, the loan and lending market is a highly promising industry that is expected to reach $1 trillion by 2025.

6. Accessible Investing and Online Trading

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.

7. Simplified Crowdfunding

As the Title III has come into effect in May 2016, the non-accredited investors (i.e. regular citizens) are now 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, leading to the further growth of the crowdfunding industry. The early results are impressive: It’s been reported that 20 out of 82 filed campaigns have exceeded their target amounts. This means 24.4 percent success rate, which is 2–3 times higher than the one reported by Indiegogo.

8. Big Data and Predictive Analytics for Fintech

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.

Citi Ventures has recently invested in a data science startup, Feedzai, an innovative machine learning platform, used to prevent fraud in eCommerce. As stated in the related press release, “with its investment in Feedzai, Citi Ventures will support the development and commercialization of new solutions with the potential to transform how to identify and prevent malicious activity in financial services.

Indeed, fraud prevention and risk management are some of the most talked about the fintech areas, where data science and machine learning has proven to be most useful.

9. Digitized Insurance Experience

One of the most notable products in Insurtech is Oscar — a health insurance startup, backed by some of the leading investors, such as Google Ventures, Google Capital, Goldman Sachs, with almost $3 billion evaluation. 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.

10. Blockchain and Digital Currency

The blockchain ecosystem represents a competitive environment. The technology itself can be applied to almost any of the above listed fields, including payments and transfers, lending, trading. However, there are some companies that offer blockchain-based infrastructures and APIs as a service. For example, Chain, a blockchain technology startup, has raised over $40 million in investments to provide tools for building and deploying blockchain networks within financial companies. Its technology is currently used by NASDAQ, Visa, Citi, Capital One, and Fiserv to “enable a smarter and more connected financial system by digitizing the world’s assets.”

Final Word

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 10 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.