On 8 April 2015, Jamie Dimon, Chairman and CEO of JP Morgan, wrote to shareholders with the following caution: “Silicon Valley is coming”. This warning is often cited by those predicting the “imminent demise” of traditional banks and the rise of “FinTech”. But, fast-forward two years and Rome has not burned. The big banks are still here, and whilst FinTech continues to disrupt and challenge the financial services sector, the companies that have pioneered FinTech do not dominate the sector and the traditional banks seem pre-eminent as ever. The banks and FinTech have come to realise that they need each other. FinTech can improve bank customer participation and experience, whilst Banks can give FinTech the missing component to their businesses - users.
The recent and unprecedented spike in the number of millionaires in the US has spurred the creation of ever-more Family Offices (FOs) as people of wealth are turning to Single Family Offices (SFOs) and Multi-Family Offices (MFOs) to help them manage their wealth. Many of these offices offer a full suite of solutions including investing, budgeting, insurance, charitable giving, tax & legal services, and more.
We are all familiar with taking a wrong turn or missing a turn altogether while driving and have the GPS navigation system holler at us about recalculating the distance and then suggesting an alternative route. Might that have sounded a little fanciful in the 1980s when people were still relying on printed maps to navigate?
Over the past few years, we've come to realize that lending is no longer constrained to the doors and floors of a bank. Now, with the power of digital platforms, we can lend and borrow through online companies at the swipe of a smartphone. This freedom has significantly impacted the lending and banking as industries, most notably the ability of individuals to obtain loan products. And this is great for consumers and financial institutions alike. In this article, we want to explore how peer-to-peer lending increases the adaptability of financial systems around the world.
Over the past decade or so, the workforce in the United States has been going through some major changes. One of the most significant of these changes has been the rise in popularity of freelancing. In 2005, only 10% of the workforce was made up of non-traditional employees like freelancers and independent contractors. In 2016, however, 16% of the workforce is made up of these alternative workers. By 2020, it is predicted that up to 40% of the workforce may be freelancers.
Merchant banks and acquirers have hit a vendor-shaped wall. The lack of choice in payment terminals is crippling banks who are currently at the mercy of the hardware vendors, and are unable to offer a payment device that meets the needs of their modern merchant customers. For years, there has been no route around for banks and acquirers, but now a pioneering concept is set to put the power back into their hands.
The sharing economy continues to grow and disrupt entire industries.
A recent report published by the Brooking Institute concluded that the sharing economy would become a major part of the global economy.
The financial industry is not new to innovations. As the human civilizations became more and more sophisticated, there was a need to create new financial products to serve the ever-evolving requirements of these complex societies. Technology in the financial sector is also not new and is around for a few decades now. Machine readable cheques, automated data processing, automated teller machines and electronic payment systems made banking easier, accelerated innovations and gave rise to various new financial products in the second half of 20th century. But the proliferation of Fintechs in last decade or so has been driven mainly by the advancements in software and internet. Given that financial services are made up of non-tangible goods (unlike automobiles, oil, housing, pharmaceuticals etc.), the financial services industry is most vulnerable to the disruptions in information technologies.
Everyone wants a piece of the $100 trillion pie. I can rattle off a list of 50 payments companies you’ve never heard of and never will. Companies that do millions of dollars in transactions a day. Everyone has a different niche, a different value proposition - more security, less personal data storage, more rewards, less fees – whatever. You want to pay with the palm of your hand? Yeah, there’s an app for that too. And there’s nothing wrong with any of this. Competition fuels technological progress, and the payments space is in desperate need of progress. Progress to eliminate the pain, cost, and time spent dealing with traditional payment processes.
I am very pleased that Mark Carney has robo-advice on his mind. For him to be speaking about a nascent industry, he must believe that firms using technology to help manage people’s money will grow to become a significant part of the market. This is a fantastic promotion of the industry and one I am extremely proud to be a part of as we put the client back into the heart of our service.
However, in his speech he appears concerned about robo-advisors becoming a risk to our well-functioning financial system. The argument is that they may lead to excess volatility or increase pro-cyclicality as a result of herding. I see his attack on robo-advice as misinformed for several reasons.
FinTech is currently one of the fastest growing sectors of technology. It is expected that by the year 2020, investment in FinTech companies will grow to 46 billon USD, while global investment in this sector today amounts to more than 26 billion USD (Statista). Because of their high degree of innovation, solutions originating in East-Central Europe, including Poland, are the subject of considerable interest in the branch and are represented at many international conferences. This year is no exception, and on 7-8 February at Finovate London, we will be able to see some new and interesting FinTech from Poland.
Banking operations are diversifying, fast. Outsourcers control more of many big banks’ core and non-core operations than ever before. The age of mobility has dawned and vastly increased both the number and the kind of devices that are interfacing with banks’ core systems.
InsurTech well and truly made its mark in 2016, stealing some of the thunder (and investment) away from its big brother, fintech, and with tonnes of exciting start-ups and innovations hitting the market.
So, what does the next 12 months have in store for us?