MOVING MONEY MOMENTUM : FINTECH PREDICTIONS 2017
The death of credit and debit cards
According to WI Research study, contactless cards are expected to double in 2017. This translated to changed shopping habits, the shopper is now more concerned about having his or her phone nearby, than his physical wallet. Mobile wallet companies will be the way ahead for online transactions, spurred by the countless incentives that wallet companies are providing consumers to pay this way. This provides a cheap and easy alternative to credits cards with their overriding interest rates, and debit cards, with their exorbitant overdraft fees.
While the banks own inaction may be the nail in the coffin, the Second Payment Service Directive (PSD2) is the catalyst. As well as additional security requirements, such as two-factor authentication, the fundamental element of this legislation is that it forces banks to open their data to third party providers. The data that previously was held only by the banks themselves and enabled the current financial services monopoly to continue.
In technical terms, this means that banks are being forced to invest money into building a standardized platform of data to enable customers to see clearly where they can get financial services that best suit their needs. For the banks, this opens up the market to competitors, where smaller but more appropriate providers can potentially pull the rug from under their feet.
Investments in AI will triple as firms work to convert customer data into personalised experiences
Investment in AI is the continuation (hopefully acceleration) of previous investments in Big Data and Advanced Analytics that clearly have not delivered on expected results. As WI points out, “Only 16 per cent of Asia-Pacific companies are very satisfied with their analytical capabilities.” So why would they get a better return on their AI investment now? I’m not too sure.
We are already in the Machine Learning era of Banking. Banks are investing in Machine Learning to make Banking more personal, but they should not forget that there is no magical solution. To make ML work, data needs to be polished and rigorously refined before it can effectively be used to power excellent individual experiences based on behaviour and interests. Advanced ML solutions will help to generate results faster and with greater depth but it’s still up to humans to ask the right questions. So organisations will continue building stronger ML expertise and teams.
Blockchain technology will become mainstream
Blockchain, which offers a safer and cheaper solution to money transfers, is set to gain more traction this year. Blockchain was the breakthrough technology of 2016 and led to the rise of cryptocurrencies like Bitcoin and a raft of new FinTech start-ups and platforms. The technology consists of blocks that hold timestamped batches of recent valid transactions, which form a chain, with each block reinforcing those preceding it. In 2017, blockchain is likely to expand beyond FinTech and cryptocurrencies and into the realms of property transactions, FX trading and music streaming services.
Less disruption and more enhancement. When fintech first emerged, the threat was that some of these companies, like those in alternative lending, would kill the big banks. As startups matured and banks moved from denial to attempting to build their own nimbler, friendlier products, it appears that both sides have started to realize that they are better together, whether formally or informally.
Last year, ETrade purchased OptionsHouse for $725 million and Ally Financial bought online brokerage TradeKing Group for $275 million. Some deals have worked better than others, but a 2016 survey by WI shows that we can probably expect more of them in the coming year as nearly a quarter of global banks surveyed said they would view fintech companies as possible technology acquisitions.
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