10 trends in the world of fintech
Before starting a fintech startup (however, like any other project), you need to understand what difficulties you will face. Don”t underestimate the rate at which your product is perceived by customers. It often happens that the end user is forgotten when developing the “perfect” product, which inevitably leads to problems after the product is released. As a result, quite often startups have to spend additional resources and time to convey to people the fact that the product they have created is designed to make the life of customers easier, that they really need it. And so do not forget that the product being developed must be ideal for the end user, and not only for the creators themselves, whose judgments about its usefulness may be wrong. It is very important to carry out market research in advance in order not to get screwed up, despite the fact that this stage can be very time and resource consuming.With limited resources and limited access to customer bases, startups often focus on solving local problems and do not think about entering the global market, which can later turn into serious problems. Therefore, startup founders need to think through strategies in advance to further scale their business.
As a rule, young companies rely on the funds of the founders, but few people in the early stages of a startup turn to the help of business angels or investors. Most startups lack expert support in their chosen industry to add professionalism and help them cope with a variety of factors.
If you want to develop your startup into a successful company, then modern technology alone is not enough – you simply cannot do without a good marketing strategy. Don”t get hung up on your product only – remember to grow your own business. To sell your product, you need to acquaint potential buyers with it, and this is a marketing task.
Knowledge of the legal framework will give founders of young companies a number of benefits. In addition, one should not forget that in the field of fintech, banks should often be viewed as potential partners or customers rather than competitors. Beyond this, startup founders will face many other challenges that may differ depending on the niche and market they choose.
Fintech Trends: Top 10
Now let”s take a look at the main trends in the fintech world:
Trend 1: Moving from innovative business models to technological innovation
In recent years, the financial services market has undergone significant changes thanks to the emergence of a multitude of fintech startups, the number of which continues to grow rapidly. Ironically, the innovation in the industry was not brought by financial experts, but by technology experts and people who are committed to leveraging modern technology to benefit the best customer experience.
Trend 2: Identity Authentication and Security Comes First
Technological innovations make transactions easier and easier, but security issues are becoming increasingly clear. A huge number of applications allow users to make transactions with one or two clicks. However, it is this simplicity that makes transactions more insecure, and the issues of user authentication and protection against fraud become much more complex. While banks are joining forces to create a powerful network in response to the rapid development of fintech, anti-fraud and identity authentication companies are also working together to deliver the best possible user experience.
Trend 3: Banks – If You Can”t Fight, Then Lead
Banks have found a new strategy to combat the temporary threat of dominance by newly minted fintech companies – the giants of the banking industry began to join forces in order to become a new source of innovation together. They adopted the desire to provide the best value for the end customer from the financial and technological startups, and the largest market players also became obsessed with fintech innovations that were previously alien to them. Many of them set up incubators to develop startups in the industry. The strength of banks allows them to make significant investments in the development of innovation. In addition, banks have a number of advantages, among which access to a huge client base is critical – something that young fintech companies do not have.
Trend 4: Multi-channel experiences are important
The mobile revolution is an important factor to keep in mind, and in order to be successful, companies need to consider that their product must be available across multiple devices. The rise in popularity of smartphones has changed the way consumers shop, and these shifts in customer behavior have significantly influenced the policies of service and product companies. Thus, the retail industry is undergoing a significant shift: the number of shoppers in traditional stores is decreasing, online research is gaining momentum, and smartphones are becoming an integral part of shopping.
Trend 5: the fintech revolution is global
In 2015, total investments in fintech companies amounted to about $ 50 billion. Below is a map presented at FinTech Week London 2015, which shows the size of investments in fintech companies by region. Hence, we can conclude that the largest funds in the development of the industry are invested in the USA, Europe and Asia. However, interesting and obvious is the fact that new centers of innovation are emerging: Africa and Australia.
There are several reasons why industry innovation is helping companies operate in the global marketplace. One of them is that innovation comes from experts who understand modern technology. Increased technological competition is driving business growth across borders. Technological advances allow companies to operate in the global market, despite the fact that they may physically be located in only one country, which fosters competition for local companies that have not reached this stage of technology development.
Another reason is the fact that technical innovations, by their very nature, are quickly introduced and allow fintech companies to make significant advances and reach a new level in a relatively short period of time. Among other things, financial and technological startups, not having such a huge client base as the same banks, are forced to participate in international conferences, various events and exhibitions.
Trend 6: new industry players are emerging
Technology companies that were not previously involved in finance took notice of the growing popularity of the fintech sector, and without undue delay began to push their own initiatives in the industry. IT giants such as Microsoft, Intel and Google are showing a keen interest in the fintech sector, backing it up with significant investments.
Trend 7: New partnerships are emerging
Earlier, we talked about the growing interest in fintech startups from IT giants and banks. This interest has led to new flows of investment and the emergence of incubators. However, other market players go hand in hand with the fintech industry, whose field of activity, at first glance, is not related to finance, while they can become competitors of financial and technological companies. These are social media companies like Facebook and WeChat that have realized the tremendous opportunities financial transactions within their social networks can bring.
Trend 8: Fintech Evolves
Despite the onset of fintech, banks have resisted new competition – the development of the financial and technological industry had little effect on them. This is how the first phase of the industry’s development can be characterized. And yet, there are many prerequisites for significant changes in the sector, thanks to which fintech evolves, expanding its boundaries and going beyond payments and loans. The so-called second version of fintech (Fintech 2.0, as it was named in the article FinTech 2.0 Paper: Rebooting Financial Services) will be cloud-based and partly the result of a move to open data.
While some fintech companies today focus on the race for unicorn status, Fintech 2.0 offers much greater opportunities for dramatic global changes in infrastructure and the functioning of the entire financial sector of the economy. To realize the power of Fintech 2.0, banks and fintech companies must work together to complement each other.
Trend 9: Payments and lending are the most attractive areas of fintech
There is a wide variety among the types of players in the fintech industry. However, some of its areas seem to be more attractive to investors and attract more attention than others. In the chart below, taken from an article by the LTP portal, we see how investments were distributed by sector of the fintech industry in 2013 and 2014. It follows from the diagram that the lion’s share of investments fell precisely in the payment sectors (14%) and lending (19%).
Trend 10: Fintech unicorns are on the rise
The number of unicorns in the industry has increased significantly over the past two years. Companies such as Stripe, POWA Technologies, Avant, Prosper and One97 have joined the ranks of startups worth over a billion dollars. Despite the fact that competition intensifies with the emergence of new players, this is rather a good sign for new and not yet emerging financial and technological companies, as it indicates that investors are ready to invest huge amounts of money in fintech enterprises, which serves as a catalyst for the growth of valuation startups.