Whether fintech plays a part in how you pay for your morning cup of Joe or how you accept payments for your business, it has become one of the hottest sectors in technology. As we near the middle of Q2, 2017 already looks like it will be an even bigger year in fintech — especially for the following verticals.
In 2016, funding for insurance tech companies topped $1 billion in the first half of the year alone. Expect this trend to continue as more companies begin offering a simplified and straightforward way to obtain coverage via apps. For example, Metromile offers affordable pay-as-you-drive automobile insurance and Oscar uses data to improve the health insurance experience.
With the emergence of the Internet of Things (IoT) we can expect companies to start providing “preventive insurance.” For instance, if your home’s furnace is running too hot, your insurance company could dispatch a technician to repair it before it explodes.
Blockchain technology is often associated with Bitcoin, but because the benefits of the distributed public ledger go beyond just payments, financial institutions the world over have made their enthusiasm for this tech known—meaning it’s in a position to have an explosive 2017. In the coming year, blockchain technology will be used to reduce plagiarism in online content, speed up bank transfers securely, reduce security breaches, help customers manage their online identities, create and sign smart contracts, and assist the IoT to operate more efficiently and effectively.
Financial inclusion and mobile payments
A report from PwC offshoot DeNovo notes, “Fintech is becoming an enabler of economic inclusion. In addressing previously excluded consumer demographics, the industry is in a position to drive innovation and economic and social change. The report cites a World Bank Group (WBG) statistic estimating that 2 billion adults, or 42 percent of the global adult population, are absent from the formal financial system. As DeNovo explains, “Therefore, even modest strides in achieving economic inclusion present the single largest addressable opportunity in fintech.”
In other words, people from all over the world will be able to transfer funds securely to anyone in the world, participate in the global marketplace, accept payments without a bulky credit card terminal, receive real-time alerts, and check their bank accounts without ever having to step inside a branch—all thanks to mobile payment technology.
Process automation, AI, and robo-advisory
Artificial intelligence startups received $1.7 billion from VCs in the first half of 2016. This trend is anticipated to continue throughout 2017. This technology is used by apps like Robinhood and Penny which use real-time data to automatically offer personalized services so that people can make more informed and smarter financial decisions.
Additionally, robo-advisory from companies like SigFig makes it affordable, transparent, and easy to manage all of your investments automatically.
Big data and machine learning
"Big data" was a buzzword in 2016, but thanks to advances in machine learning, it’s going to be easier than ever to understand the behavior of consumers. For instance, this tech can be used to analyze real-time information as a prediction mechanism in the finance sector, something Dataminr uses with Twitter and other public information streams.
Online + digital lending
Furthermore, machine learning will be used to improve security. Michael Kent, founder and CEO of Azimo writes, “With plenty at stake, compliance is one of the biggest growth markets within financial services. With so much data needing to be monitored and crunched, machine-learning technology is being increasingly applied to seek out and analyze risks to help keep us safer in the increasingly digitalized world.”
Online lenders—such as Sofi, Avant, Prosper, Lending Club and OnDeck—are able to provide services that traditional financial institutions often cannot. To include more types of borrowers and create additional lending opportunities, these lenders now have access to supplemental customer data and free cash flow (FCF) models that help them get a better understanding of each borrower’s ability to repay. Leveraging this data, these companies connect loan providers with prospective borrowers directly. This has made it possible for individuals and business owners to secure specialized loans in a simple, convenient, and fast way.
Expect businesses that offer auto, small business, health care and student loans to disrupt the entire lending industry. This industry is so promising that it could actually top $1 trillion by 2025.
Thanks to start-ups like Rootstock,an online marketplace that invests in leased single-family rental homes, and Point, which gives homeowners the chance to give up a share of ownership for a smaller monthly mortgage payment, there are easy and convenient ways to either enter the real estate market or refinance your home on your terms.
This year has already shown signs of incredible potential for breakthrough technologies to disrupt traditional industries such as lending, real estate, and insurance—all of which have been forced to adapt post-crisis.The fintech industry will continue to grow and scale into new verticals to address these and other long-standing problems, and in return, there will be more opportunities for consumers and businesses alike to achieve their financial, life, and business goals.
Guest columnist John Rampton is an entrepreneur, investor, online marketing guru, and startup enthusiast. He is the founder of the payments company Due.