FinTech is a rapidly evolving space. As a tech industry segment, the financial sector is unlike many others. Regulations are developing at a constant rate and the face of personal and professional finance is changing as we know it.
According to Citigroup, approximately $19 billion was invested into the fintech sector from 2015-16, compared to a bare investment of $1.8 billion in 2011. In light of the industry excitement, we have put together 3 recent trends in FinTech to keep you ahead of the curve.
Remittance, previously overlooked by economist and FinTech entrepreneurs alike, are beginning to become key focus points for startups. What is a remittance? In Economist Dilip Rath’s own words, “When migrants send home part of their earnings in the form of either cash or goods to support their families, these transfers are known as workers’ or migrant remittances.”
According to Fast Company remittance totaled $429 billion in 2015, a total three times that of government foreign aid worldwide. Remittances also represent the largest source of foreign income for some developing countries.
In the current economic climate, sending money overseas is expensive. But transaction fees are slowly dropping –2.5% over the last ten years, from current estimates, to an average of 7.45% globally. Here is where FinTech enters the picture.
Startups such as Circle, Abra, Transferwise, WorldRemit, and others are beginning to address this market, as the current tech infrastructure can greatly reduce the cost of money transfer thanks to advances in blockchain, wide breadth of internet access, and mobile phones.
FinTech’s Banking Relationship
Since the inception of FinTech in the 1950’s with credit cards, there has been a strong relationship between Banks. According to Forbes, “What is striking about the last 65 years of development in [financial] technologies is that while they became mainstream and widely used by banks and their customers, the banking sector was not threatened.” However, the recent accelerated growth of technology has shifted the relationship between FinTech and banking.
According to Forbes, in 2015 many new payment financial technologies, including, “mobile wallets, payment apps, robo-advisors for wealth and retirement planning, equity crowdfunding platforms for access to private and alternative investment opportunities and online lending platforms” did not enhance banking series, but in fact replaced them.
This competitive theme has subsided somewhat in the last few years, though—demonstrating that trends come full circle. Recently, Mark Buitenhek, head of transaction service at Dutch bank ING, said “many FinTechs simply want to sell their idea to a bank and many participate in bank-sponsored incubator or accelerator scheme such as Barclays Rise program. Only a minority of FinTechs possess the scale, customer base and financial expertise needed to compete directly with banks.”
Regardless of the outcome, FinTech and banking will continue to be interrelated, integrated and competitive. Just one of the many reasons FinTech is so exciting.
A newly published GAO Study breaks down the visible trends in the FinTech industry, including: Marketing lending, mobile payments, digital wealth platforms, and distrusted ledger technology. Additionally, the Report details which regulators address according industry segments and how those segments are regulated.
According to the National Law Journal, “The GAO last released a report on fintech in 2011, but legislators last year asked for updated guidance, since the industry was largely made up of peer-to-peer lending in 2011 and has since expanded greatly.” And according to the report, the expansions focus essentially on data security, a well-known hot button issue around all tech industries. Read the report here.
With the exciting Fintech environment keeping interest high, ARTEMIA can keep you up-to-date on the latest industry trends as well as communications tools. And for more information on recent FinTech Trends, check out our podcast featuring financial expert Ismail Rahman, Audit Director of the Federal Reserve Bank of San Francisco about his thoughts on the RSA 2017 conference.
Should you have any questions, or would like to know how ARTEMIA can help propel your startup to the next level. Please reach out.