The FinTech industry is seeing a rapid evolution in its services and approaches to the average consumer. Banks feel like they are under siege from startups because the technology available today makes it easier than ever to take a digital-only approach.
Banks can feel the same way when a national-level startup can provide consumer-level products and services for a lower cost.
Several trends will shape the FinTech industry over the next five years, and these are the crucial areas where changes will take place.
1. More Services for Millennials
Depending on where the cutoff line is for Millennials, the first of the generation will start during 40 in 2020 or 2021. That means the youngest members are going to be hitting 25. When you factor in student loans and a higher cost of living, these families are less likely to purchase a home. They also prefer to be entrepreneurs. That means FinTech startups are innovating new ways to manage these issues so that younger workers can catch up to the older ones.
2. Unbundled Paychecks
Banks and credit unions used to receive the entire direct deposit of a consumer’s paycheck into their account. That action isn’t always true today because startups are changing the way that workers can manage their pay. Companies like PayActiv and Earnin offer people an affordable advance on what they expect to earn. Some even offer financial planning advice with their services. The next step for the FinTech industry would be to provide direct accounts with debit card access so that banks get bypassed entirely.
3. Innovation from Traditional Sources
The first all-purpose credit card came from Bank of America in the late 1950s. Barclays was the first to offer ATM access to their customers in the 1960s. Innovation used to come from the largest providers in the banking industry, but an increase in regulatory compliance needs has led to repurposed budgets. The recession in 2007-2009 did not help matters much either. According to Deltec Bank, “Over the next five years, more banks will partner with FinTech startups to create new ways to do business.” Bank of America is already taking the lead, holding more blockchain-related patents than anyone else.
4. Artificial Intelligence
Google already offers artificial intelligence as a service. Amazon and other businesses allow developers without a background in data science to incorporate this tool into their products. The earliest reasons to use this technology involved fraud detection and identity protection. Now it offers faster customer service experiences, tailored product recommendations, and much more. This trend will lead to changes in how small business lending works for the industry.
Significant investments are flowing into the FinTech sector to make these trends happen. VC-backed companies produced $39.6 billion in funds in 2018 alone. These investments are allowing financial disrupters to offer real estate advice, savings accounts, and loans to customers. Some are even applying for bank charters. That means the next five years are going to be an exciting time for this industry.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management