As we settle into 2016, there is no doubt that we can expect to see FinTech continue on its prosperous path. We saw some FinTech companies valued at $1 billion, earning the title of a unicorn company. Various FinTech influencer lists also emerged, and of course, investment in FinTech soared to new highs.
Within any market where there is an extremely successful period, analysts raise suspicions that it could be a “bubble”. There is a lot of hype around FinTech, and there will be those companies that fail to survive beyond the buzz stage, but likewise, there will be a number of players that have made enough disruption in this space to see ongoing success. It is these companies that banks need to pay attention to. So what trends and announcements can we expect in this space as we enter a New Year? I expect that we will see the evolution of three key areas:
Big data has become the buzz word of recent years, and it is now something that the banks are becoming involved with. In a recent conference led by a bank, I heard how financial institutions are planning to utilise the power of big data.
Banks will look to analyse where consumers spend, when they spend, how they spend, and even more personal details such as the car they drive and where they travel. Essentially, when utilising this data they will attempt to sell customers personalised products. However, it is not about the banks’ own products, but others sold by third parties who the bank will charge a “reasonable” commission.
Whilst some consumers may have concerns over the use of their personal data, what I expect to see, is that banks will nevertheless attempt to use big data as an opportunity to turn into a portal of online shopping. Tech giants, such as Google and Amazon, are already doing this, and under attack from various FinTech companies, banks are keen to get involved with this lucrative option. As we move into 2016, I expect to see banks attempting to get in on the big data opportunities that currently exist.
Banks becoming slaves to tech giants
However, I don’t doubt that we’ll also continue to see tech giants moving in on the banks. As I’ve discussed, tech giants are already utilising the masses of customer data that they have, and tech giants could soon wise up and use their strong customer relationships to their advantage. Taking their deep customer insights into the finance industry, we could see banks become the slaves to the big tech giants, such as Google, Amazon, Facebook and Apple (GAFA).
These tech giants are unlikely to ever become banks, but they are best placed to build user friendly front-end tech solutions that answer to consumer demands for seamless payments and financial services. Their services have already become indispensable for people in everyday life – in 2015, Facebook announced that it had a billion users in a single day. With such a large army of supporters, there’s no reason why these tech companies couldn’t take over the consumer interaction and brand loyalty, with the banks merely providing the back end infrastructure, thus becoming a white label to the big tech giants.
Smart vs. cosmetic banking
I also believe that we will see further collaboration between banks and FinTechs, and the differentiation between “smart banking” and “cosmetic banking” will emerge. Until now, banks have been able to appear as though they are making efforts to embrace FinTech by running accelerator schemes, and other similar programmes. Whilst these schemes are great opportunities for startups looking to break into financial services, this is really just a “cosmetic activity”: it doesn’t really mean that banks are embracing technology.
However, as FinTech continues to grow, and its force is felt, we will see a difference between those banks that offer real value through genuine business collaborations and those that embark on schemes such as accelerators, purely for appearances sake. Collaborating with FinTech companies is a real way to incorporate the advantages that these technology companies provide into their business offerings.
It’s fair to say that we can expect another great year for FinTech. This is the year that FinTech companies, and banks alike, will wise up and get to grips with their data and their operations. As banks see increased pressure from both alternative FinTech companies and tech giants who could look at pushing into this space, banks will need to address their own practices as they realise that amongst the buzz, there are truly successful FinTech companies that are proving an unstoppable force. With this, we can expect a new era for finance. From banks trying to get smart with their data and taking real steps to see how they can truly collaborate with FinTech, to tech giants testing the power of their customer insights and relationships. Those who take the lead in collaboration will enjoy the competitive advantage of truly leveraging technology to improve their service offering.
Philippe Gelis, Co-Founder and Chief Executive Officer at Kantox
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