“I expect more bank branches to be closed and more fintech opportunities to be created. I also expect that more fintech M&A deals will happen especially where banks buy growing companies” says Wael Salem, as he examines how the non-bank world has disrupted FinTech in every area from payment solutions to blockchain technology
Wael Salem is an established thought leader within the Fintech and Investment sector. CTO at TradeSocio, speaker and serial technology entrepreneur, he has a particular interest in innovation, simplifying complex problems and creating equal opportunities within this rapidly evolving environment. The banking sector has seen significant changes in 2017. Today, with a mobile app, users in developing countries, can deposit and withdraw money, check account balance, pay bills and take loans. They don’t have to go to a bank to transact.
In this article, our CTO Wael Salem looks at the landscape of banking and fintech in 2018. In the U.S., companies like Affirm are helping customers buy more by offering simple installment plans. Companies like Lending Club and Prosper are helping people invest and accept capital with a mobile app. Companies like Acorns are helping people invest their pocket change and companies like Stripe have helped people accept payments through the internet. These disruptions in the fintech industry can be found in all parts of the world and in all financial sectors from insurance to asset management and savings. The disruptions have fueled massive investments and M&A in the sector.
A report by KPMG found that, on average, 15 fintech deals were announced per week. This compared to just one deal in the past five years. In the second quarter of the year, about 293 fintech deals valued at $8.4 billion were made. The growth in fintech disruption has been helped by the customer expectations, venture capital funding, ease of entry in the industry, and the pace of technological evolution. Today, customers expect to do anything within the shortest time possible and in the most cost-effective way possible. For example, to transfer money, no one has the time to go to a bank and send money. They can now do it easily using Apple Pay.
Venture capital firms’ interest in fintech has increased with deals worth more $610 million being funded in the first quarter of last year. VCs want to invest in the next Paypal or Square. On ease of entry, a graduate student with a background in software engineering can create a fintech product, attract customers, and get VC funding. It has been done before. For example, Stripe was founded by two young brothers with no background in entrepreneurship. Perhaps, the biggest disruptor of the year was blockchain technology.
While bitcoin and other cryptocurrencies saw their valuation reach more than $500 billion, the underlying blockchain technology has also grown with companies like IBM creating bitcoin solutions. The future of cryptocurrencies is hard to predict. Some, like James Mackintosh of Wall Street Journal believe it is going to zero while others like James Altucher believe that bitcoin could be worth a million dollars. While there are differences in all this, the consensus among policy and currency experts is that blockchain technology is a disruptor that could affect consumer and commercial banking, and central banking.
Another consensus is that banks that ignore the blockchain technology could be left behind. In the coming year, fintech in the banking sector will continue to grow. I expect more bank branches to be closed and more fintech opportunities to be created. I also expect that more fintech M&A deals will happen especially where banks buy growing companies. I also expect emerging technologies like artificial intelligence and machine learning to be used widely in the banking sector.
IBM’s Watson project which has been deployed with some success in the healthcare industry will see some growth in the banking industry. This year, an insurance company in Japan replaced its staff with robots. These technologies will continue to grow in 2018. In terms of profitability, I expect U.S. based banks to improve their profitability with the soon-to-be signed tax reform package, higher interest rates, and improved margins with the embrace of technology. It is exciting to watch banking get disrupted in a positive way.
In the world of fintech, we believe that TradeSocio is a game changer. Fund managers, brokers, investors and traders alike are discovering the benefits of using our platform. TradeSocio not only provides state-of-the-art disruptive technology, it is building one of the fastest-growing investment communities of 2018. We consider that if you are looking to take your finance business above and beyond, by all means contact the team for more information about how Tradesocio’s Alpha Suite can improve your business.