2018 FinTech Outlook

2017 was a record-breaking year for FinTech (Financial Technology) in London and 2018 promises to deliver plenty more of the same. Globally, $16.6 billion USD was invested in FinTech in 2017, a new annual record. That cash went to the more than 5,000 FinTech businesses operating today throughout the world. Among them are 25 organisations valued at over $1 billion USD. This year alone there were eight newcomers to this club of so-called ‘unicorns’, with their businesses stretching across a number of areas including consumer finance, lending and cryptocurrency.

FinTech has grown rapidly in recent years, driven by technological advancement, changing customer expectations, availability of funding and increasing support from governments and regulators.

FinTechs enhance the role of financial services firms, including:

• Improving financial inclusion
• Enhancing customer experience
• Increasing transparency
• Improving security and compliance
• Providing support and guidance

Three FinTech companies that Citrus Tree Consultants work with meet the above criteria:

HedgeBookPro (www.hedgebookpro.com) is a SaaS treasury management system that records, reports and values FX forwards, options and interest rate swaps. Hedgebook replaces spreadsheets and allows clients to see risk and understand when and if it is appropriate to hedge. The software includes reporting modules that help plan and forecast, seeing what influence potential fluctuations will have on hedging and exposure.

InsuredHQ (www.insuredhq.com) is an innovative software solution for the insurance industry.InsuredHQ provides insurers, brokers and agents with a SaaS solution to manage sales and policy management needs and expectations. It is useful in developed countries as well as being perfect for microinsurance in emerging countries.

Resident (www.resident.tax) delivers a user-friendly innovation to establish tax residency for tax advisory firms, family office private clients and frequent corporate travellers. Resident combines historical location and tax data to provide the users with real-time residency information. Employers and tax advisors can use it to link compliance obligations and taxation rules across various jurisdictions.

The rise of FinTech in recent years is a product of the advancement of new technologies. There are five tech categories which have been most influential:

• Cyber security
• Internet of things (IoT)
• Big data and artificial intelligence (AI)
• Blockchain
• Regulatory technology (RegTech)

Investment in each of these sectors is again set to grow in 2018 and market consolidation is likely, as key players jostle to become the all-in-one FinTech solutions provider. Global players such as Cisco, Stageforce and Microsoft, will all be looking at buying into these categories so that they can provide attractive solutions for their large corporate clients.

Blockchain is a digital ledger in which transactions made in bitcoin and other cryptocurrencies are recorded chronologically and publicly. Blockchain has come to be widely regarded as the future of banking.

“While cryptocurrency is still an unregulated ‘wild west’ I expect 2018 will result in more people buying and holding such cryptocurrencies, with many new opportunities and risks on the horizon for the average investor.” – Graham Dockrill

One cryptocurrency to watch is IOTA. IOTA is a cryptocurrency designed specifically for the Internet of Things (IoT), enabling secure sale and sharing of data streams. In December 2017, Bosch announced it has purchased a significant number of IOTA tokens to support the creation of new business models for the Internet of Things.

FinTech is about more than just the raw and emerging technologies. It has the ability to disrupt conventional banking systems by how these technologies are applied as part of new business models. Across the five categories listed above, each penetrates verticals such as lending, wealth management and commerce. FinTech startups are seeking to make efficiency gains and expand markets across these verticals by pushing innovation in things like credit scoring and payment processing.

Outside of London, which is still recognised as the FinTech capital of the world, I predict the coming year will see more FinTech solutions appear in Asia, especially China. The economy and population are moving away from consumption and becoming more interested in investment. Companies which can tap into this demand are now emerging, often with the help of artificial intelligence.

In conclusion, while I’m incredibly optimistic about FinTech in the coming year, it doesn’t come without its caveats. Investments in the sector still carry risk. 2018 will be notable for increased regulation, especially in the wake of blockchain-related initial coin offerings in 2017, some of which were good opportunities while others were dubious at best. Security is critical in this emerging sector, with appropriate security measures and regulation in place to ensure all stakeholders and the sector as a whole can grow safely and sustainably. “Don’t get somewhere as fast as possible. Get somewhere as good as possible.”

Graham Dockrill is an internationally recognised thought leader and keynote speaker. His passion for entrepreneurship and startups, coupled with his considerable skills and experience, sees him adding value to FinTech businesses in the UK, USA and Australasia. Graham is the Entrepreneur in Residence at the University of Canterbury’s Centre for Entrepreneurship Summer School.