There is no secret that fintech is at the forefront of investment trends for the coming year. Financially focused technology has sprouted because it can reach audiences that traditional banks have not. However, there are multiple spaces under the fintech “roof”.
Of the many different categories in financial technology, there are three that I believe have the most potential to succeed – payments, institutional financial services, and equity financing.
The digital world has continued to provide convenience for consumers, and the growth of the payment industry hopes to add to that mission. Over the past year, mobile apps have filled this space, but experts plan to see development continue to create faster and more improved payment services. Expect to see a rise in products or services that transmit funds in more efficient and favorable ways.
An increasing amount of banks have explored options to allow users to transfer funds between one another in an easier way. Services like Paypal and Venmo are capitalizing in those areas, thus raising competition. Also, social networks are getting involved in transactions. Currently, Facebook, LinkedIn, and Snapchat have all made significant steps towards building out those features.
The security of payments will also be a populated area in the coming year. Security is a critical focus because of the increase in fintech options for users. The biggest hurdle for attracting new audiences to new financial methods is assuring that the security of their funds and personal information is in good hands.
Institutional Financial Services
Just as consumer facing fintech services are on the radar; business or institutional financial services are highly anticipated as well. New financial management services must present an easily comprehensible interface while reporting on high-level data like performance measurement and quantitative reporting. There’s the same need for institutions as well. Larger entities already have systems in place, but they’re are looking to leverage new technology to better services and attract more customers.
Institutional financial services that easily integrate with systems already in place is the ideal partnership or acquisition for big banks and firms alike.
An example of this currently in motion is the trend of tech replacing administrative personnel in the finance industry. The demand and investment behind institutional financial services are set to increase in 2016 as more institutions find value in this developing market.
Crowdfunded investment is certainly a more recent option for startup investing, but it’s widely explored by many successful teams looking for initial backing.
For years, investing in early stage companies has been reserved for accredited investors only. Only investors with a particular pedigree could make an investment in a young company by adhering to the guidelines under the Regulation D. Dodd-Frank legislation.
Now, those traditional routes aren’t the only option now for eager entrepreneurs. Regulation CF has opened doors for community investment that has resulted in platforms that allow for consumer and investor support, i.e. Kickstarter or SeedInvest. The number of “funding portals” is expected to increase over the next year and solidify its need among the fintech industry.
As fintech continues to fill the gap for the younger demographic and the unbanked, these three areas are likely to push the envelope in the near future.