Predictions: “Methods including water divining, astrology, numerology, fortune telling, interpretation of dreams, and many other forms of divination, have been used for millennia to attempt to predict the future. These means of prediction have not been proven by scientific experiments.” (Wikipedia)
I have no experience in any of the above but it seems like the time of year when every man and his dog decides to make a prediction about the future. I thought I might as well have a crack at predicting what I think might happen in the world of FinTech during the next year…
We have seen challenger banks like Monzo and Starling roll out current accounts, FX payments companies like Revolut tackling foreign currency transfers and ‘robo-advisers’ like Nutmeg manage digital investments.
These FinTech offerings have matured to the point where we have a range of choice within each sub-sector; there are multiple companies that will give you an app for whatever you want to do with your money. But consumers are starting to want ease of use more than shiny and new.
2018 will be the year of aggregation and convergence. The Monzo and Starling strategies are different but seem to be heading for a similar end goal: marketplace banking. People love choice and it’s great to have different service providers giving you the best deals on all your financial products. But do I really want one app each for my mortgage, my current account and my international currency conversions?
One company leading with this trend is Curve – the card that could replace all your other cards. You can choose which card it becomes, and even “time-travel” backwards to change the card you used for a transaction, in case you used one that has no money on it!
This is just one example of what I think will be a bigger convergence of FinTech apps in 2018 – because we all like ease of use as well as greater choice. (If you’re reading this Curve, it’s my life goal for 2018 to get your card to simplify my ridiculous wallet, so please send me one!)
2) Crypto for the masses
Bitcoin prices went crazy in Q4 of 2017, everyone wants a piece. Hovering close to $20,000 for one bitcoin, the price of this cryptocurrency drove Coinbase to be the no.1 downloaded app in the US App Store at a certain point in December.
Demand is there, but is where’s the supply?
It seems most people are seeing the meteoric price rises and want to HODL (hold on for dear life). But more and more very early buyers are cashing out in small amounts – they have made ridiculous sums already. There are also miners making money who will be selling bitcoins.
The problem with the state of crypto now is that it is difficult to understand and difficult to enter into the space as an average person. You can trade certain better-known cryptocurrencies on platforms like eToro, and Coinbase is the top app for buying and selling. But it has high fees and gives you no control over your own private keys.
2018 will be the year when more consumer-friendly applications emerge to enable people like you and me to actually use cryptocurrencies.
That’s very exciting in itself, but remember to research and understand what you’re buying if you’re planning on putting money into these things. If it all goes tits up, there’s no helpline or customer service desk – your money will be lost.
3) PSD2 (EU) & Open Banking (UK) implementation
In January 2018 the EU’s second Payment Services Directive will come into effect. I wrote about PSD2 and Open Banking (the UK’s implementation of open data access in banking) in this post a few weeks ago.
PSD2 will let you authorise any registered and approved company to access your bank account and either give you information based on your data, or make payments on your behalf.
It’s likely large technology companies like Facebook, Google and Amazon will jump in here, harnessing the huge volumes of non-financial data they already have for customers to offer them an even more personalised service.
Smaller FinTechs also have an opportunity to provide new services to customers. But no one really understands what’s going on with PSD2 or Open Banking. Unless you work in finance you might not even have heard of it.
So unless banks and regulators start educating people on how things will change, we won’t start seeing the effects of PSD2 because there won’t be the demand for the new things that could be offered.
4) Slow down of first-time adopters
Monzo has been going over 2 years and has amassed more than 470,000 customers in the UK during that time. Revolut has over a million customers across Europe. Many of these people are young, tech-savvy and interested in FinTech, some may even work in the sector. I predict that there will be a point in 2018 when this huge customer growth slows down.
Because after the millennial FinTech lovers, who will bother switching to a digital bank?
The Current Account Switch service has been around since 2013 in the UK and the website says over 3 million accounts have been switched since then. But most people find it painful and complicated to think about dealing with their finances. FinTech offerings are supposedly there to remedy that, but I’m not sure everyone’s got the memo… Yet.
I am a FinTech fan (obviously) and even I wouldn’t have made it into the ‘Super-user’ category in EY’s FinTech Adoption Index 2017 (using 5 or more FinTech services). So there will be a slower growth curve I suspect in new customers rushing to FinTechs next year.
This is why I find Starling so interesting… Because according to Julian Sawyer’s (the COO) talk at FinTech Connect Live a couple of weeks ago, they want to target people who currently bank with one of the larger incumbent banks and who would like to switch to a digital offering.
Not the young techies who want the cool new FinTech app and the bright coral card this year, moving onto the future cool new thing next year. That’s the real challenge for FinTechs – after the first wave of adoption – can you attract everyone else?
5) Commercial use and adoption of blockchain technology (past POCs)
2018 will be the test of blockchain technology in enterprise across different industries – not only financial services. Both public, permissionless and private, permissioned networks will be implemented by large corporate organisations beyond the Proof of Concept phase we have seen to date.
This may be accompanied by high-profile ‘failures’ – for example hacks or operational issues, but I think 2018 will be the year that people see the potential of blockchain technology in a more concrete way.
On a smaller scale, startups will continue to raise funding and ICOs probably won’t go anywhere. Some people have predicted a decrease in ICO popularity in future, which could happen as regulators globally start making more pronouncements and weighing in.
But equally the regulation and adoption of best practices and standardisation of ICOs might make it an attractive way to raise funds for companies that were previously nervous of this emergent area.
Therefore 2018 might not be the year of ICO decrease, but of a higher quality of ICO in the market. You could argue this necessarily means fewer ICOs, if you think the large majority are scams, but I’ll leave that up to you!
No one knows how to predict the future (Brexit, Trump and Bitcoin are all good examples), despite the ‘millennia’ that we have apparently been practising for. At some point during 2018 we can come back to this post and see whether I was at least partly on track or just completely nuts!