When I started LendIt with my fellow co-founders back in 2013 I was most excited about how online lending could disrupt the banking system. I felt that we were at the beginning of a paradigm shift in banking and that the online lenders would soon rule the world. While it hasn’t turned out exactly like that I am actually more excited today about where finance is heading than ever before.
Today, there are many things that excite me about fintech, here are five themes that I find particularly exciting.
1. Advances in Data Analytics
I have said before that data science is becoming the most important skill in fintech. There is more data generated today than at any time in human history and we need new ways of analyzing this data. Advances in artificial intelligence and machine learning have meant we can now make sense of this vast amount of data.
There are so many benefits to finance of these advances but the most important one I think is what it means to the underserved consumers around the globe. Advanced data analytics combined with the increased use of mobile phones in the developing world means for the first time everyone has the potential to be connected to the financial system. This is going to have huge ramifications globally over the next decade.
2. Blockchain and Distributed Ledger Technology
Blockchain, or more broadly distributed ledger technology, may do more to disrupt finance than any other technology that has come before. It is the hottest area of fintech today with proofs of concept being created for pretty much every area of finance imaginable. We have seen blockchain startups emerge focusing on supply chain finance, digital asset-backed lending, securitization, credit information and digital identity just to name a few.
Of course, cryptocurrency is a big reason why blockchain is now being talked about as a potential mainstream technology. The other day I heard a former securities regulator (not from the USA) say that it is inevitable there will be a central bank issuing their own digital currency “very soon” and the cost of moving money around the world will eventually be zero. This will all be made possible because of distributed ledger technology.
3. Digital Banking
I have had a banking relationship with a large bank for over 25 years now. They know so much about my financial life – all my income and expenses have flowed through this account. But what do they do with this wealth of information that could really be of benefit to me? Nothing. This is about to change.
Digital banking startups around the world are reimagining the banking experience from scratch. While trust will always be a big factor in banking the newer generation will be demanding more from their bank. They don’t just want a transactional relationship they want helpful and actionable information. New digital banking startups realize this and so the banking experience of the future will be more personal and information-based than we have seen in the past. The big banks will catch up as the startups pave the way.
4. The Impact of Big Tech
One of the first articles I ever wrote on Lend Academy back in 2010 was about Facebook and the prospect of it entering financial services. Now, Facebook has made some moves into fintech, mainly focused on peer to peer payments, but Amazon is the company making serious inroads.
I am excited about this prospect mainly because companies like Amazon are fanatically focused on user experience and have the scale to compete with anyone. They could become a force in finance almost overnight if they chose to do so. I still think they will not dive in head first to compete directly with Chase or Bank of America but they will continue to create more financial offerings and that will be good for consumers.
5. Fintech in China
I have been to China eight times in the past four years and each time I go I am blown away by how far along they are in fintech. Now, putting the current political environment aside, I believe China is going to be the global leader in fintech for some time and we should all be paying attention.
Companies like Ant Financial and Tencent are fintech leaders because they have massive scale and are making finance simple: whether it is saving money, taking out a loan, investing or making a payment. These activities are all mobile-centric in China today as China leads the world in mobile adoption of finance. I will be watching closely as these large Chinese companies continue to innovate.
Now, there are many more things I am excited but these are my top five. What about you? What are some of the trends today that you find most exciting? Please share in the comments below.