Panel
Disruptive FinTech: A Look at Markets in Five Years
- The industry anticipates continued transformation driven by the intersection of finance and technology, with an inflection point emerging to build inclusive systems for mass markets in emerging economies over the next five years.
- Predictions indicate that mobile payments and carriers will see broad adoption within two to three years, though carriers are expected to cease being the primary source of innovation after five years, with power shifting to software platforms offering frequent login and transaction capabilities.
- Market leaders in payment infrastructure are expected to be major technology companies such as Amazon, Google, Apple, PayPal, Samsung, or Microsoft, rather than traditional financial providers, due to their ability to lower costs and own the customer relationship.
- Future competitive advantages are forecast to come from automated, high-scale digital intermediation using big data and social graphs to infer creditworthiness for thin-file clients, potentially replacing traditional credit review processes and physical identity verification.
- Investment expectations include a 20% survival rate for over 750 investments made in the last four years, with alternative asset accessibility increasing through mechanisms similar to angel investing, which currently boasts median returns of 18% to 54%.
- Strategic plans for funds include acquiring or investing in 10 to 20 Bitcoin-related companies annually, while remaining skeptical of Bitcoin 1.0 as the defining standard, and focusing on orthogonal investments away from perceived "hot deals."
- Regulatory environments are expected to constrain traditional institutions, forcing them to outsource innovation to startups or acquire them, such as the $100 million purchase of Simple by BBVA, while large institutions may benefit from absorbing compliance costs.
- Specific risks identified include the enduring nature of security problems, the potential for margin compression on low-cost digital services, and the failure of companies perceived as "hot deals," alongside a predicted fall in the retail real estate and car industries.
- Infrastructure development in emerging markets aims to connect the next two billion mobile wallets to major e-commerce stores, with agent networks already surpassing bank branches in about 50 markets and mobile wallets exceeding bank accounts in a dozen.
- The evolution of digital identity is predicted to move toward virtual extensions or biometric identifiers rather than physical cards, facilitating transactions where traditional banking is absent and leveraging trust built within social platforms.
- Long-term disruptions are expected to be led by startups over the next five to ten years, with a gradual shift of power from financial services providers to carriers in the short term and to software platforms in the long term.
- Credit evaluation models will increasingly utilize social scoring and trackable online data for both individual and small business assessments, with commercial banking processes anticipated to become significantly more efficient through vast data availability.
- Emerging market strategies must focus on building trust and brands to overcome deep consumer mistrust of banks, particularly among mass-market consumers who require novel uses for blockchain and community-created currency solutions.
- The industry anticipates a migration of financial innovations between consumer and commercial sides, with a focus on serving the "thin-file client" and disrupting giants through low-cost, high-efficiency platforms that challenge traditional margin structures.