Recent analysis by McKinsey & Company indicated 80% of traditional financial institutions have already developed new emerging tech initiatives in 2019 (think voice, VR, AR, AI and DLT). What’s equally awesome is the fact that new fintech investments are set to skyrocket in 2020 to exceed an astonishing $30 billion. This is a phenomenal increase when you think that investment in new fintech products was a meagre $1.8 billion in 2011 – what we’re currently witnessing is the unstoppable rise of fintech. In the next 12 months, new fintech related investments and innovations will continue to prosper and proliferate both the consumer and enterprise landscape and new fintech prototypes and proof of concepts (POC’s) will evolve into full scale, consumer facing apps and digital products. The key trends will focus around use of AI, data-driven development, wealthtech, the fundamental importance of execution and the need to go beyond simply having a great UX. It’s that time of year again and for fintech companies seeking a decisive competitive edge in the new year, it’s time to start sharpening the financial saw, peer through the proverbial fintech looking glass and get intimate with the top 5 fintech trends for 2020.
“Fintech investments will continue to skyrocket in 2020 and are anticipated to exceed $30 billion”
(McKinsey & Company, 2019)
1.) Execution will triumph over fintech exotica
There is one theme that consistently differentiates successful fintech start-ups from failures: ability to execute. Successful fintech companies understand how to execute harder and better than their competitors and can rapidly deploy new apps and digital products to market in the shortest possible time-scale. This is reflective of an agile mentality, often more associated with tech startups than large banks and financial institutions. The reality is that these perceptions are changing and large, traditional banks and incumbents are fusing experimentation and prototyping into the DNA of new initiatives. Combined with a proven track record in execution, this makes for a seriously formidable formula that’s now crucial to success anywhere in the fintech ecosystem.
In 2020, it won’t be the newest or the most feature rich technology that will rule, it’ll be the fintech companies executing effectively that’ll triumph. In many instances, winning fintech companies are not using new technology. The real secret to success lies in adopting an agile mindset and leveraging data-driven, user focused testing processes to refine apps and digital products in order to steer them towards success. Experimenting with new technology can often feel invigorating, but the level of associated market demand is often difficult to quantify and execution can become a complex matter.
BBVA is the second largest bank in Spain and has a strong reputation for digital innovation and excellence. Two years ago BBVA hired Derek White, the former Chief Design & Digital Officer from Barclays to head up the companies customer solutions division. The role was entirely designed to progress the customer value proposition, focusing on user experience and leveraging sophisticated analytics and big data to create compelling new apps and digital products. When it comes to digital transformation, BBVA has a solid reputation and combines traditional banking values, execution and processes with a forward thinking approach to innovation and enhancing the customer experience.
In 2015 BBVA acquired the US based online banking startup Simple and in the past two years has increased its investment in UK based Atom bank with a 29.5% stake. The company now claims to be past a digital tipping point whereby more than half of its existing user base are accessing core banking services via digital channels. In order to successfully execute and accelerate digital transformation plans, BBVA has focused on cultural adaptation and using agile, data-driven development practices to increase the rate of change. The company now regularly conducts planning sessions that incorporate multidisciplinary teams working across multiple programs of work across the globe. It’s exactly this type of forward thinking mentality and approach to executing digital transformation that provides customers and clients with world-class banking services.
2.) Great UX Is No Longer A Fintech USP
There was a time when fintech startups could gain serious competitive advantage over traditional banks by adopting a slick, mobile-centric user experience. The perception was that incumbent banks and financial services companies had slow, clunky web apps that made performing simple, everyday functions a nightmare for customers. To some extent, at one stage, this might have been true and provided fintech start-ups and challenger banks a serious competitive advantage. Today, this is no longer the case. Great UX now come as standard in every new fintech innovation and product launch. In order to onboard new users in 2020, fintech companies will need to move beyond just having great UX and find other, more inventive ways to win new business and retain existing customers.
Monzo is a fantastic example. Monzo was one of the UK’s first ‘digital only’ banks and offers conventional banking services via a slick and intuitive mobile app. Founded in 2015, Monzo offers instant predictive overspending notifications, auto budgeting and saving pots. For starters, the Monzo onboarding process is simple, fast and intuitive. Once the user has created an account they can validate their identity by scanning ID documents via the app. Part of the validation process also involves the user filming a short video of themselves and saying a specific phrase which offers more convenience than taking documents to the physical branch and facing the inevitable queues.
Barclays are another fantastic example of a bank going above and beyond when it comes to UX. Rather than attempting substantial, risky alterations to UX, Barclays appear to take an iterative, data-driven approach to rolling out new features, focusing on layers of innovation with the launch of each new update. Barclays has successfully rolled out a new feature that enables customers to view iconography in bank statements so that the company logo appears beside each and every transaction. This helps to deliver a more personalised experience for the customer and provides a faster and more efficient way to visualise spending behaviours. Another feature Barclays has introduced is designed to benefit small to medium sized businesses. Barclays identified that many business owners suggested they have to work at weekends in order to reduce a backlog of paperwork and administration. As a consequence of conducting this research, Barclays introduced a free, real-time feature that enables business owners to process invoicing on the move from any location.
3.) AI & Hyper Personalisation Will Be Pivotal
Artificial Intelligence has had an enormous impact across the entire fintech ecosystem. It’s been successfully leveraged across a range of commercial functions from virtual AI assistants and intelligent chatbots, to internal process optimisation, risk management and predicting consumer behaviour patterns. Getting to grips with AI can seem like a difficult task, but many fintech companies are already reaping the lucrative awards of early adoption. The technology has the potential to drive one of the most profound technological shifts since banks and financial services companies began embracing digital transformation.
Today, consumers actively need their banks and financial services providers to be innovative. From a fintech perspective, one of the most consistent themes that’s currently emerging is the need for hyper-personalisation and the delivery of core financial services in real-time. As the rate of digital transformation continues to accelerate and impact the fintech ecosystem, banks will have fewer opportunities to engage with customers in a face-to-face context and transactions will become increasingly driven by mobile usage. This means that banking customers become increasingly self sufficient and this is where AI and hyper-personalisation both have a critical role to fulfil.
There are a plethora of commercial opportunities within fintech to deploy AI in an engaging and highly meaningful way. Better understanding customers, predicting spending patterns and engaging with intelligent robo-advisors are all elements of the customer engagement process that can be positively affected by AI, all resulting in deeper and more sophisticated levels of personalisation. Not only will customers derive better value from their interactions with digital fintech products, but AI can also be harnessed to automate a variety of mundane operational tasks, saving time and money.
One great example of a fintech app successfully leveraging AI is Mint. The primary goal of the Mint app is to enable users to consolidate all of their core banking services in one place and provide the ability to access all of the information they require via a centralised dashboard. Mint leverages AI and Machine Learning (ML) to provide recommendations on how to optimise spending performance and budgeting. The app also tracks the users credit score and makes personalised suggestions in real-time on how to enhance their score.
Fintech companies in 2020 will continue to leverage AI to drive change in customer relationship management, optimising onboarding processes, mortgage applications, fraud detection and voice recognition. The key to success with AI and hyper-personalisation in fintech is to act quickly, develop something fast using a lean approach and to optimise the app to success based on user feedback. But most fundamentally, as always, the critical component of success is resourcing the appropriate development capability.
4.) Wealthtech will come of age
Wealth management has been undergoing a significant transformation and disruptive new technologies will now continue to reinvent how we manage our personal finances, making core wealth management services faster and more engaging for users. As one of the hottest and fastest growing areas of fintech, wealthtech has gained significant traction in the past 12 months in terms of funding, with an estimated $4.6 billion being invested in new start-ups. Some of the key themes likely to emerge across the wealthtech ecosystem will include micro-investing, digital brokerage and robo-retirement.
Managing day-to-day finances via digital channels is now a core expectation of the modern banking consumer, particularly when it comes to investing money. With new mobile-first wealthtech and micro-investing companies emerging faster than ever before, making savvy, well-timed investment decisions is no longer the sole domain of the affluent and financially literate. New wealthtech apps mean that investing has never been as quick and intuitive for a mass-market audience, opening up vast opportunities for start-ups and incumbents alike. These new wealthtech innovations will continue to proliferate in 2020 and building for a solid financial future has never been more accessible to a global audience and a new digitally-savvy generation of investors. Some of the hottest micro-investing apps to watch in 2020 include the likes of Stash, Clink, WiseAlpha, Acorns, Robinhood, ETFMatic, Chip, Nutmeg, Wealthsimple and Moneyfarm. Check out the Nutmeg video below:
Digital brokerage technologies and platforms will also continue to gain prominence. These new wealthtech products enable investors to gain real-time insight into stock market trends and provide ability to invest with a simple swipe or tap of a button. This means that market trading is also becoming more accessible than ever and digital brokerage also represents one of the fastest growing segments of the wealthtech arena. One of the key emerging trends in digital brokerage is social trading. Social trading apps aim to reduce barriers to entry into the world of stock market investment by making it easy for novice investors to get up and running fast, in a safe, secure and risk managed way.
Wealthtech enables all investors to visualise the actions and subsequent performance of their peers, meaning that novice investors can now better understand the makeup of what it actually takes to invest like a pro. The beauty of this new wave of digital brokerage technologies is the fact that no specialist investment knowledge or expertise is required, which creates a less uneven playing field between the pros and novices in a way that was never previously possible.
5.) Data In Fintech Will Be Everything
One thing that never changes in the world of fintech: customers will always love using great software and mobile apps. Although the importance of data is nothing new and something that’s been discussed for the past 30 years, it’s importance in the world of fintech has never been greater. For fintech companies, developing great software means having industrial strength software engineering capability and data science skills. In the next 12 months, successful fintech startups will learn to truly master data science and management, be it outsourced in in-house, as acquiring the right data-driven expertise becomes increasingly critical to cracking the fintech formula. Moving forward, how we harvest and interpret user data will become as crucial as the insight it provides and what we choose to do with it. Success in fintech in 2020, more than ever, will directly correlate to our ability to make commercially savvy technology decisions and our ability to derive meaningful insights from vast swathes of data.
To further demonstrate the enormity of the scale of data we’re trying to manage, this years Mary Meeker Report delivered a prediction that by the year 2025 there will be more than 200 zettabytes of original and duplicated data. In case you’re busy trying to crunch the numbers unsuccessfully, one zettabyte is the same as a staggering one billion terabytes (and one terabyte is the equivalent of 1,024 gigabytes). That’s a sh*t load of data.
“Personalisation, combined with data-driven software development will enable consumers to satisfy all of their financial needs – they will possess the power to decide themselves. We’re investing heavily in data science capability and engineering talent to automate, accelerate and increase the accuracy and quality of these decisions”
Nikolay Storonsky, Co-Founder & CEO, Revolut
The biggest and best fintech companies and banks all have one major thing in common. They have already become highly adept when it comes to data driven app development and managing large teams of software engineers. Contextually rich data sets enable us to transform business operations, delivery better, more robust software to our customers and make them happier. We’ve already discussed the importance of hyper-personalisation and through relentless focus on the right data, navigating digital initiatives to success has never been easier. Extreme personalisation has never been as achievable as it is today through advances in data science and this is helping to deliver new initiatives at a reduced cost and grow customer satisfaction levels.
So there you have it, we’ve crossed the proverbial fintech rubicon and covered everything you need to know in order to get to grips with the hottest and most dynamic trends for 2020. If you’re busy looking to the future of fintech and thinking about how to get ahead in AI, Voice, AR, DLT or any of the technologies we’ve covered in today’s blog, we’d love to hear from you directly. As always, one of the biggest challenges when it comes to successful digital transformation initiatives, whether it’s fintech or any other industry, is the ability to execute like a champion and avoid dangerous fintech vanity projects, fluff and exotica. The killer fintech companies in 2020 will be those companies who can not only focus on relentless execution but also a relentless approach to data-driven development and sourcing best in class, industrial-strength software engineering capability, know-how and muscle. If you’re considering how to breathe new life into an existing banking or financial services product or app we’d love to hear from you. Similarly, if you’re about to embark on a fresh fintech digital product odyssey, we’d be equally thrilled to start the conversation.