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The Fintech Landscape

FinTech is so prevalent in the modern financial services and technology sectors. So, what are some of the best performing FinTech sectors and what could the future hold for the space?

Lending

In the past, personal or business loans would be issued by traditional financial institution. This caused large financial overheads, making lenders suffer from lower rates. After the financial crisis hit in 2007/08, the sector quickly dried up, as lending contributed largely to the housing crisis. This made space for a large host of alternative lending businesses, which use technology to cut out the middleman and enable peer to peer lending. The high demand for greater returns combined with the reluctance of bank to lend, is a major reason why so many lending businesses have surfaced in the FinTech sector.

Investment

Central banks around the world have deployed monetary policies to incentivise the economy to spend rather than save. One of the instruments used by central banks is setting extremely low interest rates. Individuals and businesses alike are actively seeking more rewarding places to invest their wealth. FinTech plays a major role in solving this problem by delivering online investment platforms that were simply not possible in the pre-FinTech era. These can vary greatly from investment management platforms like Nutmeg through to the equity crowdfunding platforms like Crowdcube. This combination of finance and technology has opened up a new audience of modern investors that are in turn being served by businesses like OFF3R, the alternative investment marketplace.

Payments

Transferring money between accounts can be expensive. Especially if the transfer involves foreign exchange or moving finances across international borders. Globalisation has increased the demand for fast and easy money transfer and payments. Transferring money and international payments is now fundamental to many businesses and as a result the market has grown significantly. Solutions range from enabling large corporations to transfer money across border more easily, such as Transferwise, to allowing e-commerce providers to easily collect payments from customers, such as Stripe.
Insurance

One of the most recently talked up entries is the insurance sector. Because of the distance between finance and insurance, this sector is sometimes seen as an industry of its own, accordingly named InsurTech. According to PWC’s InsurTech report, key enablers for this sector are customer expectation, the current pace of innovation and the ever growing presence of start-ups in the economy. This becomes apparent when considering that insurance was one of the few sectors still relatively untouched by technology. FinTech successfully challenging the traditional financial system is perhaps what gave other start-ups the inspiration to do the same with insurance, which is often seen to be even more stable than the finance system.

What might the future hold?

In recent years we’ve seen building blocks of the traditional financial world, that were once considered to be stable, fail again and again. This is possibly what gave entrepreneurs the push to disrupt the building blocks of the financial services industry. It is therefore likely that InsurTech will follow suit with some major disruption on the horizon.

Sectors like real estate and investments will also continue to see disruption. Both real estate and investments are very competitive and volatile markets, which is a challenging environment for a start-up to grow in. Another factor that creates challenges for these sectors might be their dependency on technology.

Ultimately the size of different FinTech sectors will be determined by a multitude of different factors. In a deflation period, FinTech sectors such as investment may be more in demand because spending becomes economically less feasible. During an inflation period, FinTech sectors that promote spending and investing such as payments may grow in size. It is very likely that the size of the different sectors will begin mirroring what is going on in the economy.

By Adrian Zenobi, OFF3R Ltd

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