Overall, an interesting article. The term "FinTech", and "Blockchain" will continue to dominate the news in our industry. Bitcoin will do well but could cryptocurrency be getting more attention for a change?
Value form"
With the rise of so many forms of cryptocurrency, from bitcoin to Gaelcoin, alongside other value tokens such as mobile minutes, we’re seeing the way in which people exchange value being redesigned by the internet, particularly as value tokens are now data rather than physical bank notes."
What does 2016 have in store for fintech?
Chris Skinner presents five key areas of potential change.Yes, 2015 was the year the fintech bubble exploded. It hasn’t burst yet, but it’s clear that fintech is the word of 2015. Everyone is talking unicorns, startups, disruption, and fintech, yet this is nothing new. I often say that I’m only known in the fintech world because I’ve worked in technology in finance all my life, and someone finally decided to put the words together. Just like Brangelina, Kimye and Bennifer, fintech is of the moment.
I want to touch on what’s emerging in the fintech world. For me, there are five clear areas of change:
Value transferFrom TransferWise to Square to Stripe to Currency Cloud to Azimo to WorldRemit, all aspects of payments and currency movements are being revamped and rethought by the new fintech players.
Value formWith the rise of so many forms of cryptocurrency, from bitcoin to Gaelcoin, alongside other value tokens such as mobile minutes, we’re seeing the way in which people exchange value being redesigned by the internet, particularly as value tokens are now data rather than physical bank notes.
Value managementOur stores of value are also being redeveloped by robo-advisers such as Nutmeg, Betterment and WealthFront, as well as the way our accounts are presented to us from a mobile wallet to a fully fledged personal financial management system with visualization tools.
Credit riskEverything related to connecting people who have money with people who need money is being targeted by new platforms and marketplaces that enable these two communities to connect at better rates and lower margin than through traditional credit market. This isn’t just for peer-to-peer lending, but for everything from crowdfunding trade finance to mortgages.
TradingThe fact that the internet enabled day traders to rise from their home offices has now extended to social trading and automated trading structures. Although most high-frequency traders are using proprietary low latency infrastructures, the ability to piggyback markets and trading oracles is giving rise to whole new forms of investment markets.
There are other nuances of these markets, and in 2015 everyone seemed to wake up to the fact that this is headline news. I guess it’s because we finally woke up to the idea that fintech is actually redesigning banking, insurance, wealth management and financial services generally to be marketplaces based on technology platforms instead of localized markets based on physical exchange. This doesn’t take place fast, so expect the interest in fintech to continue in 2016. The natural question then is, is this a bubble about to burst?
I answered this in March, saying that the ‘re-architecting’ of an entire system isn’t a bubble but rather an evolving ecosystem. However, the hype around fintech may get dented in 2016 as Square’s IPO disappoints (as will several more in the next year). According to M&A advisers Magister Advisors, this means that 2016 will see:
Don’t hold your breath for tech IPOsIPOs come in waves, and all signs point to a quiet sea next year. Interest rate rises coupled with macro/political uncertainty will give an already unsteady IPO market serious vertigo.
Expect a unicorn (or two) to blow up …
The tale of Fab.com showed just how quickly you can go from a $1bn valuation to a $15m fire sale. Magister Advisors is expecting that at least one tech unicorn will go to the glue factory in 2016.
…
leading to inevitable mass layoffsUnicorns, with an aggregate valuation of $500bn, are overvalued by $200bn, according to Magister Advisors, which expects layoffs will be inevitable next year as valuations compress, leaving the ‘weakest 10-20%’ of workforces to look for their next job unexpectedly early. The biggest losers of a decelerating market will be the ‘unicorn aspirants’ aiming to raise $15-50m at $100-500m valuations.
Overheated mergers will cool off
M&A activity hit a record high in 2015, but will slow considerably for the tech sector in 2016 as valuations reset, Magister Advisors predicts.
Expectations take time to reset, and always lag reality. Many investors will not accept a new lower normal until at least 9-15 months have passed. Meanwhile, there will be an imbalance between seller price expectations and what buyers are prepared to pay, taming the M&A market while price expectations realign.
Expect M&A activity to return with a vengeance by 2017-2018 though, once expectations are more in line with reality.
Blockchain will dominate the fintech sector2015 saw large financial institutions accelerate their pursuit of blockchain initiatives, and we’ll enter 2016 in a ‘race to production’, with vendors and financial institutions alike vying to see who can be first to reap the benefits in actual deployment.
Source:
http://banknxt.com/55122/fintech-change-2016/Written by Chris Skinner
