No term is more ubiquitous in today’s financial media than fintech. While financial technology has been part of the trading world for decades, “fintech” references a type of disruptive technology that is altering our existing trading world in significant ways. Fintech focused conferences and awards are being held in every major financial center highlighting the move to exploit this trend.
Modern Trader asked the executive teams of more than 150 companies participating in one of these events what they believe will be the biggest trend in the industry in 2016. We allow these fintech leaders to share their insight in their own words. In fact, one can expect that a wealth of these companies will be award finalists and winners given their disruptive technology and forward-thinking approach to the fintech sector. Here are the top trends in fin tech.
1 Increased Sophistication and Collaboration in Technology
“The biggest trend will be an increase in the sophistication of the tools available for the everyday investor. It used to be that the pros had custom software to meet very specific needs, but now there are all kinds of startups filling growing niches for everyone.
For example, last year very few retail investors would have ever invested the time and effort it required to manage a delta-gamma-neutral options book, but today they use our tools to do it in seconds.”
“After several years of investment and development, we expect 2016 to be the year of mass market adoption and consolidation. Many fintech startups will finally be recognized as acceptable trusted providers by the general public.”
David Martinez De Lecea
“Fintech has bridged the gap from the innovator’s group to the early adopter’s group (à la Clayton Christensen Innovator’s Dilemma). What I mean by this is that fintech (like virtually every other disruptive innovation) has not really been taken seriously prior to this year. But, that has definitely shifted, and is moving to mainstream acceptance at a very fast pace indeed.”
“The Biggest trend [that] has been around is how fintech companies are benefiting with scale by integrating within the banks and building models that apply their innovative strengths with the strengths of the banks scale offerings. Rather than compete, banks are now looking to plug up gaps by working with fintech firms.”
“In particular, we expect the trend of collaboration between young fintech companies and traditional financial services and banking incumbents to continue to be a key theme in 2016.
As recent industry partnership announcements indicate, banking incumbents are finding smart ways to align with technology partners to remain competitive and to meet the needs of millennials through referral and licensing partnerships.”
2 Artificial intelligence, virtual reality and robo-advising
“We believe while the rest of the tech world is moving toward virtual reality, in the fintech world, videos are going to be the biggest trend in 2016. With the ever-shrinking attention span of the millennials, we have seen with major players such as Nasdaq, BankMobile and all up-and-coming startups focusing their efforts on video production.”
“The biggest trend in fintech is going to be algorithms disrupting [Exchange Traded Funds]. Those ETFs are cash cows and each one is replaceable by a near-free algorithm. Even the robo-advisors are high-priced compared to a simple algorithm and a low-fee brokerage.”
“We will see increased traction and exponential growth in online advice and discretionary wealth management tools such as robo-advisors. People will increasingly embrace wealth management solutions like robo-advisors and companies will leverage
technology to make the process even easier and more convenient.”
“The biggest trend will continue to be open source software. Google is winning in the smartphone market with Android. Wordpress continues to power near 30% of all websites. Magneto is the most popular shopping cart software. With companies like QuantConnect, Open Gamma and wealthbot.io showing that open source can work in fintech, we’ll continue to see a lot of growth.
“We believe automation and algorithm driven trading will continue to rise, displacing its human manager counterparts. Traditionally, quantitative funds perform better in down markets because of better risk control, and this volatility will be no exception. These better returns will further drive investment and adoption of quantitative investment technology.”
“Traditional financial establishments are beginning to feel the heat from fintech providers with genuine content and technologies. First, we witnessed BlackRock’s acquisition of Future Advisors at supposedly unreasonably high multiples. Next, some traditional financial institutions jumped onto the robo-advisor bandwagon, with key players privately admitting that their marketing is stronger than technologies and content. Don’t be surprised when you see Uber-style disruptions by leading fintech providers in 2016. After all, fintech is no longer a mere enhancer, but a potential replacement player.”
3 The rise of big data
“The biggest trend will be the continued democratization of data. Data in the financial markets — especially when it comes to decision support and alpha generating data — has often been captive to proprietary platforms or withheld completely from the diverse eco-system of financial market participants.”
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“The accessibility of [artificial intelligence] to active investors rides a larger trend we call Big Data 2.0, where all the analysis and insight generated in 1.0 gets automated into actionable market intelligence.”
“A shift toward analytics platforms that make datasets smarter. It’s time that finance specific applications are developed and adopted in order to more effectively gain insights into these data feeds, allowing investors to become more informed and make better investments.”
“The biggest trend is the acceleration of the transition to NoSQL and graph databases for uncovering and exploiting subtle but vital relationships in unstructured big data. This concept of making connections within disparate data sets will be key to discovering new insights.”
“We believe we’re in the golden age of creating and harnessing new data sources for investment related decision making — whether that be for systematic trading purposes or for individuals to react upon — new data sources are forever changing how and why we trade.”
“The move from big data to meaningful data. Everyone now has a lot of data, big data. This makes it really hard to find anything. What is needed is unique data that provides movement signals in a name, sector or market. To be able to see trends, patterns and linkages among all of them. This will diminish risk exposure and provide upside opportunities.”
“Big data and statistical analysis will be big trends in 2016. Portfolio managers need to make trading decisions based on data and trends.”
“In 2016, expect fintech developments to trend toward data-driven technologies. As new customer touchpoints emerge, such as social commerce and wearables, merchants face the complexity of managing payments over multiple channels.”
4 Rise of alternative products and the sharing economy
“The biggest trend will be that alternative finance products will continue to go mainstream. Public awareness of alternative finance options like peer-to-peer (P2P) lending and equity crowdfunding is increasing, and governments are updating regulations to allow more investors to participate in these types of markets.
“You’re going to see alternative lenders that much more visible in the mainstream as they partner more and more with larger traditional lenders. This naturally leads to the question of what other alternative offerings will we see disrupting the traditional establishment? A whole new technology-driven model for insurance? Mortgages? We’re already seeing it for lending and investments, so why not other areas?
“The biggest trend in fintech this year will be the democratization of investing that disintermediates entrenched financial institutions. Robinhood, Motif, Betterment, ClosingBell and CrowdInvest are companies that attack the financial industry by harnessing technology to undercut fee structures.”
“The sharing economy is going to hit the financial world with full force in 2016. Peer-to-peer lenders are getting credibility and the whole concept of the sharing economy will really come into force in the financial services industry in 2016. The sharing economy has largely focused on lending, but we’ll see also investing and other areas coming into their own.”
“Fintech leverages on its capacity to disrupt, to drive innovation and ecosystem buildup. Going into 2016, we expect sophisticated demands from “prosumers” i.e. individuals using product-services aimed at both, general and professional users (as defined by Alvin Toffler to converge) and then elevate cross-sectoral trends (real-time monitoring, analytics, payments and lending) within the fintech industry.”
“In 2016, we will see an increased consumerization of financial services, especially, consumer credit. As of today, there are still millions of responsible people around the world who are denied access to credit, simply because our credit systems haven’t evolved with technology. However, advanced data science and machine-learning have made it possible to harness tens of thousands of data points to more accurately identify responsible borrowers.”
5 Increased automation
“The biggest trend this year will be toward automation. There are various types of automation: from speed of execution, to scanning software, to trade management programs and even fully automated black box trading systems.”
“The year 2016 will be all about ease-of-use. It will manifest in different kinds of applications, from automated investment management to new user on-boarding. A lot of new investors will join the markets this year driven by technology built to increase transparency of information and imaginative interfaces.”
6 Fintech IPOs
“The most visible trend in the past year was the public market’s appetite for fintech IPOs, most noticeably: Square, Shopify, FirstData and TransUnion. While 2015 was a year of many winners, there will likely be some shakeout in 2016 with certain companies breaking out and other, undercapitalized businesses falling by the wayside.”
7 Security Management
“With all the recent data breaches, security within financial services is one of the most talked about trends recently. It’s one of the things that has the power to affect us the most. With mobile banking and payment technologies growing at record-breaking speeds, security management is growing at equivalent paces to keep up with these innovative products that need security technology to perform the way they should.”
8 Regulatory actions
“[In addition to advancements in the robo-space], the continued ramp-up toward implementing the Department of Labor’s (DOL) proposed fiduciary rule [also will be a trend]. If the DOL rule becomes effective in 2016, we will transition from evaluating its impact to planning for the implementation of the new regulations. It’s a material shift for the industry,
and could be the cause of both significant disruption and opportunity.”
9 Blockchain adoption
“The biggest trend is data services on the Blockchain. Blockchain is just a technology that does not do anything without a service connected to it. In the financial technology sector important players will (continue to) recognize what can be achieved by using this technology. Blockchain technology will provide this (public) accountability and help gain more trust and secure easy adoption in the financial sector.”
“Blockchain and Bitcoin will be the biggest things that the financial services community will adopt. Nasdaq is partnering with a company called Chain and plans to go live with a beta by the end of the year.”
“Blockchain technology and open source APIs and data feeds will begin to take the spotlight in 2016. Most of the face time and attention the past few years have been on payments, lending and robo-advisors. Blockchain technology has the potential to change the way our world works.”
10 Mobile Expansion and Greater Connectivity
“We consider connectivity will be the biggest fintech trend in 2016. Connectivity means that anyone or anything will be able to interact, trade or exchange information anywhere and anytime. API technology is an enabler of this process. Integration with third parties significantly extends the range of capabilities of each fintech solution.”
“The biggest trend will be better mobile technology and its increasing impact on how investors and traders conduct their work “on the go.”
In a time of ubiquitous mobile and web apps that are well designed and fast – investment professionals will be forced to ask themselves, “Why am I stuck with slow, poorly-designed software from the 1980s that costs as much as $25,000 per year, per user?”
“The most exciting fintech advancements on the consumer front are mobile payments becoming mainstream, new wealth management models coming online and [new] methods of transferring money becoming available to an increasingly global, distributed population.”
“[One big] trend is mobile trading on a wide scale. While many self-directed investors are already trading on mobile [applications] and have been doing so for several years, it is still no where near the widespread use of desktop trading on the retail side. In 2016, I [expect] the adoption to mobile trading to grow significantly, particularly with the next generation of investors.”