Before considering 2017 forecasts for FinTech and payments, let’s review notable events from 2016. MasterCard introduced “selfie-pay” into our lexicon, global economies are still adjusting to the Brexit and President-elect Donald Trump in the U.S., and both Davos and the US Securities and Exchange Commission put a spotlight on FinTech innovation. Collectively, this demonstrates we are well beyond FinTech 1.0 as more agile and innovative solution providers and established banks, payment companies and financial institutions are not just increasingly working with each other, but relying on each other to remain relevant and sustainable.
So what’s on the horizon for FinTech in the Year of the Rooster? After speaking with colleagues, partners and clients on both sides of the pond, here’s a snapshot of what we believe will shape the way money moves around the world in 2017:
Any time there is a regime change or new administration, investors become more cautious. As a result, new or riskier start-ups will have a harder time securing funding under the Trump administration. This is comes at an interesting time with FinTech maturing and expectations of inflation in the states, which has spiked since the election.
Fiscal stimulus in the US will help reflate the economy, but this will be a slow and drawn out process if it happens in the new year. And under a Trump administration, there stands a good chance of passing the stimulus through Congress.
Regardless, the interest rates across both sides of the pond in the US and UK will increase the cost of capital. This means the time value of money will dramatically impact marginal FinTech businesses. We can expect to see drop outs from early-stage, risky and/or FinTech companies without a sustainable business model, or perhaps larger or more established institutions absorbing these players.
Large banks will continue to make significant inroads into the FinTech industry. Likewise, large economies will continue to double down on FinTech investments, R&D and innovation. We can anticipate China will emerge, or at least make significant gains, to establish itself as the next global capital of FinTech.
This will keep New York City and London on its toes in terms of innovation and strategic collaborations. As FinTech continues to evolve around the world, mobile wallets, pre-paid cards, peer-to-peer payment networks, mobile top-up plans and budding payment solutions will start to merge into a single e-money segment with major platform providers emerging. Expect our global hubs of finance to lead on these discussions and convergence.
As part of this, we’ll also see blockchain mature with more useful applications. Moving beyond conversations hinged on the technology, we’ll see more products emerge that are focused on running proof-of-concept applications. A challenge in the new year is that blockchain risks being overhyped while possibly being “stuck” in only running proof-of-concept solutions.
Compliance and digital know your customer (eKYC) challenges have been simplified thanks to advancements in technology over the past few years. Though some of the challenges are easier to address, compliance and regulatory frameworks continue to evolve – making it nearly impossible for companies to keep up. Hence, we’ll see a stronger interest around RegTech within the market.
Firms are beginning to address this shift, making RegTech the new FinTech. With the regulatory market scaling back on key acts including Dodd Frank and the Patriot Act, FinTech 2.0 and beyond will play a pivotal role in helping ease and facilitate RegTech pain points. FinTech will serve a more strategic role within the finance ecosystem, alongside insurance and regulatory technology companies.
As one of the most highly regulated industries, the financial world is also one of the most innovative, and continues to evolve at a rapid pace. We look forward to the new year with its set of new challenges, and to helping shape what’s next in global payments.
Nabeel Siddiqui is Vice President of North America for Currencycloud. He has more than 18 years of international payments, FX trading and FX broker/dealer experience. Prior to joining Currencycloud, he was a founding member at AscendantFX Capital Inc., an FX brokerage firm specializing in B2B international FX payments and receivables. Mr. Siddiqui also co-founded two financial services companies and has led the growth in FX practices within established institutions including RBC Capital Markets, Custom House Global FX, Travelex and Thomas Cook.