2020 fintech predictions: challengers, wealth management and more
Challengers going mainstream, infrastructure, wealth management for the masses and a bunch more in predictions for what 2020 holds for fintech and financial services.
We’ve done yearly round ups and I reviewed my predictions for 2019.
But it’s a new year folks! Which means after a pause for reflection, it's time to look forward to what the next 12 months might hold. It’s going to be a big one.
Not challengers, just banks
Challenger banks in the UK will stop being a future threat and become a present one. Fact.
The one pushback has always been “yeah great but the numbers aren’t mind-blowing.” But the continued growth, the TV adverts that are raising brand awareness and the expansion of their offerings will make the likes of Barclays, HSBC and Lloyds finally admit they are losing customers and revenue due to the presence and performance of Monzo, Starling, Revolut and Tide.
They will need to also think through how and where they communicate to customers
Admitting this is the last bastion of the incumbents who until now have been deniers, leaving the challenger banks no longer being challenger banks. Just banks.
There is a flipside to this for the newer banks. As they continue to expand, as they are uttered in the same breath as an HSBC or RBS, they will need to also think through how and where they communicate to customers. Not everyone who signs up to a service based on a TV or radio ad will follow you on Twitter, or read your explanation of a recent outage on a blog.
This matters more and more because we’re already seeing a media backlash against the challengers and with increased scrutiny will come an increasing need to think about how to manage any issues that arise.
The background becomes a new battleground
11:FS Foundry CEO, Leda Glyptis, has been banging this particular drum for as long as I can remember!
Clearing, core banking, the plumbing that makes the entire system function will never make as many headlines as the more consumer facing aspects of digital banking. But actually, they’re the fundamental building blocks happening in the background that everyone takes for granted to make all the ‘cool’ stuff happen.
We’ve seen enough evidence that legacy systems aren’t fit for purpose
We’ll see more development building off the likes of ClearBank, RTGS.global and the continued development of SWIFT gpi. More importantly for the growth and maturity of truly digital financial services, we’ll also see new approaches to the core technology stack that will support firms to deliver these services at a speed, and at a scale we’ve not witnessed before.
We’ve seen enough evidence that the incumbent's major systems aren’t fit for purpose. According to consumer magazine Which? RBS alone suffered 18 outages in the last year. 18!
This isn’t news. But, related to Trend 1, as the nimbler competitors keep gaining market share, 2020 is the year when banks realise that 'the core' cannot be what is left after all options have been exhausted. In order to deliver truly digital services, banks need a digital core and a fully connected and re-aligned organisation to imagine, build and deliver products powered by a new digital core.
Good job someone’s doing something about that one ;)
Wealth is not just for the wealthy
2020 feels like the year this really goes more mainstream and wealth management is not just for the ‘wealthy’. Robinhood and Acorns have changed the game and we will see more copycats, especially with Robinhood coming to the UK.
This shift, to quote Simon Taylor, feels like Kobe and Shaq, Yorke and Cole, Spongebob and Patrick. That once in a generation, slap your friend in the face, sit up and pay attention, change. Revolut and Freetrade are already in the mix in that market and incumbents are responding to the changing dynamics, Charles Schwab acquiring TD Ameritrade in the US for a start.
Expect to see a lot more activity from fintech firms and incumbents in this area
Micro-savings might feel like a gimmick but they’re the step because the consumer isn’t forced to sit down and think about the scary notions of whether investing is ‘right’, it just starts to become a series of financial behaviours. Acorns and Plum have really figured out this link between everyday transactions into micro-savings and then investments at a later stage, but also guiding you as you learn and grow. Amy Gavin wrote an entire report on this in December.
Expect to see a lot more activity from fintech firms and incumbents in this area, especially as these firms work beyond savings pots and towards pension pots.
Anything but another digital account
Open banking promised so much and yet it feels like it hasn’t really delivered much. I think that will finally change in 2020 but not in the way some may think and not around a digital account proposition, at least, not in the UK.
That doesn’t mean there isn’t room for new entrants who take a JTBD approach and really think about the customers they want to serve. But these new players will likely be offering services aimed at SMEs, gig economy workers, freelancers or other niches.
If VC funding of insurtech is any sort of indicator, this space is going to really take off over the next twelve months
What I think we’ll see is more digital services tackling various customer jobs in insurance, loans and mortgages, which are the biggest financial products most customers will ever use. With changing lifestyles and financial realities, insurance has been a little slower to embrace data and analytics to find the white space.
If VC funding of insurtech is any sort of indicator, this space is going to really take off over the next twelve months covering everything from renters insurance, PAYG car insurance, drone insurance and everything in between. The likes of Blink, Pluto, Trov, Urban Jungle and Wrisk are all pushing new ideas to deliver truly digital insurance experiences.
Consumers who have been underserved by a sector that has undelivered for too long are going to be the winners in 2020.
The UK remains the premiere fintech hub
How is something not changing this trend? Because as more markets open up and the global competition for talent increases, staying top of the pile takes a lot of effort. Just ask Pep Guardiola and Manchester City (or Bill Belichik and the New England Patriots for fans of ‘the other’ football).
I think of London as the fintech equivalent to the Galapagos islands: a place with unique characteristics built around a thriving ecosystem of a supportive regulator, investors and talent.The question now, all these years on is this: will that talent dry up and put the brakes on the further development of the UK’s fintech ecosystem? Will the UK become less attractive for investments?
The answers are unclear. But I remain positive :)
So far we’ve seen little detrimental impact on the volume of fintech investment caused by the ongoing political instability. The success of a number of fintechs founded post-crisis will also act as inspiration for budding founders, particularly in the current political and economic climate.
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