It’s that time of year again: the crystal balls come out, and everyone becomes a seer. Predictions are made about the forthcoming year, and 2016 is being billed as everything from the year of virtual technology, to the year of biltong. But no one seems to ask what would make these trends possible. Is it simply fashion that will make 2016 the year of the smart machine, or are there more concrete reasons? I want 2016 to be the year fintech finally breaks out into the mainstream. Rather than make predictions about what will happen, I will ask what needs to happen to make 2016 the year fintech graduates to the big leagues.
We have to champion fintech’s social impacts
The World Bank estimates that 2 billion people in the world are unbanked. That’s 2 billion people fintech can potentially serve, promoting greater financial inclusion. Companies like Kyash in India are making use of widespread mobile penetration, enabling payments to be made via SMS, an enormous advance on much more prevalent and insecure cash transactions.
On the other side of the planet, Sub-Saharan African communities are being hurt by steep remittance fees when making international payments, according to British charity, Comic Relief. Fintechs cut out transfer fees and charges existing services have. So why aren’t more people aware of this? I can venture a reason: Fintech leaders have not yet been evangelical enough. We have got to talk about social impact as well as disruption and new technologies. Fintech’s impact needs to be better known for the industry to get the credit it deserves.
Regulation needs to be sensible
Regulation is being called fintech’s biggest hurdle for the upcoming year. The poll, taken at the Fintech Mashup expo in New York City by Silicon Valley Bank, asked 101 fintech firms and accelerators what they saw as fintech’s biggest hurdle to growth. 43% said current, or forthcoming regulations. I can guess why they are saying that: American regulation is terrible.
I recently debated why the US was killing its fintech industry, and cited regulatory obstacles as a main reason the US would not let fintech grow. The EU, by contrast, has clear regulatory rules which allow fintechs to grow across borders easily – unlike the US, where you have to get a licence for every state you operate in. Sort this out, and fintech can make real strides forward.
Government support needs to be widespread
The UK already does, so does Australia. In the Philippines, you will find government leaders raving about its fintech cashless initiative, e-peso. Fly over to Indonesia, and you will find the government listening intently to Fintech Indonesia, the lobby helping boost fintech’s prominence in society. These are the countries developing fintech centres in major cities.
In Shenzhen and Singapore as well as Paris and Berlin, the governments are beginning to cultivate fintech growth – because they recognize the advantages of doing so. So why isn’t there outright government support for fintech in the US and Canada? Why don’t the leadership of Japan and Italy publicly support it? For fintech to make a real global impact, governments need to show a willingness for their financial industries to be disrupted.
Financial institutions and fintechs will have to work together – everyone anticipates collaboration in the near future. But a collaboration that shows fintech’s potential has to happen for the industry to really enter the mainstream. While financial institutions may seek to incorporate more well-known services such as Paypal and Stripe into some of their retail products, I imagine smaller-scale fintechs will be absorbed by financial incumbents, which will then go on to provide services on behalf of those institutions.
Mobile banking looks seriously promising right now – and it wouldn’t surprise me if in 2016, a company like Number 26 is approached by existing banks to refine their existing products.
Branding needs to step up
Fintech needs to stop being special, and become an ordinary part of people’s lives. That might sound harsh, but for the industry to enter the mainstream, it really needs to become hum-drum and mundane. This will only happen when consumer behavior changes – and of course, for consumer behavior to change, fintechs have to be better at branding. It will be tough – banks globally have stepped up their marketing game. Research firm Allocadia says in 2015, banks have paid more attention to digital marketing than ever. To compete and make fintech’s capabilities known, startups have to make branding a priority and turn to ad agencies to compete.