Originally published in Entrepreneur India, January 2018
The financial technology industry has been soaring in India, kept abuzz throughout 2017 with a continuous flow of prominent developments by the public and private sector alike. With the implementation of initiatives such as demonetization, Jan Dhan Yojana and UPI, the Government has provided significant direct and indirect support to the sector. This has established a collaborative precedent for the fintech industry, and the upcoming year will inevitably build on this precedent with a wave of new technology adoption. As 2017 draws to an end and we prepare to welcome the dawn of a New Year, it is a good time to highlight some of the factors that will impact the FinTech industry in 2018.
Blockchain Technology Adoption in Fintech
Data breaches and compromised security are ever-present causes for concern in the fintech sector – however, blockchain technology is presenting itself as an increasingly viable alternative for safeguarding transactions and related data.
This security aspect tracks back to blockchain’s original purpose, as a mechanism for safeguarding transactions in the cryptocurrency space. Although a public ledger, blockchain is heavily encrypted, with core functions that make it highly impenetrable for hackers.
As a result of the security benefits offered by blockchain technology, several key players in the fintech space are investing heavily in adopting the technology. Even larger financial institutions such as HSBC and Barclays are exploring the technology – a sure sign that 2018 will witness an increasing adoption of this technology by fintechs.
Increasing Prominence of Cryptocurrencies and ICOs
In 2017, the valuation of Bitcoin surpassed USD 15,000, notwithstanding extreme fluctuations, and this rising interest and popularity of Bitcoin has initiated a wave that brings both Bitcoin and other cryptocurrencies closer to the mainstream. An example of applications of cryptocurrencies is in ICOs (Initial Coin Offerings) – offerings to early-stage investors in cryptocurrencies, bypassing traditional fund-raising methods to provide an entry point to the promising and risky world of cryptocurrencies.
By offering ICOs, fintech companies are able to bypass regulatory hurdles and fast-track the process of raising funds. For instance, one of the other popular cryptocurrencies, Ethereum, raised USD 18 million in 2014 and currently, the ether is priced around USD 200. Looking across the entire industry, cryptocurrencies have raised total investments of USD 87 billion. Between October 2017 and January 2018 alone, there are expected to be 20 new ICOs – providing further fuel for the growth in the legitimacy of both cryptocurrencies and ICOs.
The Mobile Technology Space is Set to Grow Ever Further
Mobile use has been consistently on a rise as compared to desktop use, particularly in the e-commerce and social media space, and with this has come an increasing consumer comfort with mobile payments. Fintech players have been integrating payment channels with an ever-increasing range of mobile-friendly features – from QR codes to mobile wallets – so as to offer further ease and convenience to consumers. With consumers increasingly opting for mobile payments rather than defaulting to desktop or cash, this particular trend is set to determine much of the innovation in the fintech and e-commerce space in 2018. Mobile banking and payments is estimated to touch the USD 92 billion mark by 2019. As is appropriate for a shift largely driven by consumer demand, consumers themselves will be the primary beneficiaries – although the continued fintech innovation and integration stands to bring significant benefits to retailers alike.
Widespread AI Adoption in Fintech
Artificial intelligence and machine learning will continue to empower fintech solutions and services. According to PWC’s Global Fintech Report 2017, nearly 30% of financial institutions invested in AI – and given the ubiquity of AI, the number of institutions indirectly investing in it will be significantly higher. The adoption will inevitably be more widespread in the coming year, with an ever-increasing number of fintech players adopting AI and machine learning for automation, predictive analysis, and more. As a tangible example of the role that AI can play in B2C interfaces, the use of smart chatbots is likely to increase in the fintech domain, for automating customer interactions, addressing queries and more. Artificial intelligence will further come into action in securing financial transactions and services, where machine learning can be deployed to analyse patterns and adopt safeguards to counter potential security risks.
Ultimately, only time will show how these live trends have reshaped both consumer behaviour and the fintech sector. However, we can continue to be sure that change remains the only constant, and that today’s status quo in the financial services sector will experience ever more disruption in the coming year. Consumers are demanding better, more secured and streamlined banking and financial services: this will continue to inspire and energise fintech firms, as they try to innovate in order to not only match but also shape the evolving consumer expectations.