FinTech Predictions for 2016

We thought it would be fun to make some predictions for what may be in store for fintech startups, investors, and pundits in #tech2016:

Wealth Management

My home industry so I will offer more insight on this space naturally…

  • The term “robo advisor” will become obsolete. As platforms become more robust and the product set more diversified, pigeonholing the industry into a low cost, managed Vanguard ETF portfolio will be antiquated and misinformed.
  • Cash will continue to pour into the “winners” for at least one more round to expand their product set and the other players will get picked off for $50-$300 mil buy/build decisions.
  • There WILL be a very large $500mm-$1bil+ cash acquisition, most likely by a large Asian internet company or FI (Tencent, Alibaba, Rakuten, RenRen, ICBC, Yandex etc.), with tons of cash to burn, expanding financial product offerings, and hundreds of millions of customers to satisfy. Most American acquirers have been priced out of the market.
  • Thousands of traditional advisors will either close up shop, sell their businesses, or apply to jobs at startups (already see this happening). Within 5–10 years advisors and financial/investment advice won’t exist outside of digital channels except for ultra high net worth and legacy, older (60+) clients. Remember, just because you don’t walk into an office to speak to someone, doesn’t mean you can’t get personalized advice from a human through a digital channel.
  • Contrary to the popular belief of digital wealth being a race to the bottom for small balances, both fees and account balances will RISE (http://www.thinkadvisor.com/2015/12/14/think-robos-dont-appeal-to-the-wealthy-think-again#.VnAWO5K2o2M.twitter)

Blockchain

  • Bitcoin will rise from the dead. Wait, Bitcoin, what is that? With a 50% rise in price from the beginning of the year, and over a 100% gain from its low in mid January (https://www.hedgeable.com/research/bitcoin/analytics), Bitcoin has risen from the ashes. Look to see an uptick in Bitcoin investment and interest and the price to skyrocket.

Lending

  • Lending will face a supply problem as new sources of capital for loans begin to dry up. There are just too many lending platforms out there and not enough hedge funds and institutions to invest. Not many new lending platforms will get funding in 2016.
  • Look for lending platforms to diversify their business away from P2P in 2016 into credit, mortgage, and wealth management, with SoFi leading the way, possibly through an acquisition.

Payments

  • Although the adoption has thus far been slow in the US, Apple Pay adoption will skyrocket internationally in 2016. Android Pay and Samsung Pay won’t be too far behind.
  • Stratos (firesold last week), Coin, Plastc, Swyp and once hot “all in one credit cards” will fade away. Why spend money manufacturing hardware if we can just do it on our phone?

Insurance

  • Insurance Tech (InsurTech) was the hot fintech space in 2015, look for this to continue in 2016 with many more deals across the spectrum. Don’t be surprised if we see a few more unicorns, joining Oscar. Lemonade (P2P insurance marketplace) will be a hot one to look out for.

Venture Funding

  • The balance of power has shifted from traditional valley VCs to corporate and strategic venture firms. Look for more banks and FIs to create both on and off balance sheet venture arms in 2016, as later stage fintech startups seek strategic partners over cash.

International

  • CHINA will be the buzzword of 2016. Chinese unicorns, US companies partnering in China, Chinese acquisitions of US companies. It will be all about China, where fintech startups have filled the gap across every financial product for millions of people who never had access to traditional banks and financial institutions.
  • Many more US startups will expand internationally directly and through joint ventures with large foreign banks and financial institutions where the rate of innovation is a good 5 years behind. Australia will be a key market to watch as an initial test market for expansion.
  • The US will continue to lead the way in innovation. Hundreds of European and Asian clones will continue to pop up taking advantage of the markets US companies have spent many years and hundreds of millions of dollars to build.

Did I miss anything? Let me know what you think.

Hoping everyone has a prosperous 2016. Let’s kick some a$$ together!!

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Mike is the Co-Founder and Master Sensei of Hedgeable — the only private banking platform for millennials.