8 FinTech and Crypto Predictions for 2019
It was a big year for FinTech and Crypto in 2018 and the coming year is shaping up to be every bit as exciting.
Here are some predictions for 2019:
1. Institutionalization of the Crypto Ecosystem: The Toddler Growing Up
This year saw the crypto space grow from a baby to a toddler. Its maturation was driven by the development of best practices by industry associations and by announcements from institutional players such as Goldman Sachs, Nomura, Fidelity and others that they’re launching crypto offerings.
Expect more such announcements in 2019 as other institutional players, from exchanges to service providers, decide to announce their crypto initiatives, either by building their own solutions or partnering with or investing in crypto companies. This is a very positive step for the crypto ecosystem, providing a much-needed dose of experience and institutional maturity. The surprises may come from some of the large tech firms who are reported to have been building their blockchain and crypto teams in recent months.
2. More Crypto Regulation, Please!
Many regulators around the world are quite knowledgeable about crypto and often don’t get the credit they deserve for their forward-thinking policies. This past year saw many regulators, from Hong Kong and Switzerland to Malta and Gibraltar, issuing proactive guidelines and frameworks for cryptoassets.
In 2019 you can expect even more regulators and governments to look at providing the regulatory clarity that the crypto industry both wants and needs. The surprises here may come not from the existing crypto-friendly jurisdictions but from some of the larger and traditionally less nimble jurisdictions. France, for example, is pushing through legislation for ICOs, while in the United States a bipartisan initiative is underway to make the US more competitive as a crypto jurisdiction.
3. Bye Bye ICOs — Hello Security and Stable Tokens
With over US$20 billion raised, according to some sources (although the market substantially slowed down in the second half of the year), 2018 was a record year for ICOs. And 2019 will likely be the year of security tokens, which are more akin to traditional securities and are backed by hard assets. For example, for real estate projects, security tokens can provide liquidity by tokenizing large real estate assets and streamlining corporate actions.
Stable coins, which are backed 1:1 by fiat currencies, will also play a larger role in 2019. They’re seen as a safe haven for crypto traders looking for stability without leaving the crypto ecosystem, and are also attractive to mainstream users looking for a means of payment or a stable store of value to conduct day-to-day transactions.
4. Virtual Banks to Drive Innovation in 2019?
This may be the year of the challenger, or virtual, banks. These digital-only offerings are getting traction in the UK and Europe, with players such as Revolut now reported to have over 2 million clients. But it’s in Asia where we may see their biggest impact.
For example, Hong Kong regulators are set to approve, for the first time, new virtual banks that could include digital-only offerings launched not only by traditional banks but also by the large tech firms and FinTech unicorns. This could change the retail and SME banking landscape across Asia, as these new digital offerings can solve real-world problems, including the relatively poor user experience for retail banking consumers or the lack of integration with accounting and other SME-specific software for commercial clients.
5. Financial Health: Meditation for My Brain, Gym for My Body and FinTech for My Wallet!
We exercise for our physical health. We meditate for our mental health. But we still don’t actively use FinTech for our financial health — when it’s desperately needed. According to some reports, about 57% of Americans don’t have even US$400 of savings to cover an emergency expense and 43% of Americans have been carrying credit card debt for over two years.
This can hopefully start to change in 2019 as financial health comes to the forefront and consumers begin using FinTech solutions, from P2P lending to roboadvisors, to help improve their financial lifestyles. Virtual banks may be the catalyst, as they try to integrate such solutions to try to differentiate their offerings and help with client acquisition.
6. Forget Banks and Their Innovation Teams — Here Come Virtual Banks and Crypto Companies
In 2018, some B2B FinTech and RegTech firms stopped working with bank innovation teams, who are often criticized for moving slowly and lacking budget. There is a constant perception that some incumbent banks want to partner with FinTech firms or conduct proof of concepts more as a marketing tool than as a driver of meaningful change within their organizations.
In 2019, many of those B2B FinTech and RegTech players may pivot to focus only on crypto companies or virtual banks, where there are no legacy issues, decisions can be made quickly, and regulatory compliance is seen as a competitive advantage rather than a cost centre.
7. Regulators Catalyzing Innovation
Global regulatory collaboration is increasing and improving every year, with organizations such as IOSCO having become impressive forums for coordination and sharing. Regulators are now leading by example, spurring innovation in many instances.
For example, one regulator-led initiative set to launch in 2019 is the Global Financial Innovation Network (GFIN), which aims to include regulators globally, from Canada to Bahrain and Singapore to Australia. Not only does it provide features you would expect, like regulatory cooperation and cross-border engagement, but it also includes initiatives such as cross-border trials that allow companies to test new tech product across multiple jurisdictions.
8. Data Privacy: Power to the Consumer!
In 2018, media and public scrutiny of platforms like Facebook or Google — where users give out their data for free to be able to use services or search engines — increased substantially.
This may have accelerated the long-term trend towards giving users control of their data and allowing them to monetize it in various ways, including using crypto micro-payments. In addition, we may see pricing variations in the value of data based on uniqueness and specialization; for example, a professional mountain climber or triathlete could command a higher price for his or her data than a person with a standard nine-to-five job.
About the author
Henri Arslanian (Henri.Arslanian@hk.pwc.com)
Henri Arslanian is the PwC FinTech & Crypto Leader for Asia, the Chairman of the FinTech Association of Hong Kong and an Adjunct Associate Professor at the University of Hong Kong, where he teaches the first FinTech university course in Asia.
With around half a million LinkedIn followers, Henri has been awarded many industry and academic awards over the years, from being regularly named one of the Most Influential Individuals in FinTech in Asia to being awarded the Governor General of Canada Gold Medal for Academic Excellence. Henri was also recognized as one of the Global 2017 LinkedIn Top Voices in Economy & Finance and is regularly featured in global media, including Bloomberg, CNBC, CNN, the Wall Street Journal and the Financial Times.
Before joining PwC, Henri was with a FinTech start-up and previously spent many years with UBS Investment Bank in Hong Kong. He started his career as a financial markets and funds lawyer in Canada and Hong Kong. Henri is also a TEDx speaker, a published author, and currently sits on several finance, academic, government, civil society and FinTech-related and advisory boards globally.
Other recent articles from the author include:
- The New Regulatory Framework for Crypto Exchanges in Hong Kong: 10 Things You Need to Know
- The New Regulatory Framework for Crypto Funds in Hong Kong: 10 Things You Need to Know
- Want to launch a crypto fund? 6 Things You Need to Know
- Want to do an ICO? 5 Things You Need to Know Before You Do
- 5 Ways FinTech Will Change the Hedge Fund Industry