7 Things That Will Shape the Future of Fintech: Fintech companies should get ready for a quickly shifting market driven by new regulations and modifications in consumer behavior, based on a written report by McKinsey & Company. The consultancy recently released new information outlining seven critical elements of these changes and just how companies can be successful in the area. Along with fintech companies, financial advisors might want to take a close look at these trends to remain in front of significant market changes.
In this post, we are going to consider the report’s findings and what it really means for the fintech industry and financial advisors that leverage these technologies.
1. Expanding Scope
The fintech industry has expanded into a lot more than 30 different financial services through the entire value chain. For instance, social finance (SoFi) has expanded from offering financial products to young professionals to career coaching and networking. These trends could indicate increasing competition for robo-advisors and traditional financial advisors as fintech companies involved with ancillary financial services add advisory services for their core product offerings.
2. Increasing Diversity
Fintech companies are employing a multitude of business models that focus on an assorted selection of customers. For instance, robo-advisors target younger tech-savvy clients searching for streamlined retirement savings, while other models concentrate on helping financial advisors offload time-consuming tasks like portfolio rebalancing and concentrate on value-added activities. Advisors should make sure that they’re benefiting from these technologies.
3. Improving Collaboration
Fintech companies have already been collaborating with one another to increase their revenue and market share. For instance, BBVA Compass is dealing with FutureAdvisor to provide low-cost financial advisory services to assist customers with portfolio optimization. Traditional financial advisors should consider the same types of collaborations to lower their expenses, reach a wider potential audience and boost their technological competitiveness. (For additional, see: Robo-Advisors and Banks: The Following Robo-Frontier.)
4. Impending Consolidation
Fintech companies will probably see consolidation as larger players consider acquisitions to satisfy their growth objectives. For instance, Prosper Marketplace spent $30 million to get BillGuard, renamed it Prosper Daily and enabled users to monitor spending and credit. Financial advisors should know about these changes and work together with established companies, in addition to take full advantage of any acquisitions produced by their very own platforms.
5. Normalizing Valuations
The fintech industry has started to decelerate because it has matured, meaning valuations for start-ups within the space slowed down. Between 2014 and 2015, valuations for fintech companies grew by 77% typically before slowing to 9% between 2015 and 2016. Traditional financial advisors should remember that this slowing growth can lead to fewer start-ups and much more failures, meaning picking established fintech firms may well be a wiser choice.
6. Shifting Regulations
The regulations around the financial services industry began to adjust to fintech businesses that have entered the marketplace. In some instances, these regulatory changes could hurt fintech businesses that have effectively circumvented existing rules. In some cases, fintech companies may help financial advisors adhere to the most recent regulations and help you to concentrate on clients rather than be worried about legal matters just as much. (For additional, see: Fintech Firms Getting ready for Regulatory Changes.)
7: Emerging Ecosystems
Fintech companies may start to produce their very own ecosystems to satisfy clients’ needs. For instance, peer-to-peer loan providers may eventually choose to branch out into financial advisory businesses given that they serve exactly the same customer base. Financial advisors should make sure that they’re an integral part of these ecosystems over the long term to benefit from these changes instead of being left out and attempting and get caught up in the future.
The Conclusion
McKinsey & Company’s latest research highlighted seven important changes occurring inside the fintech industry that may impact financial advisors as well as their competitors. By being conscious of these changes, advisors can make sure that they’re well positioned to remain in front of the trend and take part in the long run instead of being left out.
