Tuesday, 3 March 2015

Fintech trends, analyst industry round up part 2

Guest post: Eria Odhuba analyst relations lead for Comms Crowd collates industry analysts predictions for fintech for insurance, China and the cryptocurrency eco-system.

Gonna be a scorcher for fintech
Before we get too far into March, I thought I’d follow up my previous predictions by continuing to look at what analysts think is in store for the rest of 2015. I’ve also given myself a bit more time to get information from calls, reports or announcements made during February.

One topic that is hot right now - insurance. If you’re like me, insurance rates seem to shoot up every year. But if technology is being used to make the insurance industry more cost effective (and, hopefully, pass the lower costs on to us), what are the key things to look out for in 2015.
Focused on the US insurance market, Aite Group predicts a new trend which will inevitably be widespread elsewhere – personal risk management. Key things to look out for include:

1. Smartphones enable next-generation risk management capabilities

2. The Internet of Things and sensor fusion technology contextualize risk

3. A personal data backlash creates monitoring opportunity

4. Insurance learns to share

5. Digital marketing platforms socialize

6. Core applications cloud compute

7. Risk-scoring models sell life insurance

8. Health insurance transparency reaches ubiquity

9. Health insurance payments go mobile

10. Docs demand denial-management data

Here in the UK, the key trends are 1, 2, 4, 5 and 6 (my take!) – we’ve not reached the health insurance penetration rates you get in the US, but there is a lot that vendors and clients will learn from the US experience.

For those interested in China, Kapronasia has looked at the top 10 China banking and capital market trends, plus the top 10 Asia digital currency trends. Key ones that jumped out for me include:

1. Wealth management will continue to be a key product area – with a growing elite class, this is inevitable especially as a growing band of rich Chinese look to pass their global wealth to heirs while minimising tax.

2. Chinese financial institutions move away from foreign vendors. Now this is big news. Over the past few years, the strategy for vendors looking to get into China has been to partner with local firms / individuals who can help navigate the bureaucracy that existed. It looks like Chinese firms are starting to build up the expertise needed to deliver many of the services that local financial services need, so foreigners will struggle to make in-roads. Value-add will be a premium for winning new business.

3. Overall digital currency regulation in Asia will not be positive. Trust is a hard thing to win, and digital currencies in Asia will be something the regulators look on with suspicion until they know more about them – and their potential for fraud. Basically, more money for analysts, consultants and lawyers that can help vendors and firms navigate what could potentially turn out to be a big, fat mess!

For more capital markets predictions, Greenwich Associates doesn’t just have 10 trends to watch, it has 15! Where do I start with these predictions, you just have to read them. The one I think will result in big structural changes (though all of them will) is number 7 – the unbundling debate in European equities will rage on. ESMA and the FCA have proposed a complete unbundling of all research advisory services including corporate access. Blood will be shed getting this sorted – and the buy-side firms will seriously have to think about how they access and use research to deliver value to clients.

Finally, what about Bitcoin? There are two sources I’d like to draw on regarding this.

First of all, let us look at Aite Group’s report in December 2014. This, controversially for some, came up with an interesting hypothesis. Bitcoin, as we know it now, might not exist in the future but could evolve and provide the platform for new laws and forms for cryptofinance within the financial services industry. The ‘Napster-came-before-Apple-and-Amazon-and-Google’ comparison might be something we look back on in a few years time.

Secondly, Juniper Research has published a report on The Future of Cryptocurrency. Whether bitcoin or other current forms of cryptocurrencies exist in 5 to 10 years time, Juniper predicts that although crypto-transaction volume is likely to increase in 2015, value should decrease 58% throughout this year to approximately $30 billion. It believes that despite the drop in bitcoin values, it is a great tool that can be used to improve the payments ecosystem.

Taking the Aite Group and Juniper Research reports / predictions together, it all makes sense. Crypto-currency transactions are in their infancy. With sensible regulation, sound storage and custodian services of cryptocurrencies, enhanced fraud protection and education, 2015 might just be the start of something really exciting.

Both the predictions above and those covered previously will drive the need for advice from the industry analyst community. There is so much change happening in fintech and a huge need to incorporate new things with old, creaking legacy systems, CIOs will have to prioritise with care.

Happy days!

If you found this interesting you may also like: 

How to ensure AR programmes deliver to the bottom line
- Part one
- Part two
- Part three

Or you may want to peruse our analyst relations whitepaper which is a summary of the above three blogs and can be downloaded here.

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