It’s been quite a year for the fintech industry. Even jaded investors probably raised their eyebrows once or twice.
The 2017 milestones for fintech — that’s short for financial technology — have ranged from the launch of bitcoin futures
to robo adviser Betterment exceeding $10 billion in investor money.
Could the new year bring more big developments? Or major flops?
We asked players in the growing industry about what looks overhyped as 2018 nears — as well as what appears underappreciated. We also asked them for their fintech predictions, including potential surprises.
Read on for their responses.
Takes on the crypto craze, including forecasts
• “Bitcoin, blockchain, basta! I think we all recognize the potential for the blockchain to fundamentally change how we do business, but the hype is simply overwhelming for someone who looks at this stuff on a daily basis. I need a blockchain vacation.”—Tadas Viskanta, founder and editor of investment blog Abnormal Returns
• “Investing in bitcoin is clearly overhyped, and I expect to see large fluctuations in price in 2018. So the key is understanding that cryptocurrencies are fantastic inventions of our times, and we will see many use cases in 2018. But investing in bitcoin now should only be done with the part of one’s asset allocation mix which is reserved for high-risk investments.”—Susanne Chishti, CEO and founder of Fintech Circle
• “While blockchain and bitcoin were an attempt to create an economic system that was independent of governments, banks and corporations, we will see a big move from these bodies to play a more significant role in this space. We believe independent cryptocurrencies have a future and are here to stay as long they have a viable economic model and the token is backed by a tangible value. We imagine a future where each industry niche will have its own currency.”—Ankur Consul, partner at venture-capital firm HigherOrder VC
• “You’re going to see a lot more [crypto] exchanges coming to the marketplace. You see Coinbase — everyone likes to throw out the 100,000 accounts in a day statistic, [saying] ‘… OK, if they get 100,000, then maybe I just get 1,000. I can still start my own exchange with 1,000 customers.’” —Matthew Miller, COO of Shift Markets, which aims to help clients start their own cryptocurrency exchanges
Reports of robos’ asset gathering may be greatly exaggerated
• “There is an assumption that the large incumbents’ (fund companies, banks, etc.) ‘robo advisers’ are guaranteed to gather assets. A few certainly will, but we’d expect some of them to struggle to gain assets when their customer experiences don’t connect with consumer needs.”—Jon Stein, CEO and founder of Betterment
• “Robo advisers themselves have been and continue to be grossly overhyped. If you look at the ACTUAL adoption of assets for the pure robo advisers (e.g. Betterment and Wealthfront), the assets are just trivial. Combined they’re less than $20 billion of AUM [assets under management] after six years. That’s less than Vanguard gets in a typical month now. It’s less than 0.1% market share.”—Michael Kitces, partner and research director at Pinnacle Advisory Group and publisher of the Nerd’s Eye View financial planning blog
• “We don’t appreciate the degree to which the robo-adviser model has simply become how money will be managed going forward. The analogy I draw is to the media. Ten to 15 years ago blogs were this other ‘thing’ that the mainstream media wanted to ignore as best it could. Now blogs/blogging is how everyone communicates their ideas (longer than 280 characters). The same goes for online, automated investment solutions. Five years ago, robo advisers were viewed as risky and only appropriate for 20-somethings with no money. Now nearly every big investment firm has some sort of automated solution.”—Tadas Viskanta, founder and editor of investment blog Abnormal Returns
Other fintech predictions: Women, AI, big data, insurance
• “2018 will be the year of women and diversity. There are so many excellent female fintech entrepreneurs, investors and thought leaders out there, and they will finally break through our male-dominated technology and finance industries. …The most powerful male leaders in finance and politics are demanding now that conference organizers, for example, select female speakers, otherwise they will not speak either.”—Susanne Chishti, CEO and founder of Fintech Circle
• “So far, the hype about artificial intelligence is even bigger than the actual successes right now. The potential is still infinite, and therefore it will remain the topic in 2018. AI needs time and, above all, a lot of data on the basis of which a behavior can be detected in the first place.”—Ramin Niroumand, CEO and co-founder of FinLeap, a “company builder” that has launched a number of fintech companies
• “The hype that big data (of increasingly dubious quality and quantity) directly equates to insights and business cases is finally dying down. We are finally reaching a much better quality-versus-quantity equilibrium, even more so if used in conjunction with the right type of machine learning.”—Jeremy Sosabowski, CEO and co-founder of AlgoDynamix, which aims to provide warnings before big market selloffs
• “I don’t know if this counts as a surprise, or merely a hope, but insurance has largely been untouched by fintech. There are some exceptions of course, but this big chunk of our financial lives is ripe for being disrupted whether it be home, auto, life, health, disability, etc. There is simply too much data out there than can be used to make better, more accurate, risk assessments which should translate into better pricing and services for everyone.”—Tadas Viskanta, founder and editor of investment blog Abnormal Returns