There is no doubt that 2016 has been a tumultuous year.
From Brexit to Trump and the Ukraine to Syria, we have seen many upheavals on the geopolitical front. A lot has happened in Fintech, too, although here the upheaval has in my opinion been almost all positive. Today FinTech is firmly established as one of the biggest sectors in all technology.
What will next year bring?
We can look forward to more tumult I think. If there is one overarching FinTech trend, I would say that several things that were only “potentials” in 2016 will become much more concrete. That could make 2017 the “year of getting real” on a number of fronts.
Here are some of my thoughts.
The year ahead: Predictions for 2017
- The year of the pilot. 2017 will be the “year of the pilot” for blockchain in financial services, as it moves from proof-of-concept into production. We should see this in particular in cross-border payments and trade finance. Overall however blockchain will still be restricted to the “low hanging fruit” in banking. I remain convinced that broad-based application of DLTs will happen more quickly outside of financial services.
- The year of the standard. We may see significant progress in blockchain standards during the year. If so, it will be driven by small groups working on specific use cases as opposed to large, complex consortia. Indeed, I expect we will see consolidation in the blockchain consortia area.
- The year of the platform. On the back of increased standards and interoperability, we should see broad-based platforms and ecosystems continue to emerge, driving banking as a service and the creation of new business models. Look for this particularly in the robo-advisory and lending businesses.
- The year of the attack. The number of cyber-attacks on organizations will increase significantly, and we can expect a steady stream of revelations about hacks. Denial of service is becoming much more threatening and dangerous for banks and in 2017 banks and others will be called on to toughen their defenses. This will be reflected in cyber-security spends, which among wholesale banks will increase from 5% of total tech budgets to 7-8%.
Eye on the prizes: Trends to watch in 2017
Along with the above “predictions”, here are some of the trends I think worth keeping an eye on in the coming year.
- PSD2 pushing partnerships between banks and FinTechs. Banks and other financial services players will have to spend 2017 preparing for the implementation of the revised EU payment services directive PSD2 in 2018. With the creation of open banking platforms, there will be opportunities for FinTechs to partner with banks to create more exciting customer experiences and provide increased transparency on performance and fee structures.
- Competition among financial centers for FinTech innovation. 2016 was the year of regulatory sandboxes with the FCA and MAS Singapore leading the change by establishing themselves as business developers with a mandate to attract business to their respective jurisdictions. In 2017, leading regulators will strengthen their position with global collaboration and implementation of new policies and laws based on learnings from their “sandbox” environments in order to reduce uncertainty in the FinTech ecosystem.
- The continued rise of smart machines. It’s no secret that there are great strides happening right now in artificial intelligence. Advances in machine learning and robotics will I think continue to sweep the business world. Startups will continue to get funding in the areas of risk assessment, research, investment management, trading and back office automation.
- An intensified war for talent. Banks and FinTechs will be competing for people with the right skills. The key expertise in financial services will be in artificial intelligence, in particular robotics and machine learning, where the game will be to attract scientists with Masters Degrees and PhDs. There will also be a battle for domain and technicaly expertise in finance, distributed ledger technology, and cyber security.
A new road
Finally, 2016 was a very big year for me personally.
2016 was also the year of the launch of Bussmann Advisory, with the goal of helping companies stay ahead of the digital disruption curve.
The company has gotten off to excellent start, better than I could have imagined. For that I am grateful, to my new clients and all those who have collaborated with me and supported this move.
With that, I would like to wish everyone the best of the season and a happy and healthy new year. It promises to be an interesting one.
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