Trends are the froth on the seas of change. It’s tides and currents you want to be aware of.
First published by Bird Lovegod in the Yorkshire Post in January but worht a repeat.
I was recently asked to write an article on the three current trends in fintech. After giving it some thought, I realised there was no point. Trends are like the weather. They come and go, what’s trending on social media today won’t be trending tomorrow. In fintech especially, trends are unimportant.
As a sector, fintech is complex, heavy, it’s all about millions, if not billions, or trillions, of pounds. It’s about long term changes, digitisation of vast global networks, and developing and connecting new financial infrastructures. And the regulation of the industry is serious, we’re talking about creating new banks in some instances, FCA approval takes years, investors are in it for the long term, not to make a quick buck. Trends are the froth on the sea of change. You can read the froth all you like, and watch it get blown around, but it’s the tides and currents that hold meaning and direction.
So a better question would be ‘What’s important in fintech right now?’
Firstly, it’s necessary to understand what influences fintech. One of the main factors is Technology, clearly. The entire sector exists because of radical changes in technology.
Another factor is Regulation. Changes in regulation have a profound effect on shaping the fintech sector, the companies in it, and the products and services they offer. The entire sector operates within a space defined by regulation. Regulation provides the borders, the coastline, for the fintech seas. Without regulation it would be an absolute free for all.
The third factor and one rarely talked about is People. The fintech reformation of the 21st century is not just a technological movement, it’s a reflection of culture and society. The first fintech companies emerged from the economic rubble of the financial crash. They offered to take on the banks and the banking system, to disrupt it, to replace it, piece by piece. Technology had made it possible, but it was the financial crisis that made it culturally desirable. People had lost trust in the banks, lost faith in the system, and when companies like TransferWise stood up and said they could so the same thing for a fraction of the cost, they found a welcome audience. Societal conditions are key to commercial success. The fintech scene couldn’t have happened before the banking system proved itself flawed.
So let’s have a look at what’s changing in fintech currently. Changes in regulation. Two big ones, GDPR, giving EU individual’s rights over their data, and PDS2, requiring banks to share their customer data with authorised third parties. Movements in technology. Blockchain is still a big deal. So is Artificial intelligence. Cryptocurrencies are also making a lot of noise, although they struggle to justify their own purpose. Changes in society. A heightened awareness of human rights, environmental issues, and ethics; made increasingly more glaring by local and international political polarities. You might think the political climate is heading in a less ethical direction, and perhaps it is. However, it’s my observation that cultural movements are created by their own opposites, a political tendency towards division will help create a cultural movement towards unity.
How will these changes in regulation and changes in technology react when combined? And how will they be packaged and made available to an increasingly conscientious consumer base? And what innovative and potentially disruptive companies will emerge as a result? The big hidden factor is the human one. My personal prediction is that radically ethical companies will emerge as the new disruptors of the coming age. The next big thing is going to be a humanised version of finance, a hyper ethical version, that takes doing good to extremes. Fintech companies, and companies with fintech services integrated into them, will take it upon themselves to really change the World. They will use the technologies where required, Ai, Blockchain, and others, but the driving force will be humanity rather than technology. Success will be counted in transformed lives, saved lives, and humanitarian interventions done on a huge scale. Companies who measure success on a balance sheet will suddenly look old fashioned, hollow, and irrelevant. The visible humanitarian impact of hyper ethical companies will drive expansion through millennial generations at viral speed, and the engagement of millennial generations in the process will bind culture, commerce and finance into a single thread.
A hybrid of commercial power, charitable intent, and global ambition. Under the froth of what’s trending on Twitter, that’s what’s rising up from the deep.