FinTech platform revenues will reach $638 billion by 2024, up from an estimated $263 billion in 2019. And blockchain technology will have a key role to play, according to Juniper Research.
Along with the likes of machine learning and Big Data analytics, it will be the cornerstone of FinTech platforms. Such technologies will make new use cases mainstream, including smart contracts, loan underwriting using AI to analyse non-traditional data sources, and personalised insurance policies based on IoT-generated data.
Incumbents fight back
In light of rising customer acceptance of digital platforms for financial services, traditional players are responding rapidly. Incumbents are attempting to replicate FinTech firms’ offerings; for example with digital banking offshoots (Marcus from Goldman Sachs) or new services (HSBC’s Wealth Compass). Juniper Research believes that incumbents will use these strategies to appeal to users outside their normal target audience, such as Millennials, to secure future revenue streams.
Where incumbents cannot replicate their younger rivals, they are partnering with startups. For example, Austrian banking group Bawag is using Spotcap’s lending-as-a-service platform to support SME lending. The challenge, however, is to integrate these partnerships in a seamless way, keeping friction low and maintaining control of the overall customer journey.
Juniper Research’s Michael Larner comments: ‘The distinction between the FinTech suppliers and traditional incumbents will blur in the 2020s; digital engagement will become the norm. The winners will be those that provide personalisation allied to an outstanding customer experience.”
Juniper Research also reckons that heavy regulatory burdens imposed on financial institutions after the 2008 financial crisis mean direct entry, beyond partnerships, remains unlikely in the medium term for even large technology companies.