VCs Say These Are the Next Big Trends in Fintech
Fintech is enjoying an exciting period of growth. Venture capital contributions are not only up year-to-year – as evidenced by an increase in funding from $1.9 billion in 2010 to $27.5 billion in 2017, according to Forbes – they are up significantly. KPMG’s twice-yearly Pulse of Fintech report detailed a total of $122 billion in funding for fintech companies since 2015, as well as a major uptick in private equity and mergers and acquisitions deals through Q1 and Q2 2018, already exceeding 2017’s totals.
The rise of smartphones, as well as Big Data, cloud computing, AI, and blockchain, are making financial transactions quicker and more efficient than ever. Fintech encompasses many different sub-categories of business, and while some areas, like lending, have fallen out of fashion at the moment, others are just heating up.
Insurance is one arm of fintech enjoying a period of growth. Blockchain is a natural fit for the space – with the advent of smart contracts (like those programmable on Ethereum’s blockchain) that don’t need oversight to ensure they behave as intended, there is considerable potential to automate previously labor-intensive processes, like paying out claims.
Patricia Kemp, a general partner at venture capital firm Oak HC/FT, said at Forbes’ 30 Under 30 Summit that insurance is a “terrific use case” – provided fundamental aspects change first. “70 percent of the cost of insurance is moving paper around,” said Kemp. “So there’s all this innovation needed in just the basics before you even get to something like smart contracts.” Companies like Lemonade, who offer renters and home insurance policies, have recently expanded operations – Oak has also invested in startups like Trov and Clara Analytics, who use artificial intelligence and machine learning to provide “on-demand, single-item insurance” and reduce operating costs for managing claims, respectively.
Merritt Hummer, a principal at Bain Capital Ventures, told Forbes’ 30 Under 30 Summit attendees that real estate has risen to the top of investors’ minds “in the past 12 to 18 months”, with both existing VC firms and real estate companies founding their own funds. Beneficiaries include San Francisco’s Opendoor, which allows users to buy and sell homes while bypassing the traditional, slow real estate market (and is now valued at over $2 billion). Companies like LendingHome are streamlining the process of securing a mortgage, while other platforms simplify the processes of investing in and viewing real estate by bringing them into the digital world – often by eliminating labor-intensive, paper-centric workflows.
We seem to be seeing only the tip of the fintech innovation. Simplifying complicated tasks in insurance, real estate, and more with creative, innovative products points to an exciting future for fintech investors, companies, and customers alike.
The Investment Industry is Also Benefiting from Innovation in Fintech
Hedge funds and large institutional investors have been using Artificial Intelligence to analyze large data sets for investment opportunities, and they have also unleashed A.I. on charts to discover patterns and trends. Not only can the A.I. scan thousands of individual securities and cryptocurrencies for patterns and trends, and it generates trade ideas based on what it finds. Hedge funds have had a leg-up on the retail investor for some time now.
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