The financial technology market is booming as startups try to disrupt every area of finance. The growth the sector has enjoyed this year is expected to continue unabated in 2019, with one forecast pegging the compound annual growth rate at 74.16% from 2019 through 2025.
When it comes to the areas startups are aiming to disrupt it runs the gamut from banking to insurance. And while some industries will see more growth than others, traditional financial services companies should brace for a further shakeup in 2019. With that in mind, industry players across the fintech spectrum weighed in with their predictions for the fintech marketplace in 2019.
Insuretech Goes Mainstream; Spurs M&A
When it comes to fintech, insurance is one area that is slowly being disrupted. But if Victoria Treyger, Managing Director at Felicis Ventures’ prediction proves true 2019 will be the year insuretech goes mainstream. “We will see changes in how ‘insurance’ is sold where it becomes bundled with other home services especially apartment rentals and home sales,” said Treyger. “Businesses will see a sharp increase in all types of commercial insurance that they can buy directly online rather than through brokers.”
One area the investor thinks will see “dramatic growth” is in cyber insurance as it becomes commonplace for businesses to have this type of coverage. As hackers grow more sophisticated and data breaches happen at an even faster pace threatening the reputations of any sized business, companies will want to protect themselves. Treyger said the insurtech market is also going to get a lot of interest from investors in the New Year. Expect to see more mergers and acquisitions as the traditional insurance companies “snap up the insurtech companies in order to drive growth and acquire the direct to customer distribution channel,” she said.
Online Lending Growth May Dip But Fintechs Will Adapt
Online lending is a more mature area of the fintech market, but that doesn’t mean it will see a slowdown next year. And that’s even with a backdrop of macroeconomic uncertainty and a growth rate that could see year-over-year declines. Vince Passione, chief executive and founder of LendKey, the lending platform, and online marketplace, predicts fintechs in the lending space will create white-label lending platforms and will develop software as a service relationships with banks and credit unions as an alternative revenue stream. What’s more, Passione predicts fintechs will make the loan origination process even faster in the New Year. “Fintechs will invest in greater automation to replace manual processes, resulting in a faster loan origination process,” said the executive. “Automation removes friction for the borrower from the application process and reduces the chance of human error in processing the loan documentation.”
Fintechs Will Stay Private Longer
This year saw a lot of technology companies, particularly in the software industry, tap the public markets via initial public offerings. Airbnb and Uber are expected to launch IPOs in the New Year, but they could be the exceptions. There are expectations among some that fintechs will stay private longer. "Capital markets data show that the median age at which companies go public has grown from 6.3 years in the 1980s to 10.2 years in this decade,” said Kelly Rodriques, Chief Executive of Equidate, a stock market for private tech companies. “In 2019, CEOs and their boards will continue to balance the needs of a wide range of stakeholders as they evaluate whether and when to go public.” With staying private longer becoming an attractive path for fintechs, Rodriques predicts fintechs will face more pressure to ensure liquidity, which will be critical for the startups to sustain their momentum.
Cryptocurrency As A Payment Method Will Grow
To date cryptocurrency payments have been a niche application with Bitcoin failing to take off with the masses. But in 2019, Sanja Kon, vice president of global partnerships at crypto-commerce company UTRUST thinks there will be a rise in cryptocurrency payments as more customers get educated on the advantages of using digital currency. She pointed to lower transactions costs as one of the big benefits. Kon predicts biometrics technology will be embraced in a bigger way in 2019 as mobile device adoption continues to grow as will the number of peer-to-peer payment platforms available to consumers. “Peer to peer payments will continue to grow in double digits next year, driven by the widespread adoption of smartphones and convenience offered by the P2P apps,” said Kon. “Venmo reported that it processed over $35 billion worth of transactions in 2017, resulting in a 95% increase in growth of payment volume vs the previous year.”
