2018: The Year Ahead in FinTech

2017 was quite a year for FinTech. So, as we head into 2018, what can we expect to see? Here are a few things we’re keeping our eye on:

Infrastructure and Enabling Becomes Focus in the $640bn Tech Space

While a lot of investment lies in front user-facing technology, no one has really invested in building the new technology, enabling or infrastructure that incumbents can use. This will result in incumbents biting the bullet to release themselves from massive legacy systems and moving their platforms to cloud-like services. Legacy tech providers are going to be forced to reckon with a consultative model that doesn’t allow for incumbents to advance. And incumbents will focus on creating flexible and light, yet secure, value chains that don’t wed them to one platform or cost base.

How This is Playing Out

  • Cross River and n26 become examples of flexible, cloud-based plug & play platforms.
  • Due to client demand, FIS, IBM, and CA began cutting consultants and investing in scalable enabling technologies available in the cloud.
  • nCino demonstrates how banks can use a cloud-based platform for a service that’s accessible via Salesforce, a growing ecosystem player.

Talent Race and Shift

The labor market for finance and FinTech is going to become increasingly confusing to incumbents. On one hand, they’ll need to maintain legacy systems with tenured staff, while in order to compete they’ll need to shift to pro-developer workforces across functions. And as many top-ranked engineers start to head west, the east coast finance companies and FinTech companies will need creative solutions to attract and retain fresh talent.

“Millennials…know how to upgrade your complicated infrastructure from Fortran to Ruby, how blockchain applies to your business model and how to save money on market data. Millennials can also streamline your interbank APIs and get your whole platform on the cloud. It’s a brave new world, and it’s not getting any slower.”

Unbundling and Frenemies

Imagine a world where Vanguard opens accounts, enables funding via Venmo and allows for proxy voting within the Yahoo! Finance app. This year that scenario is more likely. Asset managers will get closer and closer to the end customer, bypassing traditional sales channels. And the top asset managers will unleash components of their algorithms to allow for distributed Robos that direct consumers into their low/no fee ETF products.

Competition will put increased downward pressure on trading fees and force financial institutions to release more components of their customer journey into user experiences. And the competitive unbundling will push marketing teams to abandon the traditional conversion funnel expectations for immediate transactional activity and results.


As Financial Institutions shift from legacy systems to cloud-based services, the race to build financial technology ecosystems will accelerate. As demonstrated by Dr. Rahul Basole, in his work with visual analytics of ecosystems, it’s clear that speed to market, depth of developers and available number of APIs will drive successful outcomes in business moving forward.  

As the traditional linear value chain is disrupted in favor of plug & play ecosystems, financial institutions will need to move quickly to modularize components to be available in as many ecosystems as possible, while at the same time making their core service offerings essential for others to plug their APIs into their platforms. While this may seem confusing and like a brave new world, Professor Basole’s work on APIs and the battleground between Amazon and Walmart is illustrative of the potential pitfalls and benefits.  

Potential M&A Opportunities

  • One of the big three challenger Robos (Betterment/Wealthfront/Personal Capital) will be bought by an incumbent looking to play catch-up with Vanguard and Schwab’s momentum. 90% Confidence
  • Ant and WeChat will make plays for a US FinTech company in either the money transfer space or payments space in addition to the repeated push to gobble up MoneyGram. 90% Confidence
  • PayPal buys a PFM platform targeting millennials that gives them hooks into the full spectrum of millennial finances. Bold move possibility: PayPal buys SoFi. 75% Confidence.
  • Broker Consolidation, TD buys RobinHood. 50% Confidence
  • Wisdom Tree gets bought by a Passive Fund Management Firm. 50% Confidence
  • Amazon will be the first mover to buy a FinTech platform that allows financial institutions to put their customer journey in the Amazon experience: Alexa, Echo or Amazon Wallet. 75% Confidence
  • Amazon launches their own cryptocurrency for customers, vendors and the entire supply chain rather than partnering with an existing platform. 50% Confidence  
  • State Farm Insurance makes a bold $Bn play for Lemonade. 50% Confidence
  • JP Morgan, Citi or Goldman Sachs buys a Square and/or Stripe. 50% Confidence

What are your big predictions for 2018?

2017 Year in Review

As this year comes to a close, we’re taking a moment to reflect on the biggest fintech happenings of 2017. Allow us to refresh your memory…

Scope and Scale…or Fail

In order to scale, you need scope and in order to have scope, you need scale. It’s the classic chicken and egg strategic scenario. We’ve seen how scale and scope can help, but on their own, they’re a three-legged stool. Technical innovation is the missing leg to complement them for true success. So the question for both incumbent and new entrant financial institutions is: How can you gain scope and scale? Learn from these failures and successes…

Unbundlings: Disrupting the Disruptors  

Will Asset Managers move closer to customer relationships as they race to acquire more assets? We looked at some of the behavioral shifts in digital and customer expectations and found that consumer attention is increasingly tricky and even more expensive to get. In order to create stickiness, financial Institutions need to start using latent technology, data, and other signals to surface the component of their customer journey at the right time (and the technology and messaging platforms need to be able to deliver). Find out how in this three-part post…

The Importance of Understanding the Psychographics of your Consumer  

The psychographics of consumers — their activities, interests, and opinions — are the underexploited levers that could drive Finance Companies and Financial Apps. In order to create stickiness and build a relationship, we found that companies need to focus on what the customer feels — not who they are. Be wary of throwing stuff at a user and distracting them from why they came to your site in the first place — lean into your strength. Learn how to use psychographics to your advantage…

FAANGS In Finance

Earlier this year we documented the upside opportunity for Google, Facebook, and Amazon to build financial services products, following in the footsteps of their Chinese counterparts Baidu, Tencent, and Alibaba. We also explored the potential of Financial Institutions bringing their customer journey into the FAANGs experience. Learn more about how you can — and should — use these FAANGS to your benefit…

What’s Next for the Robo-Advisor?

First championed by venture-backed startups, the robo-advisor was quickly replicated by incumbent firms. Today, the startups in the space are seeing declining growth rates, while competing with the incumbents they once threatened. To achieve staying power as stand-alone companies, the next generation of wealth management startups will need to invest heavily in cutting-edge technology, not clever marketing. Find out Where Robo-Advisors Went Wrong…

Stay tuned for our look ahead to 2018…

Unbundlings: Disrupting the Disruptors – Part 3

This is part 3 of our 3-part series on “unbundlings”. Read parts 1 and 2 now.

The Great “X-factor” of AI

Artificial Intelligence is still in its infancy. As experts note, there’s a dearth of roughly 4,000 true experts nationwide on AI and the majority work at Google, Facebook, Amazon, and Apple—with the margin being lured into Goldman or Quant Funds. Even more insightful is recent news that Microsoft is significantly cutting sales people in favor of “developer activists.” Could this mean AI is closer than we think? One thing we do know is that AI improves results by applying methods derived from aspects of Human Intelligence at a beyond human scale.

So, while there’s a growing “alt-data” movement in the FinTech world, very few retail firms have tapped into the potential to make both the consumers and their own bottom lines stronger. And if history is any indicator, waiting for the Big Four to define the space will only mean you’ve missed the boat by the time it happens. It’s important to get off the sidelines, onto the field and join the team.

Future’s So Bright

AI Start-ups saw record funding last year. While it would be beyond us to predict the future of how AI is going to unbundle investment firms to unleash the power of their products and features, it’s the investment firms who have the customer data, relationships, and future retirement in the palm of their hands. And it’s those firms that can capitalize the most on reframing the customer connection and using AI data to have a better understanding of their needs. FinTech companies need to use these assets to partner with the Big Four and create partnerships that marry these two.

Starting Point Tips

  • If privacy, compliance or security (PCS) are concerns, address these items by partnering with approved vendors and make these “qualifying criteria” for partnership.
  • Inform the Big Four that after PCS, your goal is to grow your customer relationship, resulting in more money for both your customer and your company.
  • Identify key champions at the Big Four who can help you to shift your advertising budget into a transactional budget that’s measured on engagement on these platforms.

The Future Waits for No One

The question is not if but:

  • How fast these “unbundlings” will come
  • Who’s best prepared to benefit from these events
  • Who will fail in the process

Where will your organization land?

Watch later this week for our Year in Review and next week for our Year Ahead.