What is the next big thing in fintech? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.

Answer by Bonnie Foley-Wong, CEO of Pique Ventures, on Quora:

If someone asked me this question six months ago, I probably would have said blockchain and distributed ledger systems (think of all that paperwork it could replace!) "Next big thing" depends upon where--North America or Western Europe, China, or "developing economies" such as in Africa or South America? However, if I think about financial services broadly, trends begin to reveal themselves.

The most prominent theme I'm seeing in the financial services industry is the rise of digital banking. As a consequence, the digitization and automation of financial services in small business banking is potentially a significant opportunity. Another significant area is digital and mobile banking to provide basic access to financial services (2 billion adults do not have a bank account).

A number of broader trends are impacting the financial services industry:

  • Low or negative interest rates
  • Debt-fueled economic growth
  • Pressure to reduce costs meaning automation is increasingly more attractive
  • How to retain/maintain customer relationships and attention to service
  • In general, an industry with a future-oriented lens that is focused on managing risks ahead of innovation
  • Customers are expecting digital and mobile offerings of financial services
  • Branch networks are shrinking

Lending, credit cards, and mortgages will continue to be large market opportunities. Financial institutions will be looking for ways to reduce costs and increase their margins on these products, creating fertile ground for fintech solutions.

Taking a look at the type of fintech opportunities I've been seeing over the past year to 18 months as an investor, I've seen a few business-to-business solutions including automating workflow, introducing algorithmic predictive cashflow analysis for small businesses, and digitizing underwriting and pricing financial products for small business lending. These opportunities mainly center around the same recurring theme--financial activities are costly for small businesses due to lack of scale, coupled with small and medium-sized enterprises being drivers of economic growth, which means financial institutions need more cost-efficient and effective ways of serving this market. Financial technology is the direction this is heading.

Two billion adults worldwide do not have bank accounts. This represents a completely new market opportunity for many financial institutions. Mobile money accounts can drive financial inclusion and accessibility, as seen in Sub-Saharan Africa. Especially if you consider people in rural areas or with limited time or connections to the already-shrinking branch network, digital and mobile banking are potential solutions.

When I think about significant developments in financial services of the past, not necessarily fueled by technological innovation, I think of:

  • Securitization (1970s, private label issuances exceeded government sponsored issuances for the first time in 2005)
  • Microfinance (1980s)
  • Online payments (late 1990s)

All of these innovations reached large markets and made financial products or services more accessibility to more people. I think the next big thing(s) in fintech will similarly reach large markets and will be the digitization and automation of financial services for small businesses and digital and mobile banking for the unbanked.

In developing this answer, I made the following notes. Maybe there are other significant opportunities in fintech around these activities.

What happens in the financial industry?

  • Storing money - deposit-taking, trust services, retail banking, and business banking
  • Money management - activities related to currency, investments, and financial management
  • Financing activity - lending, financing, and capital funding
  • Payments - including interbank transfers, accounts payable and receivable, credit cards

What are the activities needed to make the above services/benefits possible?

  • Trust and compliance
    • Record keeping
  • Automating administrative tasks such as application forms
  • Movement of money
    • Payments
    • Transfers between institutions and accounts
    • Transfers of money from institutions to individuals, companies, and organizations
  • Decision-making
    • Data gathering
    • Prediction and learning loops
    • Algorithmic decision-making
    • Building capital, generating income
  • Relationship building and management

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