Another year has passed in the fast-paced world of fintech. Since its inception, the industry has
evolved from a loose collection of startups that want to take on and beat incumbents, to a
broader ecosystem of different businesses looking in many cases for partnerships. Fintech has
gone explosively mobile, increasingly efficient, and significantly up in value for investors. What
will 2018 hold for fintech firms, their investors, and financial services consumers?

From Disrupter to Partner

According to recently published data from PriceWaterhouseCoopers, the rate at which financial
institutions (FIs) have partnered with FinTech companies is up from 32% globally in 2016 to
45% this year. In Canada, 62% of financial institutions currently have at least one Fintech
partner, and 88% expect to have one within three to five years. PwC notes: “mainstream
financial institutions are rapidly embracing the disruptive nature of FinTech and forging
partnerships in efforts to sharpen operational efficiency and respond to customer demands.”
Partnerships with innovative fintech firms will allow existing financial institutions to draw on the
high-speed, high-ingenuity development cycles of smaller fintech firms, thus bringing new
solutions to the market faster and more dynamically. Conversely, fintech firms benefit from
access to the massive customer bases, and associated data sets, of incumbent financial

The trend toward fintech-FI integration can also be illustrated by the transition from heavily
B2C-oriented models in fintech, toward a more B2B and platform-oriented marketplace. As
PwC’s report notes, some “robo-advisor” products which were initially offered as
consumer-facing products are now starting to be repositioned as integrated platforms within
larger FIs. This trend can be expected to continue in the coming year.

The Payments Industry Goes Mobile

Though mobile payments platforms have already established themselves as a significant carrier
of fintech development potential in the last five years, they are poised for further market
expansion. The mass adoption of cheap communication technologies has offered a greater level
of convenience to customers around the globe. This has naturally entailed a rise in the adoption
of digital payments as well.

Global revenue from mobile payments is estimated near US$780 billion in 2017 according to
Statista, and is forecasted to increase to $930 billion in 2018 – continuing a rapid trend of growth
since 2010 . Much of this growth has been attributable to the success of mobile payments
platforms in Asia, including Tencent’s WeChat Pay and Alibaba’s Alipay. To illustrate this, let’s
look at North American mobile payments leader PayPal. The eBay-owned firm boasts 200
million users and, as of 2016, an annual payments volume of some $354 billion. Alibaba and
WeChat Pay operate with double and triple the user base, respectively: the two firms combined
processed almost $3 trillion in 2016. Statistics show that within a five-year period (2010-2015),
the percentage of digital payments in China—online and, increasingly, mobile—moved from
3.5% to 17% of all retail transactions.

The success of mobile payments will have a knock-on effect on other sectors of fintech
development. Mobile wallets generally rely upon other technologies in order to build foolproof
and powerful solutions for monetary transactions. For example, Android Pay uses Host Card
Emulation (HCE) for better security. HCE is used to store and transmit payment card
information, such as card number, name of the card holder etc. via the cloud. This allows
secured processing of the information between mobile apps and merchants. Fintech developers
with expertise in security, blockchain, and other functionally critical aspects of the development
process for mobile and contactless payments can ride the wave of this technology’s increasing

The Influence of AI Expands

Artificial intelligence design may be helping us build quality-of-life improvements in many areas,
such as transportation and integration with the Internet of Things, but has seen perhaps the
largest impact in the financial industry. According to the latest Global Fintech 2017 Report
issued by PwC, 30% of large companies are investing in Artificial Intelligence (AI). Among the
most likely and most important areas of investment by FIs are those which will increase the
sophistication of data models and analytics to better identify and quantify risk, and those which
make use of advanced methods, tools and technologies to improve information security and
predict, detect and analyse fraud.

AI and automation are poised to affect the Fintech space at every level, from user experience
(through the increased sophistication and accessibility of web-based chatbots present at firms’
landing pages) to customer service (frictionless processing of documents) to robo-advisorship
and risk management based on predictive analytics and driven by highly advanced algorithmic
analysis of larger-than-ever data sets.

Use New Tech to Build On Past Success

2018 promises to be another year of innovation, expansion and redefinition of the fintech space.
Successful longer-lived firms will apply future-forward ideas to the models that made them, while
new firms will find themselves in the position of having to not only jump onto a fast moving
development curve, but contribute powerful ideas and tools of their own.

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