Fintech 2016 Year In Review

Fintech Report - 2016 Review, 2017 Predictions

2016 was a roller coaster year for the financial services industry. The Brexit vote and the election of Donald Trump rocked financial markets and raised key questions about the future of compliance regulations in financial services. One constant that has remained this year, however, is Fintech’s relentless march of progress to change the way traditional institutions operate. Innovation in the industry is showing no signs of slowing, as Fintech continues to transform the industry, backed by increasingly heavy investment, and key Fintech acquisitions by banks.

We’ve rounded up the most significant trends of 2016 in the world of Fintech, but we’re not just dwelling on the past – we discussed the future of Fintech with some of the leading analysts and industry experts in the financial services industry, exploring the emerging trends and innovations which will continue on or significantly scale in 2017 and beyond.

Download the full report.

2016 Trends

Rise of APIs and “Banking As A Service” (BaaS)

Application programming interfaces are familiar technology, having been used for years in banks. Traditionally, APIs were useful for developers at the banks to make changes without having to touch back-end systems. Now, not only are banks offering open APIs, allowing external access, but third party APIs are freeing developers from platform restriction, giving them more mobility and flexibility in designing their applications.

For example, consider how USAA is using a Coinbase API in order for users to send Bitcoins. Or how Quovo’s new Account Authentication API could be a huge improvement for Robo Advisors. Some are arguing that not only are APIs blurring the line between banking and Fintech, they’ve created “Banking as a Service” (or BaaS). The term was coined by Chris Skinner in 2009, but came to prominence in 2016. Essentially, BaaS means that through open sourced APIs, apps, analytics, etc., consumers will be able to customize their own banking experience, leading to  Plug-and-Play banking.

Blockchain Slows Down (But Doesn’t Stop)

Blockchain, the distributed ledger technology which came to fame as the undergirding technology platform for Bitcoin, saw a surge in popularity, with a legion of VC investment and key partnerships with financial institutions.

However, while most of these institutions – notably the big banks – have been enthusiastic about Blockchain (In 2016, 90% of North American and European banks said they were exploring the technology); they still haven’t been able to move past a proof-of-concept stage or unlock the potential of blockchain technology.

Investments in Blockchain and Bitcoin start-ups have seen a steady decline in investment across 2016, from $153 million in Q1, to $119 million in Q2, to $87million in Q3. The R3 Consortium, which early in the year was garnering the support of many significant financial institutions and hoped to raise $200 million from investors, has only raised $59 million, and dealt with the blow of losing Goldman Sachs at the end of October 2016.

Distributed ledger technology like Blockchain is still one of the most exciting and potentially game-changing pieces of technology in the industry, but the spike of interest and investment in early 2016 seems to have plateaued as institutions realize they’re a long ways off from seeing substantial benefits from incorporating Blockchain.

Still, 2016 revealed some exciting developments with the technology, such as Visa’s new B2B Connect platform, which uses a “near real-time transaction system designed for high-value international payments between participating banks” and “an enterprise-grade distributed system called Chain Core, which enables institutions to initiate, operate, or connect to a blockchain network.”

Rise of Robos

Robo Advisors continue to advance in number, Assets Under Management (AUM), and demographic reach across the globe. Automated algorithm-driven advisors may not have outright disrupted the industry this year, but they’re still rocking the boat, and the trend is only growing. A November report from Cerulli Associates estimates that the market for digital advising will have surpassed $83 billion by the end of 2016.

It’s not only been a big year for Robos like Betterment, who received $100 million in funding this year, but banks and traditional institutions have been affected too. Wells Fargo is finalizing a deal with SigFig, and Morgan Stanley and Merril Lynch are building their own Robo-solutions, rather than investing in retail Robo Advisors.

While the future is bright for Robo Advisors with estimations that their AUM will skyrocket over the next four years many purely automated firms aren’t growing fast enough to disrupt the old guard; the future will likely belong to hybrid firms that are able to find ways to incorporate Robos into pre-existing models. However, hybrid firms will inevitably face the challenge of a disjointed client experience when layering on a Robo Advisor to a paper-based firm. Traditional firms will first need to consider how the entire client experience can be improved through an agile approach, and will then be better equipped to add a Robo Advisor offering.

To see the rest of our 2016 Fintech analysis, download the report.

2017 Expert Fintech Predictions

Mike Gardner, CEO Agreement Express

“We’re going to see an acceleration toward the ‘consumerfication’ of enterprise financial technology. This will take many forms. One will be an agile approach as we move away from epic BPM/ERP projects, and towards agile platforms that allow organizations to collect data, learn, iterate, and adjust on an ongoing basis. For example, a financial institution that wants to overhaul its client onboarding process won’t have to wade through 6-12 months of BPM configuration; they'll start using new software in the same week and utilize its learning capability to adjust quickly towards optimum, rather than trying to plan a perfect process upfront.”


Darrin Courtney, Principal Executive Advisor, CEB TowerGroup

“A recent CEB survey of high-net-worth clients (HNW) indicated that those on the higher end of the HNW scale (those with $10 million plus in Assets Under Management were more aware of automated advice engines, more likely to use them in the next 12 months and to put a larger percentage of their assets into those solutions. Survey respondents cited the main reason for this to be that “the online and mobile capabilities are better than what I get currently” from their wealth management providers. Not surprisingly, firms are trying to quickly improve the digital experience for these clients, which made improving client onboarding from front to back office the most important technology priority in CEB’s 2017 Wealth Management Outlook. However, while 84 percent of firms listed onboarding as very important, if not extremely important, only 53 percent of surveyed firms felt confident in their ability to deliver – representing the largest importance/confidence gap of any initiative.”


Greg Palmer, VP of Finovate

“Successful fintech companies are the ones that zero on in on painful inefficiencies and use technology to improve them. There are, of course, many examples in world finance, but to me, the biggest is the systemic inefficiency that categorically excludes huge segments of the world’s population from basic financial services because of factors outside of their control. There are massive opportunities out there for companies who are able to use technology to improve access to financial services (literally billions of potential customers are at stake), and we’re only just now scratching the surface of what’s possible.”


To see the full list of 2017 expert fintech predictions, download the entire report.


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