According to a 2017 Deloitte report, there were almost 1,000 fintech companies founded worldwide between 2010 and 2016. And in the United States, the world’s largest fintech market, 264 fintech companies have received a total of $7.71 billion in investment since 1998. With so many new faces in the industry pool and that much money floating around, it’s important that companies stay aware of the big waves washing over the space so they stay above water.
What are companies paying attention to these days? We asked fintech pros at four LA companies, who mentioned AI, horizontal integrations and new authentication strategies as just a few of the things on their radar.
CEO Patrick Kanns said Papaya Pay wants to make the process of paying bills as easy as possible for consumers, since it isn’t a particularly fun experience. In order to do that, he said the company is investing energy into keeping up with how mobile payments are affecting the industry.
What are the top three fintech trends you’re watching that are significantly impacting the industry?
Firstly, we are closely watching and deeply involved in the growth of mobile payments. Traditionally, mobile adoption for fintech has been slower than other verticals like gaming, social media and e-commerce. This has recently changed with investing, lending and payments now prevalent on mobile.
Secondly, we are keeping up with the younger demographics. Generation Z is mobile-first and prefers apps for digital wallets, banking and sending payments. They also hold less cash and have an aversion to credit card debt.
Finally, we are watching AI and how it improves security for payment technologies. AI and machine learning software are able to detect fraud instantly and automatically, making mobile payments even more secure.
Mobile adoption for fintech has been slower than other verticals like gaming, social media and e-commerce.”
What under-the-radar fintech trends are you watching that the industry isn’t talking about?
The opportunity is concentrated in underserved segments of the U.S., especially those who are unbanked, have limited credit history or lower income. Bill payments are a major source of stress and anxiety in the U.S. Our mission is to help alleviate that, starting with a quick and easy way to manage and pay bills.
How are these trends affecting the future of your company?
We now rely on our phones for almost everything in our daily lives, and we expect the experiences to be instant and frictionless. Why not bill pay? In the U.S. today, only a small percentage of bills are paid via mobile device when compared to the other fintech verticals. Our goal is to provide a seamless mobile bill pay experience, so that consumers can save time and energy for what’s really important in their lives — which is certainly not bills.
As a risk management and end-to-end payment solution provider, Verifi takes authentication and security seriously. CEO Matt Katz said his company is watching those two trends like a hawk. From 3D Secure 2.0 to efficient data-sharing, the leader said there is much on the horizon that could shape the payments sphere, and Verifi is ready for it.
What are the top three fintech trends you’re watching that are significantly impacting the industry?
We are focused on the impacts major card brands can have on merchants. One is card brand data-sharing solutions that can help reduce customer disputes and chargebacks. There is a new European regulation, Payment Service Directive 2, which sets requirements for merchants and acquirers to maintain a low fraud rate threshold and strong customer authentication. We are also monitoring updates on refund authorization requests and merchants operating negative option billing models.
We see the future of the security of payments being dependent on the integrity of the data that facilitates them.”
What under-the-radar fintech trends are you watching that the industry isn’t talking about?
Two important points come to mind, which are in-app authentication and 3D Secure 2.0. The widespread adoption of these and other authentication best practices could significantly reduce fraud and provide a more secure purchasing experience for consumers.
Another is the move toward frictionless, cross-border payments. We’re looking at senders, receivers and financial institutions, and the hurdles they face in government regulations and differences in technology.
How are these trends affecting the future of your company?
Understanding emerging technologies, the scalability of our solutions and anticipating the direction of the evolving payments industry are at the foundation of how we work with our clients and partners.
We address these growing trends in how we deliver our products as a holistic solution for end-to-end payment protection. We see the future of payments security being dependent on the integrity of the data that facilitates them. This helps us focus on how transaction data is captured, analyzed and shared to prevent fraud and disputes, and how we can better serve our clients.
Jason Wenk, CEO at software provider for financial advisers Altruist, said he views consumer-focused solutions as a hot topic in fintech, but he wants to see more attention paid to small- and mid-sized businesses. He believes that while it won’t be easy, there is a lot of potential in targeting fintech services at the SMB market-level.
What are the top three fintech trends you’re watching that are significantly impacting the industry?
The biggest trend impacting the industry right now was actually the latest announcement from the large custodian banks. They have finally matched the commission-free capabilities of fintech companies that have been offering those things for some time now.
The next trend we’re seeing is a race for deposit accounts with around 2 percent rates on cash becoming the standard, rather than the exception. Finally, mature startups are going more horizontal, offering multiple business lines in things like investing, trading, banking and credit. At face value, all of this seems like it would be great for consumers, but in reality, it just makes it hard to differentiate services and experiences.
Mature startups are going more horizontal, offering multiple business lines...”
What under-the-radar fintech trends are you watching that the industry isn’t talking about?
Everyone is in a race for consumer-facing solutions, which is great since there are a lot of areas of the financial industry that need to be fixed. But at the same time, people are sleeping on the needs and opportunities in serving small- and mid-sized customers. The time to get to market takes longer and the problems are sometimes more complex, but the opportunities to create positive change via a network effect are tremendous.
How are these trends affecting the future of your company?
These current trends in the market confirm that we are on the right track as we build a product to better serve financial advisors and their clients. We have been entirely focused on solving the gaps they face and our user experience helps them be more efficient in their practices. Through our consumer research, we’re able to create a clearly defined value prop that does not compete with our customers. As people get used to better and more accessible financial products, SMB providers — financial advisors in our case — will need to adapt to survive and thrive.
SoLo Funds is an exchange platform for small loans meant to help people in need of some quick capital. Chief Product Officer Jon Blackwell said he is excited about the idea of his company and others assisting more consumers and entrepreneurs overseas by reimagining more traditional investment products.
What are the top three fintech trends you’re watching that are significantly impacting the industry?
More states are passing laws to move gig workers from independent contractors to employee status. This is a big win for gig workers to ensure certain protections and benefits for their hard work, but to me, it is just one small step in providing underserved communities access to the products and services they deserve.
Emerging markets like Eastern Africa, India and Southeast Asia are seeing massive growth in fintech companies. The digitization of financial services has been hindered by outdated regulations that require lots of paperwork. However, regulators in these markets are quickly catching up and moving to paperless systems and accepting e-signatures, thereby removing significant barriers to growth. This is a favorable trend for entrepreneurs getting government support and can allow for faster scale and frictionless user experiences.
Tip-based revenue models are becoming more popular but increasingly scrutinized by regulatory agencies. The Securities and Exchange Commission is starting to evaluate if this form of payment is being used to potentially circumvent regulations. Companies like Earnin, Dave and SoLo Funds are proving the effectiveness of the donation-based revenue by operating it at scale. But it’s important to ensure that the donations are completely optional and do not provide donating users special access to services or a “pay to play” situation.
We’re now seeing early-stage B2C fintech companies begin to pivot their offerings to B2B to move out of a crowded space...”
What under-the-radar fintech trends are you watching that the industry isn’t talking about?
I recently read that more small businesses are created every year than babies born in the U.S. This is a huge shift and one that is largely attributed to the growth of entrepreneurs having the tools available to start side businesses and reach a large audience quickly. We’re now seeing early-stage B2C fintech companies begin to pivot their offerings to B2B to move out of a crowded space and take advantage of the growth seen in small businesses.
Those in the fintech space have been seeing companies like Robinhood and Wealthfront lower the cost and barrier to investing excess capital, but we’re also seeing a new wave of companies aimed at reimagining older investment products like real estate investment trusts. This shows a continued push to accessing more of the underserved market and providing potentially lucrative financial products to a previously overlooked population. With much of the U.S. fintech space becoming crowded in recent years, I expect this reimagining of legacy investment products to continue in an effort to reach excess capital that remains dormant.
How are these trends affecting the future of your company?
Several of these trends show that there is still significant friction and opportunity to provide underserved individuals domestically and abroad with access to financial services they deserve. Our product taps into the growth and demand of these underserved populations, providing alternatives for those in need or looking to better their financial futures.
