There were many ups and downs for the fintech industry in 2016. We've seen some of the oldest and most well-funded segments, like marketplace lending, stumble, while global fintech funding dipped after 2015's all-time high. But this year also brought the rise of new segments and increasing support for the fintech sector from governments, and there are still some bright spots attracting investment. Based on these factors, our own research, and the trends we're seeing heading into the new year, here are our top five predictions for fintech in 2017:
Insurtech will continue to ascend. Insurtechs are firms that use new technology to update or disrupt the insurance value chain. These firms attracted serious levels of funding in 2016 — the biggest VC-backed fintech deals through mid-December outside of China were for insurtechs, with Oscar raising $400 million and Clover raising $160 million. Insurtechs will also attract significant investment through 2017 and continue to dominate when it comes to deal size outside of China. Investment will be driven by increased interest from the corporate investment arms of legacy players and tech giants including Google.
The US will get more challenger banks. In December, the Office of the Comptroller of the Currency (OCC) announced its decision to introduce a federal charter that will allow fintechs to become licensed as special-purpose national banks. A federal charter means that small firms will no longer have to go through the expensive and complex process of being licensed state-by-state. In addition, the incoming Trump administration’s pro-business stance will facilitate the establishment of new banks. These factors will boost the US challenger bank scene, just as special fintech licenses have done in the UK and Europe. As a result, the number of digital-only banks in the country will swell — a trend we have already begun to see with newcomers like MemoryBank — helping the US fintech sector to catch up with its transatlantic rivals.
There will be a shift from ideation to tangible use cases for blockchain [...]