Ten Predictions for the Fintech Industry in 2016

This article is written by Sonny Singh. Sonny is the Chief Commercial Officer of BitPay, the largest processor of bitcoin in the world. Previously, he was the VP of Business Development at Jumio. Sonny is also an angel investor in Getaround, EstateAssist (acquired by DocuSign), TubeMogul, Narrativ, etc.

There's been a lot of talk and debate about the tech bubble bursting in 2016. While I think this might be true for a lot of industries, I believe the fintech industry – lending, personal finance, Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term, crowdfunding, insurance, etc will continue to grow.

According to a recent report released by KPMG, global fintech financing has increased dramatically in a couple years from $3B in 2013 to $20B in 2015. I think the fintech growth story will continue in 2016.

Here are my top 10 predictions for the fintech industry:

1. P2P lending sites like Kabbage, SoFi, Prosper, Lending Club, Funding Circle, etc will continue to grow in 2016. P2P lending sites still have a lot of room to grow as consumers and businesses will flock to their sites to get loans quicker. The incumbent banks can’t move as fast as these upstart lending sites, and they will eventually look to acquire these sites. A couple of players from this space will go public this year and Lending Club's stock price will slowly increase. The rise in interest rates will not cause a dramatic increase in defaults…yet.
2. Bitcoin will have a great year while the Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term will still be confined to research projects. The popularity of bitcoin will take off internationally as solid use cases start to emerge. However, many bitcoin startups will struggle to raise Series A rounds and will be forced to pivot or merge. The blockchain will continue to be popular among banks, but the real action will be confined to research and won't reach large-scale production environments this year.
3. The line separating traditional financial executives and fintech startups will become blurry. Financial executives are going to start joining fintech startups and many executives will try their luck at angel investing. Unfortunately, they will quickly realize it's a lot harder than they thought and the pay definitely isn’t as good.
4. The mobile wallet wars will continue but consumers really don’t care. Banks and merchants will continue to launch mobile wallet solutions like Chase Pay, Apple Pay, Walmart Pay, MCX, etc and they will continue to struggle for adoption. Storing your credit card in your mobile wallet doesn’t solve a large pain point as you still need to physically carry your drivers license, health insurance card, etc. Until consumers can leave their entire wallet at home, the mobile wallet just isn’t that appealing to consumers.
5. Venture investing in fintech will have another record year and surpass 2015 levels. Valuation write-downs in former hot companies like Dropbox, Snapchat, etc .will have investors looking for quality in revenue producing fintech companies like Adyen, Prosper, and Klarna. Venture firms will look to capitalize on this trend and start hiring fintech operators to join their firms. Corporate venture firms from Capital One, First Data, AMEX, BBVA, Santander, etc will continue to expand their presence in Silicon Valley.
6. PayPal is poised to have a breakout year now that it's finally free from eBay. Acquisitions of Xoom, Venmo, and Braintree will help solidify PayPal as a leader in global payments. PayPal has established itself as one of the leaders in the rapidly growing mobile and ecommerce industries, and it's now expanding this footprint into emerging markets. The acquisition of Xoom gives PayPal a strong brand in the remittance market in developing countries like Mexico, India, the Philippines, China and Brazil. Venmo will continue to grow despite some new competition and Braintree is starting to win business from traditional payment processors like World Pay, and Chase Paymentech.
7. Regulation will become a big issue in the crowd-funding space. Crowdfunding platforms will finally get more clarity from regulators which may require them to get money transmitter licenses. These regulations will force crowdfunding companies to spend more money on legal compliance but will not slow down the growth of the larger companies. The smaller companies will have issues trying to comply with the new regulations.
8. Money 2020 – one of the largest fintech conferences in the world – will become too big and commercialized. Money 2020 has grown dramatically in the last couple years and has become the go-to conference for the financial industry, with over 10,000 attendees last year in Vegas. The founders did a great job of growing the event by appealing to the financial and technology communities. Executives from Wells Fargo, Mastercard, and First Data could mingle with executives from Google, Facebook, and Samsung.

The event became so big that it had to move locations from the Aria Convention Center to the Venetian to accommodate all the people. There are dozens of parties every night hosted by large financial institutions as well as many Silicon Valley venture capital firms. The founders of the conference recently sold the event to i2i Events Group, so it will become even bigger and more commercialized. This is one of my favorite conferences, so hopefully I’m wrong about this prediction.

9. Robo-advisors like Wealthfront and Betterment will lose customers if the stock market drops. These mobile apps make it very easy to view portfolios, so consumers will get indigestion from seeing bright down arrows on their smartphones every day in a down market. Normally, consumers see their retirement portfolio once a month when their statement comes in the mail. Now, these apps are on users' phones, meaning that most users check the value of their portfolios multiple times per day. It's fun when the value is going up, but let's see how consumers react when the value starts dropping.
10. Fintech investing will see the highest growth coming from international markets, and Singapore will emerge as the new financial tech hub in Asia. Last year London clearly established itself as the leading fintech hub in Europe with companies like TransferWise, World Remit, Currency Cloud, Powa Technologies, Markit, and Funding Circle. Singapore is the ideal country because of the large financial institutions located there, and its launching pad to Asia. The government of Singapore also encourages technology startups with grants, funding and incentives.

Bonus

I normally don’t make predictions on the price of bitcoin, but what the heck – the price of bitcoin will break $1,000 in 2016 and end the year around $750. However, this price increase will not be due to the halving of the bitcoin block network which is scheduled for July 2016.

I believe 2016 will be another great year for startups trying to disrupt the financial industry. While fintech has tremendous upside, startups have to realize that there are many regulations, networks, and incumbents they must work with. This can be extremely labor and capital-intensive, and many startups may run out of capital before ever getting to market. That being said, I expect many great things in 2016 and look forward to seeing this industry continue to evolve.