Why Fintech will evolve massively over the next five years
Dan Schulman, CEO of PayPal recently said that Fintech (the financial technology sector) will change more in the next five years than during the last 30. It certainly looks like this will be the case.
There is no longer any doubt that millennials are hugely disrupting many industries, and none more so than with the changes we’re seeing sweep the financial sector.
Start-ups and established firms are having to rethink the way money is managed and moved around. In order to keep up with the technological advancements, it’s imperative that the more traditional companies implement huge changes. If they don’t, we could be looking at a financial sector ruled by a new kind of bank.
The millennial generation think about money and everyday transactions in a vastly different way to previous generations. Take a now established payment platform like PayPal, for example. By expanding into a payment app with Venmo in the US, it’s taking transactions into the social media sphere.
Venmo allows the user to attach an emoji or tag onto each payment, which moves it away from a practical use only P2P service into something much more fun. Schulman notes that users log into the app just to see what their friends are doing, as much as to make payments.
P2P payment sector
The person-to-person payment sector is worth around $40 billion at the moment, and is projected to leap to around $335 billion over the next five years. Online digital payments are valued today at about $3 trillion and it’s expected that in just three years these will be at more than $8 trillion.
While established companies like PayPal are leading the way with innovations in the Fintech sector, there are also many opportunities for disruptive start-ups. There are thousands of small tech companies developing apps across this sector, as well as crossing over into the Proptech (property technology) and Regtech (regulatory technology) sectors also.
Giving users what they want
The main driver behind so many of the revolutionary Fintech ideas is simply making everything easier for the user. If a company can come up with a secure way for people to manage their money online, with as few steps as possible, then they’re going to be already challenging the traditional banking system.
At the moment, PayPal has 218 million active users, and in order to keep delivering easier ways for customers to pay, it’s constantly evolving its offering. In October 2017, it gave more than two million US retailers the ability to accept Venmo payments, expanding the uses of the app hugely.
Staying ahead of the game
PayPal is making lots of moves to show that, even with all of the new start-ups fighting for visibility in this increasingly crowded marketplace, it intends to continue to lead the field.
In March this year, PayPal’s European division linked up with the Luxembourg National Research Fund (FNR) and the University of Luxembourg to create a specialist Fintech chair. It will be working to clarify digital tech and improve links between industries, regulators and users.
– Freddie Achom