FinTech industry

Part
01
of one
Part
01

Fintech Industry

The five trends in the financial technology industry, with relation to millennials in English-speaking countries are millennials are reshaping the Fintech Industry towards sustainability investment, emergence of alternative banking solutions to cater the demand of millennials, large institutions are getting into Fintech space, robo advisor is making a hit among the next gen investors, and millennials are moving from banks to Fintech companies.

TRENDS IN THE FINTECH INDUSTRY IN RELATION TO MILLENNIALS

1. MILLENNIALS ARE RESHAPING THE FINTECH INDUSTRY TOWARDS SUSTANABILITY INVESTMENT

  • OVERVIEW : In the CB Insights 2019 Fin tech future report, millennials are having a $30 trillion in future spending power and are reshaping the investing and fin tech spaces to better align with their ethical values.
  • "In a Morgan Stanley 2017 survey, 86% of millennials expressed interest in the idea of sustainable investing; 61% reported making at least one sustainable investing decision within the past year; and 75% expressed a belief that their investments could make an impact to reverse climate change".
  • Driving the ESG and Sustainability investment trend, millennial are likely to make 2X more sustainable investments than the average investor in the future.
  • An upwards trend in the "impact investing" and ESG has been reported for 2014-2019, with an increase in news mentions of about 140, along with sustainability investment reaching to $22.9 trillion in 2016 from $101 trillion in 2014.
  • WHY IT IS A TREND : Showcasing the changing pattern in the Fintech Investment globally, wherein a large investment proportion is being diverted towards sustainability investment, is largely being driven by Millennial investors. This is a growing trend highlighted by credible market research reports from CB insights and Morgan Stanley.

2. EMERGENCE OF ALTERNATIVE BANKING SOLUTIONS TO CATER THE DEMAND OF MILLENNIALS

  • OVERVIEW: Fintech startups are aggressively re bundling products and services ahead of their maturing customer base of millennials, who expect more digital and automated banking and investment solutions, by introducing alternative digital banking options such as digital wallet (Revolut), micro investing (Acorns) and other CB insights.
  • Revolut has come up with digital wallet, Acorns have launched micro investing along with other startups such as robinhood (brokerage), coinbase, and fundrise offering alternative investment apps, which is predicted to continue to rise in prominence among next-gen investors.
  • Around 95% of millennials globally prefer using online banking regularly, another 23% list mobile banking as the most important feature with 33% of millennials believing they won’t need a bank within the next five years. To cater this growing expectation, and harnessing millennials’ trust in technology to provide financial services, an emerging group of fintech companies are deliberating moving towards creating alternative banking solutions.
  • Startups like Chime and Simple are teaming up with existing, FDIC-insured banks to offer protected banking options on strictly mobile platforms where in Chime has grown to 750,000 accounts and $2.5 billion in transaction volume wherein its automatic savings accounts has generated $72 million in savings for its users in 2017.
  • The Fintech trends posted by BBVN highlights that traditional banking has been changing towards more digital and advanced banking solutions, wherein moving their services and products from unbundling to re bundling.
  • Digital financial advisers and other robo tool for managing personal finance are being bundled by fintech companies to lure a large number of millennials who want to move towards fintech investments with more tech comfort, and has been a growing trend in the market.
  • WHY IT IS A TREND : The credible global research study from CB insights quotes that "aggressive Fintech startups are re bundling products and services ahead of their maturing customer base- millennials" as an emerging trend driving the fintech industry to cater to their digital demand, along with articles from Investmentnews, equities.com and BBV reinstating this growing trend in the fintech tech companies globally to grab millennials expectation.

3. LARGE INSTITUTIONS ARE GETTING INTO FINTECH SPACE

  • OVERVIEW : CB Insights highlights that the battle for millennial deposits is becoming more aggressive by large banks such as Goldman Sachs and e-commerce giant Amazon entering into the Fintech space through partnerships, and stretching their growth markets globally.
  • Fintech are increasingly globally by extending their target markets beyond the boundaries of the US and European markets by offering a global bank account facility for expatriates and customers who need to manage their money internationally.
  • Fortune reports that Amazon has been looking into entering the Fintech space by assessing the possibilities to build a competing digital bank, as it already has "all the ingredients to be a bank", according to Jeff Roberts.
  • WHY IT IS A TREND: The Fintech Industry is being disrupted by the growing movement in large global banks such as Goldman Sachs and Citi Bank of America, along with e-commerce giant Amazon making a move into the Fintech Space due to the attractive investor base of millennials who have $30 trillion in future spending power as highlighted by credible sources from CB Insights, fortune and others.

4. ROBO ADVISOR IS MAKING A HIT AMONG NEXT GEN INVESTORS

  • OVERVIEW: In a move to attract the millennial investors, fintech companies are democratizing investing and creating next-gen investment platforms that are focused on creating new methodologies to gain access through alternative investment apps and Roboadvisor.
  • Fintech companies such as Alphaflow are leveraging the robo-advising model to generate a passive income-producing portfolio for their next gen real estate investors and currently has $17.32 million worth of assets under management. Wealthfront has also embarked its portfolio with robo advisor inclusion.
  • "Robo advisors are increasingly growing in popularity, and these automated services are threatening to take huge amounts of business away from traditional financial advisors" according to businessinsider.
  • The article states that millennials largely prefer robo advisors because they remove the perceived "guess work" out of investing, which provides a measure of comfort to hesitant millennial investors. And often, robo advisors offer cheaper fees than human advisers, which also makes them attractive to this group.
  • WHY IT IS A TREND : Survey reports and credible news articles such as CB insights and Business Insider show that Fintech services are getting huge attention from millennials for global fintech companies such as Wealthfront, and that others are emerging as a growing trend in the fintech industry in relation to millennials.

5. MILLENNIALS ARE MOVING FROM BANKS TO FINTECH COMPANIES

OTHER INFORMATION

  • Globally, English is an official language in 83 countries (55%) and is widely spoken in 55 other countries.
  • Betterment invest in thousands of companies across the world for its customers to benefit from growth in both developed and emerging markets.
  • Acorns deals in global investments and offers new millennial investing strategies of financing to its customers.

Research Strategy:

In order to obtain the insights on the trends in the financial technology industry in relation to millennials in English-speaking countries, we searched through credible market research reports on Fintech through CB insights, Deloitte, and Morgan Stanley, which regularly report the growing trends in the industry. We also searched through business articles from fortune, businessinsider, investmentweek, to provide a comprehensive insight on the trends in financial technology industry in relation to millennials.

To provide the trends that are applicable to English-speaking countries, we found that around 55% of the countries in the world are English-speaking countries (83 countries) and 55 other countries spoke English, hence it is assumed that global trends are largely related to majority of the percent which accommodates most of the English-speaking countries (like NorthAmerica/Europe). Also, the examples of the Fintech companies provided in the RC naming betterment, Acorns and others where also found to be major global fintech companies who have millennial customers and offers worldwide investment portfolio options. Hence, the trends listed have been provided from a global perspective.

Through the search, the above listed 5 (based on the time available for the job) fintech trends are in relation to millennials from the global economy are listed based on the below inclusion criteria:
  • The trends are cited by credible global research report such as CB Insights and are repeatedly mentioned in more than one source.
  • The trends are directly quoted in relation to millennials and have shown a pattern of gradual change/trajectory which is disrupting the whole financial technology industry.
  • The trends incorporate the insights related to "how the industry is changing ", "what Fintech services this generation is using and what they expect", and "what Fintech services are getting attention".
  • The trends do not relate to Cryptocurrency.
Additionally, an old source has been incorporated as it shares relevant findings on the Millennial Disruption Index along with key insights on how millennials are transforming the FinTech industry. No similar source from recent years was found, hence we have used it as a supporting source.
Sources
Sources

Quotes
  • "“About 53% of our new-to-firm accounts are millennials,” he said. “What’s really important is that it’s not just any millennial…our average retail household has in the vicinity of $350,000 [in assets]. So the average millennial we’re winning has that level of affluence today already.”"
  • "Revenue growth has averaged 13% over the past three years, falling just short of $11 billion in 2018; and profit growth was 20% annually over the same span. The firm has just under $3.7 trillion under management, in about 15 million brokerage, bank and retirement accounts."
Quotes
  • "Millennials use robo advisors because they remove the perceived "guess work" out of investing, which provides a measure of comfort to hesitant millennial investors. And often, robo advisors offer cheaper fees than human advisors, which also makes them attractive to this group."
Quotes
  • "In the dissonance that exists between traditional financial services and this skeptical generation, there lies an opportunity for fintech companies to create alternative banking solutions.An emerging group of fintech companies is doing just that, harnessing Millennials’ trust in technology to provide financial services as this generation ages and looks to invest its money."
  • "While fintech companies like Chime, MoneyKey, and Grifin are the vanguards of emerging financial trends, traditional services are scrambling to keep up. In a bid to appeal to this demographic, banks are incorporating mobile apps, online platforms, and robo-advisors into their typical services."