2016 was something of a big year for politics and financial markets – yet how much actually changed during those 12 months?
Yes, on the political front we saw seismic shifts from Brexit to Trump. But most of these ‘big changes’ didn’t come into force last year at all. Instead, 2017 is when everything will start to fall into place. We’ll see how Trump’s policies actually start to pan-out and have a better idea of the shape Britain’s Brexit plan will take, for example. In the FinTech arena, I believe will also see a similar trend taking place.
Many of the seismic shifts which began in the last year or so, such as the emergence of blockchain and artificial intelligence (AI) technologies, are now at a more mature stage and ready for major banks and other financial institutions to begin looking at their practical application. This will likely also require regulator involvement, particularly when these changes may impact the existing market structure. In turn, this will require FinTech companies to step-up their engagement with both their clients and the regulators, while also seeking out new partnerships or funding options for expansion.
As such, there are three keys areas of change to focus on in the coming year – whichever area of FinTech you are in:
Greater adoption and what this will mean.
A number of last year’s hot topics are now being looked at more seriously and in greater detail than ever before. From the rise of RegTech to the automation of functions such as transaction cost analysis (TCA), there are now a number of new areas which institutions need to get up-to-speed on – and quickly.
But successfully taking many of these innovative concepts and applying them in real-world, corporate environments is not without its challenges, and is part of the reason why I believe uptake can be slower than initially expected. FinTech firms can play a key role in educating and training institutions both large and small about the benefits on offer, but also how to adopt these new technologies in a safe way. Which brings me to my second trend…
Higher level of regulatory engagement.
According to a recent report published by Euromoney called Ghosts in the Machine, 76% of the 424 financial professionals surveyed believe financial regulators are not up to speed on AI. And I believe this is likely to be a similar story on many other areas of FinTech innovation. Yet all this is about to change. Already we’re seeing a big push from most major global regulators to better understand FinTech and its role in market function.
At the same time, government watchdogs are also likely to get tougher and more intrusive when it comes to FinTech generally as Mark Carney warned recently. While this might be viewed as a threat, it may also present a valuable opportunity for the industry. FinTechs can, and should, come together to educate, inform and work more closely with the regulators, which in turn will provide a greater level of certainty for clients and the financial markets as a whole.
FinTech matures and comes of age.
Increasingly, we can see FinTech is becoming more normalised and integrated into the daily running of the markets. Media dialogue and headlines have moved significantly from the early days of articles asking: “What is FinTech” and there is certainly an appetite for more intricate and detailed analysis. This is also reflected in many financial markets industry awards, with a number of new categories such as AI and distributed ledger technologies making an appearance this year. In addition, the recent trend of growth and consolidation is likely to continue this year – this is covered in more detail in a previous blog by my colleague Martina Doherty, available here.
Overall, regardless of which area of financial technology we look at, there is real and tangible change afoot this year. As with all change, these developments are likely to throw up new and unexpected challenges of their own. But I am confident that as the various parts of the industry come together to look at the practical application of FinTech, this will only prove to be for the benefit of the sector as a whole and the markets in which they operate.
If you would like to read more of Alice’s blogs you can find them here.