Fintech Predicted to Surpass Banks in Next 10 Years

Fintech is the wave of the future.  It is changing the way consumers think and act about finance.  Consumers no longer need to conduct all of their business at traditional banks because financial technology companies often offer greater flexibility, better service and, in some cases, better deals.  Mark Goldberg, a partner at Index Ventures, is a strong believer in the future of fintech.  He feels that within the next decade fintech will be bigger and better than traditional banks.  Here is a breakdown of some of his recent predictions.  

Prediction #1: By the end of Biden’s first term, at least one of the neobanks will be worth more than Goldman Sachs

Neobanks, which are fintech banks that operate digitally without physical branch offices, are growing strongly and steadily. In 2020, fintech signups and engagement exploded with valuations for some exceeding $10 billion.  Digital banks offer customers many positive benefits, such as easy to use platforms (often with transactions via mobile app), fewer fees and a better overall user experience than traditional banks.  Even opening an account with a neobank can be quicker, easier and far more pleasant.  Access to these superior digital services is especially important during the pandemic when people are stuck at home.  

Prediction #2: The rise of multiplayer finance 

Goldberg maintains that finance is inherently social and therefore financial companies need to reflect that.  People spend money on trips, meals and events that they usually attend with others and once the pandemic subsides, new platforms will put groups, rather than individuals, at the center.  Collaboration is key and fintech companies, such as Braid, which creates a place for people to share and manage their money together, will come out on top.

Prediction #3: The rise of fin-fluencers

Having a strong and aspirational brand identity, in addition to functionality, will be critical to the future of banking.  Companies will have the opportunity to reach and attract new customers by creating a desirable brand and marketing it through social media platforms, partnerships with influencers and the development of coveted branded items, such as clothing.

Prediction #4: Tech companies, not banks, will offer the best deals on financial products 

Just as Amazon has done with its Prime Card, offering 5% cash-back on Amazon purchases (even at the expense of the card’s profitability), other companies will follow, offering bigger and better deals than banks can.  And through such incentives, the customer will be motivated to conduct more transactions.  Banks are unable to compete with these types of deals because it would hurt their core business.

Prediction #5: privacy will hit the mainstream

Financial data is highly personal, yet so many companies, including credit cards, sell our data with no concern for our privacy. Technology companies, however, must prioritize privacy, which will set them apart and build consumer trust and loyalty.

The bottom line is, fintechs have the potential to offer customers the widest array of flexible products and services with endless possibilities.  Goldberg imagines a future where tech companies, such as Apple and Peloton, might be able to offer the best deals on health insurance, loans, savings accounts and other financial products that were traditionally reserved for big banks.

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