FinTech market probably never has been on such rise as it is currently. Lithuania with the Bank of Lithuania at the forefront grasping full potential of FinTech enterprises for quite some time already is putting concentrated effort to create favourable conditions for FinTech companies to come to Lithuania. It is obvious that FinTech fever is rising, so what could we expect from FinTech sector this year or how will it affect financial services market?
Ms. Inga Karulaitytė-Kvainauskienė, attorney at law in ECOVIS ProventusLaw, distinguishes 7 possible major developments and trends in FinTech market this year.
1. Increased focus on customer expectations and needs.
A simple example – for years customers calling financial services companies had to listen to an automatic answering machine and wait until they would be put through to the consultant. It is likely that in 2017 this type of automated customer service will slowly decline while financial services companies will increasingly adapt to the needs of their customers. There will be more financial service providers, and particularly FinTech companies, who will be using a variety of chat rooms and correspondence applets for servicing their customers. “Consumers are becoming more digital savvy and open minded when it comes to smart technological solutions. It is likely that telephone calls to banks and financial service providers will start becoming a thing of the past”, – says Ms. Karulaitytė-Kvainauskienė.
Mr. Audrius Ramanauskas, head of the Lithuanian FinTech company „Mistertango“, seconds this opinion of Ms. Karulaitytė-Kvainauskienė. “The trend to pay more attention to the service convenience and customer experience, is on the rise in Lithuania as well. Contactless payments, new telephone apps are introducted while FinTech companies offer very simple and fast online payments”, – commented Mr. Ramanauskas.
2. The breakthrough for mobile payments
Mobile phone being used as exclusively calling and texting device is far back in the past. We depend more on more on a mobile phone. Mobile phones are gradually becoming our personal banks while mobile payments are becoming common practice. According to Ms. Karulaitytė-Kvainauskienė, phone-to-phone money transfers (quick and at a low cost) will continue to grow rapidly worldwide and will become one of the main FinTech service development trend this year.
Consumers are becoming more digital savvy and open minded when it comes to smart technological solutions. It is likely that telephone calls to banks and financial service providers will start becoming a thing of the past”, – says Ms. Karulaitytė-Kvainauskienė.
3. There will be increased focus on security requirements
Another priority matter for FinTech companies, who are increasing by the day, should become trust and security guarantees. “With the increasing amount of data and transactions financial technology service developers will increasingly have to adapt their instruments in order to be able to see the potential risks and ensure the security of customer transactions in this rapidly digitalizing world”, – says Ms. Karulaitytė-Kvainauskienė.
Mr. Ramanauskas seconds the aforementioned opinion by arguing that, for example, the use of fingerprints should become more popular when ensuring payments security. “Here trends are being set by global solutions. For example, we ourselves are purchasing secure customer identification technologies. In turn, players in the Lithuanian market are strictly controlled by the Bank of Lithuania, which is significantly increasing consumer safety”, – says Mr. Ramanauskas.
4. Development of “InsurTechs”
As 2016 was the year when InsurTechs rise began, it is likely that this year their development will gain a momentum. Pension insurance will be, or at least will try to become, more flexible – the number of FinTech start-ups will increase. Such start-ups will be offering pension and life insurance, which will be available through a few clicks on a mobile phone application thus saving the user a visit to an insurance broker. However, Ms. Karulaitytė-Kvainauskienė stresses that while the insurance industry is enormous, the development of this type of Fintechs is so far limited in Lithuanian because of legal requirements – to enter the insurance market is a significant challenge here.
“With the increasing amount of data and transactions financial technology service developers will increasingly have to adapt their instruments in order to be able to see the potential risks and ensure the security of customer transactions in this rapidly digitalizing world”, – says Ms. Karulaitytė-Kvainauskienė.
5. RegTech development and increased regulatory activity
Financial services in this digital age require a new regulatory approach. Regulatory technologies include fast, flexible, reliable, safe, easily integrated, cost-effective regulatory solutions that provide a competitive edge and are based on innovations in the financial sector, thus not only helping the regulators to protect consumers from data breaches, hacking, money laundering and other fraudulent activity, but also help them by creating the integrity of the market and promote competition.
It is obvious that the old regulatory mechanisms favoured traditional banks, but with the emergence of opportunities to provide financial services through information and communication technologies not only for these banks, the old regulatory approach has to change. “It is great that in Lithuania both – the Ministry of Finance and the Bank of Lithuania – encourage competition in the financial service sector, as well as put in a lot of work in order to attract new financial services companies, create a favourable legal framework, but without losing sight of the preventive (money laundering, data protection) measures”, – states attorney at law at ECOVIS ProventusLaw.
6. Segmentation of FinTech companies
Together with the growth of FinTech companies their specialisation will become more noticeable as each of them will have to look for their own advantages against competitors. “Those who have no advantages against their competitors will cease to operate or integrate with another companies”, – believes attorney at law in ECOVIS ProventusLaw, adding that it is possible to expect integration of vertical money lending, insurance platforms and payment systems.
It is obvious that the old regulatory mechanisms favoured traditional banks, but with the emergence of opportunities to provide financial services through information and communication technologies not only for these banks, the old regulatory approach has to change.
However, the decision of Great Britain to withdraw from the European Union, Donald Trump’s election as US president forces a discussions, where to FinTech companies will chose to move? Mr. Trump’s desire to stop the free trade agreements and globalisation policies as well as isolationist policy mood cause a variety of discussions on further development and prospects for FinTech companies. “After Brexit many FinTech companies are looking where to raise their wings while other countries are increasingly competing with each other in order to attract them”, – so Ms. Karulaitytė-Kvainauskienė.
There is no doubt that the British withdrawal from the EU really affected FinTech market in 2017. Just who will benefit the best most out of it..?