In 2014, FinTech became a buzz word. There was a tremendous amount of attention, venture investing activity and interest in new possibilities for financial services – from next-generation offerings to more customer-friendly experiences. Bitcoin continued to capture the imagination of many, Lending Club went public, Apple Pay was introduced and that’s all just part of the picture – it was quite a year.
From a big picture perspective, some key themes surfaced that we expect will continue to gain momentum: democratization, disintermediation of traditional models and customer experience.
Democratization: Top-of-market capabilities, previously only available to institutional and high net worth clients, are being made more easily accessible to a broader group of customers. This expands the financial literacy, opportunity and options to more people. Betterment is a perfect example – this online investment advisor is providing a greater continuum of sophisticated wealth management options to a broad audience. (Citi Ventures participated in the Series C funding round for Betterment.)
Disintermediation of Traditional Business Models: New platforms and technologies have changed the way certain financial products and services are being delivered. One example is the growth of loan marketplaces, which provide borrowers with new financing options and investors with new asset classes. For example, SoFi and its equivalents are meeting student lending needs with alternative underwriting approaches.
Customer Experience: There is a clear march toward providing customers with intuitive, mobile-first, personalized financial offerings. The expectation that banking is as user-friendly as shopping or browsing your Facebook page is increasingly the norm. From Simple to Apple Pay, the emphasis is on providing a new customer experience and interface. It’s clear that established financial services institutions are operating in a very dynamic market with a diverse array of new entrants and emerging technologies that are upending traditional growth areas and opening new and unexpected doors. At Citi Ventures, we see tremendous opportunity to embrace new possibilities and envision a safer, more efficient and friendlier system for next-generation banking.
In 2015, we expect the exciting ride in FinTech to continue.
Here are the five big trends you won’t be able to ignore in the coming year:
1. Merging of Lifestyle and Payments. We’re seeing more lifestyle platforms experimenting with a "Buy" button. Next year, we’re anticipating significant movement towards payments embedded into the user experience. Social networks are one of the largest sources of referral traffic for purchases – Facebook, Instagram, Pinterest and Twitter are all experimenting with “Buy” buttons, and we expect that purchasing options from a single platform will become increasingly commonplace. Apple, of course, has already made a big play in this market.
2. Growth in Automated Investment Advisory. Automated investment advisors and investing services – those that use sophisticated algorithms to inform allocation recommendations – will become more popular among an increasingly broad set of consumers. These platforms – Betterment, Wealthfront and others – bring the very best in modern portfolio theory to consumers at significantly lower cost than traditional advisory. We can thank millennials for this shift. Many of them prefer new digital solutions to meet their financial service needs.
3. Expansion of Marketplaces into New Verticals and Services. Marketplaces will continue to grow and expand into new verticals and services; we’ve already seen expansion into other lending verticals such as solar and real estate. Marketplaces have enabled