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    Did fintech deliver in 2019?

    From the growth of quantum computing and fintech regulation, to the diversification of cryptocurrency and investment in digital transformation, we look at the predictions for the fintech sector in 2019: those that came true – and those that didn’t

    Last updated December 2019

    First published on December 17, 2018

    At the end of 2018, there were big expectations for the growth of the fintech sector and its disruption to financial services in 2019. According to PwC, global investments in fintech have more than tripled since 2014 to over US$12 billion and 80% of technology, media and telecommunications companies are creating jobs related to fintech, to point to just two examples. As 2019 draws to a close, we look at whether these fintech predictions for the year came true.  

    Expansion of decentralized payment apps

    Verdict: true

    One of blockchain's better received offerings, decentralized finance (DeFi) means financial records are not stored in a centralized server, making them more secure. In June 2019, the value of DeFi projects reached a peak at an equivalent of nearly US$700 million.

    Honesty will win in GDPR

    Verdict: in progress

    As businesses finally started to get to grips with the GDPR, it was the organizations transparently sourcing consumer data, using opt-in models, that were expected to hold the advantage. 

    In 2019, businesses have invested in their GDPR practices, including hiring Data Protection Officers (DPOs), the demand for which has risen by over 700%. Fines for the companies not conforming have also been implemented in the past 12 months, the most notable being Google's fine of €50 million in January 2019.

    Growth of quantum computing

    Verdict: not yet…

    With excitement surrounding the ability of quantum computing to redefine the limits of processing power, 2019 hasn't seen the progress that many hoped for and these machines aren't yet in use. However, there have been promising developments: researchers at the University of Science and Technology of China reported a record 6.5 billion-fold gain in the number of ways a quantum computer system can be configured.

    Diversification of cryptocurrency

    Verdict: true

    After the dramatic rise and fall of bitcoin (which saw trading prices fall from US$19,783 at the end of 2017 to US$13,500 at the start of 2018), people expected the number of different cryptocurrencies to grow – which it did. In 2019, 236 cryptocurrencies began trading for the first time.

    NFC payment chips implanted in humans

    Verdict: false

    It started in Sweden in 2015, but despite media attention, the number of humans that have chosen to be 'microchipped' is small. However, eyes remain on Sweden, where disruptive technology companies are working toward a cash-free society that functions purely using microchip implants.

    Regulation in fintech

    Verdict: not yet…

    The fintech sector saw significant growth in 2018, surpassing the 2017 total in the first six months. Much of this was attributed to the sector's lack of regulation, and as a result many expected 2019 would become the year of fintech regulation. As the year draws to a close, we have seen fintech move from under the radar, and is now attracting growing regulatory responses and supervisory scrutiny.

    Algorithms to asses consumers for non-traditional lenders

    Verdict: true

    The non-traditional – or alternative – lending market, that uses algorithms and AI to assess credit profiles, has seen continued growth in 2019, as the small- and medium-sized business (SMB) market looks to non-traditional lenders. 

    In 2019, one such platform, Kabbage, secured US$200 million of revolving credit and a US$700 million securitization agreement (the pooling of assets so they can be repacked into interest-bearing securities). PayPal, another popular peer-to-peer (P2P) lending service, is predicting a 42.7% five-year compound annual growth rate that will reach US$574 billion by 2023. 

    RegTech help banks and lenders comply with regulation

    Verdict: true

    As regulation in the fintech sector is expected to grow, with it will come the need for RegTech: AI-powered regulation technology that will help financial institutions make sense of large volumes of regulatory data. The current RegTech market stands at US$4.3 billion, but this is expected to grow to US$12 billion by 2023.

    Moreover, a study by the University of Cambridge Judge Business School finds that 48% of businesses use RegTech solutions for the regulatory management of information and tools, while 49% of buyers use the navigation and implementation of new and existing regulations as their motivation for purchase. 

    Digital-only banks continue 

    Verdict: true

    This has certainly been seen in 2019. In the first six months of 2019, five million people opened an account with a digital-only bank in the UK: a customer acquisition growth rate of 170%. Moreover, the global reach of digital-only banks is expected to hit more than 35 million people within the next 12 months, trebling the size of their existing customer base. Revolut is one example of a successful online bank that offers innovative solutions, such as the ability to round up all spending to the nearest whole number, moving the 'leftover' change into a savings account.

    Huge investments in digital transformation

    Verdict: true

    The 2019 global spend on digital transformation, to boost efficiency and security, is expected to reach US$1.18 trillion by the end of this year, an increase of 17.9% from 2017. 

    As predicted, the largest sector investment is the financial sector, which is predicted to have a compound annual growth rate of 20.4% between 2017 and 2022.

    TAGGED IN apps; blockchain; ebanking; fintech; financial services