It was a big year for FinTech in 2017 – and next year is shaping up to be every bit as exciting, said PwC which recently released its top 2018 Fintech predictions by Henri Arslanian, the firm’s FinTech and RegTech lead for China and Hong Kong .
Some of the predictions from PwC include the followings:
1. Bitcoin and cryptocurrencies – here comes the institutional investors?
Expect increasing public awareness and upward spiraling prices to continue in 2018, with potential institutional investors announcing crypto investments or launching crypto funds, plus some of the “incumbent” service providers, from brokers to banks, entering the space.
Look out for many new innovations in the retail space as well. Despite the numerous ground-breaking features of cryptocurrencies or ICOs, investing in them is still not very user-friendly. And the safekeeping of private keys requires even more experience. For example, while you can always regain access to your bank account if you lose your bank’s PIN, your crypto assets are lost forever if you lose your private keys!
2. Are the regulators and tax authorities set to join the Crypto party as well?
Many regulators have taken a balanced and practical approach to cryptocurrencies so far. But they have made it clear that they will crack down on any violations, with the SEC’s investigative report on the DAO being a good example. However, more high-profile enforcement cases against reckless ICOs look set to take place, with regulators seeking to make examples of some of the bad apples for the rest of the industry.
Expect the tax authorities to be more active, too, especially with the rise in the price of Bitcoin. The recent IRS request for the names of account holders at one of the large US crypto exchanges may be an indication of things to come.
3. ICOs – is the child becoming a teenager?
ICOs generated a lot of media attention in the past year, with more than US$3 billion raised via such token sales and the industry evolving fairly quickly from a “two guys and a white paper” model to one of experienced teams advised by professional firms with well-thought-through business models.
While the ICO frenzy may calm down in 2018, especially in terms of the number of ICOS and the amounts raised, expect the industry to further institutionalize, with the further development of best practices. This will be seen especially in key areas from KYC and AML processes to governance and transparency standards. Expect more industry best-practice initiatives to take place, too – the recent one from the Hong Kong FinTech Association being a good example.
4. RegTech – a wave of consolidation ahead?
Regulatory technology (RegTech) will continue to be highly interesting to financial institutions looking not only to deal with their regulatory obligations more effectively and efficiently, but also to reduce the risks and costs associated with such functions.
However, the long sales cycles and the procurement obstacles will remain a challenge, especially as legal and compliance teams are often relatively unfamiliar with RegTech. In addition, the lack of dominant players in this space will cause further consolidations in the industry, with RegTech start-ups likely being acquired by some of the traditional technology providers who don’t want to be left behind.
5. Banks embracing FinTech – the end of innovation teams?
Although innovation teams played a crucial role in the early days of FinTech, when banks and start-ups were learning how to work together, many were often criticized for lacking budget and serving more as a marketing tool than acting as drivers of meaningful change inside the organization.
With the increased familiarity and understanding of FinTech by banks’ senior management, expect many FinTechs to avoid innovation teams altogether and deal with the relevant business lines directly. As well as saving FinTech start-ups time and energy, this will continue to embed innovation as a mindset across the organization rather than having it limited to just the innovation team. Easier said than done!
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