The global fintech ecosystem continued to mature over the course of 2019. With major developments on the horizon, such as the increasing focus on open data opportunities, more regulatory clarity in a number of jurisdictions, growing involvement of big techs in fintech, and the ongoing evolution of technologies like AI, blockchain and cryptocurrency, 2020 promises to be another big year for fintech.
Here are KPMG’s top 10 predictions for 2020:
Bigger, bolder deals: Deal sizes will continue to grow as investors focus on late-stage fintechs. Frothy, speculative deals will be increasingly replaced by high-conviction deals focused on companies with proven business models and paths to profitability or access to capabilities in adjacent areas of interest.
Product expansion: Maturing fintechs and challenger banks will continue to expand the breadth of their service offerings beyond their initial niche focus areas into adjacencies, e.g. energy, telco, etc.
Deals occurring in diverse locations: Fintech deals will increasingly be seen in jurisdictions outside of traditional fintech markets, such as in Southeast Asia, Latin America and Africa.
Rise of Big Tech: The Big Tech giants like Alibaba, Alphabet, Apple and Tencent will increase their focus on the fintech space, working to increase their reach into developing markets – whether directly or by forging fintech investments or through strategic alliances – to increase the value and seamless integration of their ecosystems to their customers.
Digital banking licenses: Following the lead of Hong Kong (SAR) and Australia and Singapore, more countries in the Asia Pacific region will develop digital banking regimes and use digital banking licenses to stimulate competition and deliver services to under-served/un-served segments of the population.
The hunted start hunting: Mature fintechs will increasingly make their own investments in other emerging fintechs as they seek to augment their capabilities, get access to talent more quickly and grow in new markets.
Partnerships: The use of partnerships will continue to accelerate between big tech players and fintechs, traditional corporates and fintechs, and fintechs with each other. Partnerships will be highly customer-focused and geared toward creating more value and getting to dominate scale more quickly.
Open banking to open finance: The focus on open data opportunities will move beyond banking and into other aspects of the financial services industry, as well as solving common pain points in other sectors, e.g. energy, telco, etc.
Re-bundling of financial services: The unbundling of financial products will begin to reverse course as consumers increasingly seek a solution to increasingly complex and fragmented digital lives, preferring a trusted platform to orchestrate their financial affairs.
Cybersecurity and digital identity management: Cybersecurity-focused fintechs will become more attractive as traditional financial institutions shift from building to buying cyber.