“There’s going to be more change in the financial services industry in the next 5 years than there’s been in the last 30” — Dan Schulman

The background

Financial services industry is more than ever by technology. As a professional in the sector, I am seeing changes that most companies and their employees would not have imagined couple of years ago. Being passionate about technology and working in the sector I thought it is interesting to share where most opportunities for both business and product development will be. The below sub-sectors I highlight have been curated by both my experience as well as the research that I constantly read.

The opportunities

Risk and Regulation

Regulators across the globe have had a closer look at the financial sector since the global financial meltdown in 2008. Numerous mnemonics such as IFRS9, AIFMD, BASEL III, FRTB, MIFID II, DottFranc or FATCA have become common discussion subjects I have heard from the boardroom to the receptionist area of financial institutions in various geographies including Europe, North America and MEA. The unprecedented impact these regulations have on financial institutions have lead to many changes in the business model of financial institutions as well as to huge demands in business efficiencies. Technology is seen by many as the right answer. This has created numerous opportunities for existing software vendors as well as created significant space for start up companies. Given that financial institutions are slow to adopt change the opportunity to sign new clients and develop products to help financial institutions become complaint with with the previously mentioned regulations has never been greater. Only 50% of the companies had integrated some form of risk and reg tech in their enterprise software the 2017 Chartis risk report found. The market size is greater than 10 BLN USD. Many opportunities to be grabbed as the following KMPG report outlines.

Payments

Given the overall rise in technology usage, especially smartphone and internet usage in the last couple of years cashless payments have been on the rise. A Capgemini report has found that YoY growth in South East Asia is above 30%, while the global growth has been averaging 10% for a long time now. The most interesting industry trend is that B2B transactions in cash dominated societies such as India have started to move over digital means. Both retail and b2b sectors create significant opportunities for companies in the payments spaces. In my business meetings in Pakistan for example is not uncommon to hear of growth rates in the digital payments space that increase 35%. When we add the eventual benefits that blockchain technology could bring to the sector, I am convinced that companies innovating in the payments space will be have significant opportunities to grow.

KYC

The recent regulation in financial services has lead many companies to ramp up their KYC standards. It also has created a significant gap between existing capabilities of financial institutions and the new standards. Many of my clients across various geographies have asked me for solutions that could help them onboard new clients or re-paper existing ones in more efficient and rapid manner. The industry is projected to grow to 4 bln USD + by 2023 from about a billion today.

Take aways

We live in very interesting times. It seems like what used to be considered as non core activities in the financial services sector they have created more opportunities for innovation and software vendors. To make sure that you can benefit from the current exponential growth there are a couple of prerequisites. The first one in the list could potentially be, having a sound knowledge of the current and upcoming regulations governing the financial system. Being adaptable and flexible, keen to learn and promote changes will also help you. Finally, and most importantly, looking for the right opportunity that will help you or your company achieve more in these three sub-sectors can be the key of your future success.

Reference Shelf

Feel free to click on the links in the text. There are quite a few reports and stats I found interesting to read. Also, please share your thoughts about the article – what did you like, what do you disagree with? Looking forward to hearing your thoughts.

About the author

Boris Grozev is a seasoned fintech executive. Moreover, he is an entrepreneur by heart. Boris has helped number of businesses. To clarify, he has created and implemented business development and product enhancement strategies. In addition, his advisory work in emerging and frontier markets has resulted in culture and technology change. Above all, it has fostered innovation and lead to tangible results. He also invests in variety of asset classes and shares his experiences from the journey to financial independence. Boris’ leadership abilities, ambition naturally spread to others. He is a fast learner. His stamina, attitude and passion to succeed help to achieve common goals.