FinTech does not always equal FinTech. The number of digital tools and technological advancements rejigging the financial sector would go beyond the scope of this article. If there is one thing that is true about most FinTech solutions, it’s their focus on “personal finance”. FinTech software often allows users to manage their finances on their own. He doesn’t need an intermediary anymore, such as a human advisor or a bank — although a robot advisor could still be thrown in.
Yet, when looking at the vast variety of technologies and software applications, one thing becomes clear: FinTech has quite a few peers running the show. They are *Techs in their very own right.
Let’s take a look at what we have:
The first “peer technology” of fintech is
InsurTech is highly disruptive. Yet, while many other industries openly embrace innovations of digital technology, InsurTech has taken its time to get down to business. The decision makers of insurers all agree that
The concentration of insurance technology in the hands of small companies relates to the fact that most of those new solutions don’t fit the classical insurance approach. InsurTech desists from dividing clients into broad and imprecise risk categories based on static data.
One of the biggest challenges of InsurTech startups will be to convince the major movers and shakers to jump on the bandwagon,
PensionTech follows a similar direction than InsurTech, offering technology-powered improvements and problem solutions for pension systems. And like InsurTech it lacks a strong engagement on part of major annuity providers, who only recently have begun investing larger sums to keep pace with the ever-increasing digitalization.
It will be beneficial for them, for sure: Finding and choosing the right coverage for one’s retirement is still viewed as a barren topic. PensionTech promises to level the field here, introducing young people to annuities and saving plans. Keir MacDonald, an analyst at Redington, even brings the topic of gamification into the debate: Giving similar incentives like video-game apps, online pension software could cause users to interact with their pensions and investments on a regular basis.
On the other hand, future retirees will be interacting with pension technology on a regular basis, too. Accessibility and comprehensibility are the two most important aspects here: Apps monitoring a user’s different pensions and savings are already in use worldwide. The UK government for example recently declared support for the country’s own Pensions Dashboard.
And let’s not forget artificial intelligence here — no discussion of modern technology is complete without it. In the future, robot-guiders powered by complex algorithms will become a common service in PensionTech, helping users find a policy fitting their unique lifestyle.
In a way, regulatory technology or RegTech is the odd one out among the *Techs. Most FinTech sub-sectors are geared towards facilitating financial services for consumers. RegTech, however, targets banking and financial institutions dealing with complex regulatory and compliance issues.
The emergence of RegTech is closely linked to the financial crisis of 2008. The following years gave rise to new requirements and regulations affecting financial services. As the Business Insider Magazine states, the increase of changes to regulatory processes surged up to an imposing 492% in only 7 years after the crash — the majority of them dealing with customer protection and anti-money laundering. Subsequently, ensuring regulation and compliance has become one of the financial sector’s most complex and resource-heavy endeavours. The challenges are manifold: KYC processes, PCI DSS, AML rules, all both domestic and international. Fast and effective solutions for regulatory management are in great demand.
This is where RegTech comes in. Regulatory technology substitutes manual reporting and compliance processes with digital operations. For example, RegTech assists matching a regulation set’s intention and its interpretation within a given regulated entity. To achieve this, algorithms based on the regulation text are used. They go through data and apply semantic technologies and machine learning to find connections. RegTech also automates process audits and data management. Following audit trails, it gives out reports, simplifying data for easy review and cloud- or platform-based sharing with regulators.
In the future, RegTech will likely make more far-reaching use of artificial intelligence. It will allow institutions to dig up delicate connections between data sets, effectively predicting movements of items more exactly. RegTech also changes the capabilities of regulators: Real-time monitoring allows to detect violations right as they occur, not only in retrospect. The industry is already placing trust in regulatory technologies: The global investments in this sector are expected to reach 120 billion dollars over the next 5 years. A real bargain, when compared to the financial penalties coming due in case of non-compliance. In the US alone, such costs valued up to 160 billion dollars in 2016. Indubitably, RegTech makes a difference.
Let’s be honest: Feeding piggy banks with loose change never felt like an ideal method for wealth building. Fortunately, in this era of digital progress, alternatives are easily accessible. Via smartphone, for example, one of the home platforms of WealthTech. Like the other *techs named above, WealthTech draws on modern digital instruments like big data, cloud computing
WealthTech startups are clearly gaining ground in the industry. In 2016 alone, CBInsights counted a total of 74 deals made by investors to back WealthTech companies. Indeed, WealthTech has been a topic since the late 1990s, if not under a different term: Robo-advisors analyzing data and helping clients compile profitable stock market portfolios for themselves are not an entirely new phenomenon.
Yet, access to these services has constantly improved. Today, digital broker applications present would-be investors a gateway to the stock market. Some of them take their cues from social media platforms, allowing registered users to follow investments like they follow their friend’s Instagram stories. New forms of stock purchasing promoted on WealthTech platforms target at young people. One example would be micro-investments, investments of small amounts of money up to 100$ with no commission. Offers like these significantly lower the bar to get started on the trading floors. Of course, a number of WealthTech startups also provide solutions to administer one’s own investments and savings. They do it better than your piggy bank ever could.
Thanks to property technology or PropTech the real estate game now plays out on the digital field, too. That is a necessary development, as PricewaterhouseCoopers states in one of last year’s publications. Looking forward to 2020, they anticipate the real estate market to become more dependent on the environmental sector, on government politics and on migration. This, as PWC says, will give rise to golden opportunities as well as fierce competition and excess risk. In a future like this, advancements in PropTech will turn the scale. Tech like it can
Just as with other fields of innovation, startup companies are setting the fashion of PropTech currently. They do so by bridging the gap between investors, owners
A very different application area for PropTech would be house management. Think that the custodian’s office is always accessible via
And then there would be the so-called
Overall, breakthroughs in PropTech promise to ramp up efficiency through fast, digital business procedures, while coincidently saving costs. And this could very much lead to less expensive rents.
Of course, all this can only act as an excerpt from the vast variety of *Techs joining hands with FinTech. And be assured, as you are reading this, smart developers and finance experts are already contriving new ones just as we speak.