5 fintech trends for 2020

As we approach the end of 2019 it’s the time of year when sector pundits start to look at trends for 2020. You’ll find these within nearly every imaginable product group, and fintech is no different. This year, as in mnay others, the trends are identified at the major conferences, such as Money 20/20, which took place in Las Vegas in October.

1. Product bundling

Fintech startups have typically released single products. Transferwise is an example. As a result, what a bank offered had been ‘unbundled’ by the fintechs. Now there is a move to rebundling products to provide a one-stop experience, but it’s still early days.

2. An holistic experience

Fintechs were initially about financial inclusion and affordable options, but now there is a move towards creating an holistic customer experience that focuses on financial health. Financial health is becoming more vertically focused. This trend includes companies that target specific demographics (e.g. seniors or kids), job categories (e.g. gig economy) and industries (e.g. dental practices).

3. A more global vision

US-based conferences in the past tended to focus on the domestic market, but this year has seen attendees arrive from around the major world regions. It forces the Americans to think more globally and recognise that some of the largest fintechs in the world are global, including the neobanks, such as Nubank in Brazil. We will definitely see an acceleration in the growth of fintech globally, as Asia and Europe are already outperforming North America.

4. More focus on security

Cyber threats are certain to rise, not least because quantum computing is about to come into play and its method of computing will upset the current cryptographic security.

5. From vertical to horizontal

In the beginning fintech startups were vertical, as they travelled alone, so to speak. But the big news is that in the next few years, it will look at horizontal integration as it introduces its innovative ideas to other industries, and also make it possible for non-financial firms like Amazon to offer financial products. It was apparently noticeable that a significant number of C-Suite execs from other industries were at the Las Vegas event.

Of course, fintech is still in its infancy, and we will see many more changes, probably in the not too distant future, as fintech evolves to meet a range of needs worldwide.

Bitcoin heads towards its teen years

On the 31st October 2019 Satoshi Nakamoto’s baby turned 11 years old. It’s quite remarkable to think that in two years time the white paper that changed the world will be a teenager.

Of course more people are preoccupied with Halloween on this day, at least in Europe, and the UK delayed its Brexit as well for the second or third time (everyone is losing count), which grabbed the news headlines. However, it is somewhat sad to see that after 11 years, the mainstream media still ignores Bitcoin, and all the celebrations were left to the crypto-focused press.

The original white paper is only nine pages long and opens with a remarkably humble statement: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” Some might say that this is the understatement of the century, because the author makes it sound as if it is mundane, and yet 11 years on we know its potential to create billionaires, as well as spawning an entire crypto industry now filled with a host of altcoins, as well as goodness knows how many fintech startups related to cryptocurrency.

A groundbreaking white paper

We should never forget just how groundbreaking the bitcoin white paper was. For the first time somebody had delivered a blueprint for an anonymous, trustless, decentralised currency. Of course, it didn’t appear out of nowhere. Fore example, Nakamoto says in his white paper that the proof-of-work protocol was developed from Dai Wei’s B-money thereby ensuring a ‘one CPU one vote’ policy.

Another important aim was to be a deflationary currency. This was achieved by stating that a finite number of bitcoin would be available. In this case 21 million. Fiat currencies by contrast can be printed or minted whenever a central bank/government decides, and that is an inflationary move. Eventually you end up like Venezuela in a state of hyperinflation, if you keep printing money, but your national borrowing keeps growing and there’s nothing to repay it with. Then you see people with notes piled up in a shopping trolley just to buy a loaf of bread. This situation is alien to the bitcoin ecosystem.

Nakamoto had beef with fractional reserve banking

Satoshi Nakamoto was not a fan of the banks that run the global monetary system, precisely because of issues like hyperinflation. But his pet hate was fractional reserve banking. In this system a bank can accept deposits, make loans or investments, but it is only required to “hold reserves equal to only a fraction of its deposit liabilities,” as Martin Young explains at BTC News. The problem with this type of banking is that when the reserves don’t match the money deposited by customers, and there’s an event that creates a domino effect, then the bank collapses and the customers lose their money. Which is exactly what happened in 2008. Let’s not forget that Nakamoto published the white paper only six weeks after Lehmann Brothers spectacular crash.

Eleven years on, bitcoin has become iconic for its many supporters, and hated by a few. It is also true to say that the majority of people worldwide still don’t understand it, and are being fed all kinds of scary stories by the media, which doesn’t encourage them to understand the upside of cryptocurrency.

It may be true that we haven’t yet reached anywhere near the mass adoption figures that the first cypherpunks hoped for, but in another 11 years, I believe that celebrations of bitcoin’s birthday will be more widespread and that it will be more widely accepted. It may even be a lifebelt for many when the next global financial crisis hits us.

Stablecoins: Cop Out Or Compromise

I would call myself a cryptocurrency purist. The reasons why digital assets appealed to me in the first place are their decentralized nature and the fact that the blockchain is ‘trustless’. Furthermore, it is a riposte to the banking community, which for a very long time has controlled us all unchallenged. And then they caused a financial of the collapse of such proportions that stability was ripped away from the average citizen. People lost their jobs, their homes, and there were even worse tragedies.

So when the Bitcoin whitepaper was published in 2009, it felt like a way forward. One of the problems was that the early Bitcoin believers were perceived as being anarchic hackers and the techie equivalent of punk rockers. And yes, some of them were, but there were also technology entrepreneurs like myself who embraced its possibilities.

In the early days, the buzz suggested that the crypto revolution would be an easy process, but of course, we have discovered that it is a rocky road and we are nowhere near mass adoption a decade later. Much of this is attributed to the price volatility, the lack of opportunities to spend crypto and the opposition of regulatory bodies in numerous global jurisdictions.

Along Came Stablecoins

And then along came stablecoins. If cryptocurrency was a sport, the purists were all shouting ‘foul’ and ‘cheat’. What I want to consider in a calm way is this: are stablecoins a cop-out, because they are ‘fake’ crypto’ to some extent? Or are they a compromise that could ultimately open the floodgates to mass adoption of all forms of digital assets?

In respect of a compromise, I’d compare stablecoins to the trainer wheels on a child’s first bicycle. They help the child get used to the idea of balancing on two wheels. Eventually, these ‘stabilisers’ can be removed and the child can progress to the reality of riding a bike without them. Now, even as a purist, I can see the potential advantage of this. I recently met an economics student, a Generation Z crypto enthusiast, who is invested in a small way in digital assets. He happily extolled what he believed would be the benefits of Facebook’s Libra, as just that kind of ‘trainer crypto’ that would enable mass adoption. I don’t put this forward as a conclusive argument for this view of stablecoins, but only as anecdotal evidence about possible public feeling, especially amongst Millennials and Gen Zers.

How else might stablecoins benefit us? I looked up some expert opinion on the topic.

MakerDAO says,

“A successful stablecoin implementation would be a major catalyst for disruption to global financial infrastructure, challenging weak governments and mismanagement of national economies. Furthermore, stablecoins allow for decentralized insurance, prediction markets, transparent credit and debt markets, and create a level playing field between small and large businesses in global finance.”

If MakerDAO is correct in their assertion, then isn’t it the case that stablecoins are performing the same kind of disruptive element crypto purists believed Bitcoin would deliver?

Stablecoin As Cop Out

As you know, stablecoins are tied to fiat currencies such as USD, GBP, Euro, etc. And there are those who believe that is their fatal flaw. What they are saying is that stablecoins are only as good as the asset they are tied to, and the way in which the two assets are tethered. This is a more complex debate. But, if I can simplify it at all, I’d say this: the core problem purists see with stablecoins is that they are still centrally controlled, they can be manipulated by market forces, and they are certainly not ‘trustless’ in the same way that BTC, ETH or LTC are. Some, such as Ben Prentice argues that stablecoins will simply lead us into the same trap as the old order of fiat currencies. He writes, “I believe inflationary fiat currencies where monetary policy is decided by few individual humans is not a sound form of money.”

So, I ask you — what do you think? Do stablecoins have the potential to help people slowly adapt to the decentralized digital assets, or are they a cop out intended to ensure that fiat currencies, controlled by a global elite according to some, remain dominant in the way we make all of our financial transactions?

Winklevoss twins tell Wall St to wake up

Winklevoss is a big name in the crypto world. The twins, who were Facebook co-founders, have been advocating for cryptocurrency for many years now, and have built up a considerable bitcoin holding, as well as founding the Gemini crypto exchange.

In the last couple of weeks, bitcoin has risen above $10,000 and dipped below it, but overall this year its value has climbed by 200%, giving hope to the crypto bulls, who were left out in the cold during the bear market of 2018.

Enter the Winklevoss twins, who have now warned Wall St banks that they have been “asleep at the wheel” when it comes to bitcoin and cryptocurrencies generally.

“Unlike the internet, which you couldn’t buy a piece of, you can actually buy a piece of this new internet of money,” Tyler and Cameron Winklevoss told CNN. They added, “It’s still a retail-driven market, from day one. And a lot of people have done really well. Wall Street has been asleep at the wheel.”

As Billy Bambrough at Forbes comments: “Bitcoin’s epic 2017 bull run, which saw the bitcoin price soar from under $1,000 per bitcoin at the beginning of the year to almost $20,000 in December, was largely thought to be due to Wall Street and that institutional investment could be poised to flow into bitcoin and crypto.”

However, the institutional investment didn’t materialise and the price of bitcoin crashed. The Winklevoss twins took a different approach, “We had to invest because we were afraid of missing out, we couldn’t miss out on this future.”

It appears they are now lobbying the Wall St banks to become more involved with the aim of seeing that institutional investment emerge this year, even if it didn’t appear in 2017.

Bambrough suggests that in some ways keeping the banks outside the market has helped bitcoin retail investors, and he cites teen bitcoin millionaire Eric Finman as an example. Finman recently announced that he is backing Metal, which launched in 2017, but has been revamped as a “all-in-one digital banking platform for cryptocurrency” — despite slumping 98% in value since its all-time high. Finman’s support comes as Metal Pay relaunches to compete with more directly with the likes of Venmo and PayPal, payment platforms that want users to store and send cash on their apps.

Meanwhile, Tyler and Cameron Winklevoss said they are open to partnering with Facebook chief executive Mark Zuckerberg on the social media giant’s Libra cryptocurrency project after it was revealed they have been in talks about joining the Libra Association.

The banks may appear to be losing out in this emerging market; it may even make banks a thing of the past. But there is a way to go before we’ll see that, even if these institutions are slumbering giants.