Fintech continues to grow from strength to strength and many fintech companies are reaching household name status. So, as 2019 draws to a close, what does 2020 hold in store?
Here are five trends we found that are set to shape the fintech space in 2020 and how we think they will affect not only wealth management but also what matters most — the consumer.
1. Large ‘Traditional’ Players Continue to Enter the Fintech Space
Fintech companies may have started as underdog disruptors, but the fintech explosion has attracted the attention of the big names. Large ‘traditional’ players have since recognised the importance of keeping up with customer expectations and are working towards adopting the latest technological innovations to remain customer centric. These corporate companies are aggressively entering the space through strategic mergers and acquisitions (M&A) and collaborative partnerships.
Several noticeable figures highlight this ongoing trend and we can expect more frequent, and larger strategic M&A deals in 2020.
According to S&P Global Intelligence, the M&A deal volume for 2018 stood at US$76.3 billion. In the first eight months of 2019, this figure had already skyrocketed to US$121.2 billion.
The biggest deal of 2019 was London Stock Exchange Group’s US$27 billion acquisition of Refinitiv, a financial data and analytics provider. While previously these deals have been on the payments side, 2020 might potentially see more deals in the consumer-facing space.
LU Global is itself a prime example. As a member of Ping An Group – World’s largest insurance company by Forbes Global 2000, Ping An Group kickstarted its investment into the wealthtech space via Lufax over six years ago and from that LU Global was born. Since then, LU Global has been powering through Southeast Asia disrupting traditional wealth management and seeking active collaboration with incumbent financial institutions who are looking to change the future of financial investments.
2. The Increasing Use of Decentralised Blockchain Technology
Blockchain is most famous for being the underlying technology of cryptocurrencies. But cryptocurrency is just one of the many applications of blockchain technology — its potential is so much greater. And although the use of crypto continues to be a contentious issue, that is not the case for blockchain. Financial institutions, including central banks, have realised this.
For instance, the Monetary Authority of Singapore (MAS) launched Project Ubin. It is intended to explore how blockchain technology — with its ability to create alteration-resistant, transparent, and publicly auditable ledgers — can improve the efficiency of clearing and settlement processes. It is already in its fifth phase.
As we enter 2020, more and more integration of blockchain technology into the fintech space is expected. As PwC put it in its ‘Financial Services Technology 2020 and Beyond’ report:
Blockchain will shake things up”. 56% of respondents in its Global Fintech Survey stated that they recognise the importance of blockchain. However, the report also notes that many respondents are unsure how to respond to this trend.
Not so for Lufax, LU Global’s parent company. Lufax has already begun recording transactions from its digital wealth management platform onto its own blockchain. This inherent transparency allows investors to trace their assets and boost their confidence in the platform while simultaneously helping ensure compliance and accountability.
3. The Continued Permeation of Artificial Intelligence-Driven Algorithms
AI may be an overused buzzword, but its impact and use is very real — and growing. With an ability to increase efficiency, reduce costs, and lower barriers of entry, artificial intelligence is permeating more and more facets of the financial ecosystem and in particular, wealth management.
AI’s capabilities are also expanding. Not only will it continue to evolve data analytics, new capabilities will be developed as well. One example is social and emotional intelligence, which will pave the way for better intention prediction and thus improved customer engagement. This is an area where AI still has room for growth. As Lufax’s whitepaper showed:
Over 90% of investors are unsatisfied with the current state of ‘intelligent’ wealth management, citing robots’ lack of ability to properly understand and answer user questions.
Deloitte notes that industry frontrunners are leading the way in AI integration. Lufax is one such leader. AI technology has already been applied to Lufax’s risk control, customer service, wealth management services, breakpoint analysis, customer intent identification and other fields. Not keen to rest on its laurels, Lufax is continuing to actively integrate AI into more aspects of its service so its customers will be able to enjoy both lower costs and more personalised offerings.
4. Consumer Data Continues to Drive Personalisation and Security
Today’s wealth management customers don’t just demand efficiency, they also expect personalisation. With businesses now having more raw consumer data than ever before, the main competitive advantage is now becoming how well they can translate that to more personalised products and services — consumer intelligence. The ongoing evolution of AI algorithms — particularly in the predictive analytics space — used to sift through this mountain of data will continue to drive this competitive advantage.
“Customers are often faced with challenges brought on either by asymmetrical information, or their own lack of understanding toward investment and risk. This is where AI can come in and help identify the optimal match, thus democratising professional and individualised services.”
There is no doubt consumer data is more valuable than ever. But while it enables greater personalisation, the flip side of the coin is that companies must also take extra measures to safeguard it. At LU Global, we ensure that we are always up to date with the latest security measures and protocols.
Listen to podcast: Head of Systems and Operations, Edward Tan, discusses security protocols for mobile applications for financial services with Channel News Asia’s 938FM Dollars & Sense.
5. Asia Continues to Grow as a Fintech Innovation Hub
With Asia’s huge population — a high percentage of which are unbanked — and a rising middle class, it’s no surprise that Asia has risen as the centre of financial innovation. This is particularly true in China, where fintech ecosystems have been scaling and innovating much faster than the West.
A few statistics to consider:
In 2018, almost half of the value of global fintech deals came from China. Four of the world’s ten largest fintech companies are Chinese.
With rising household incomes combined with an economy pivoting toward a consumption-driven one, it’s little surprise that China has emerged at the forefront of the Asian fintech space — an ongoing trend that is likely to continue in 2020.
LU Global is itself a product of such innovation, and we continue to strive toward our goal of enhancing the traditional wealth management model with technology and passing the savings back to consumers. No longer do investors have to be shackled by high minimum investment amounts and long lock-in periods.
Enjoy greater liquidity and flexibility through MarketPlace — a secondary market within the app that’s just been launched, enabling LU Global customers to trade selected fixed-term investments among each other.
Nor do our users have to contend themselves with generic wealth management offerings. Instead, they get to invest in the very same products that institutional and high-net-worth investors do.
The Consumer – The Ultimate Winner
It’s a fact, consumers are less loyal than before, and companies will have to do more to retain and win their business. This intense competition is driving innovation and the consumer is the ultimate benefactor. LU Global understands this. That’s why we are focused on giving as much control back to the investor as possible, via low minimum investment amounts, shorter lock-in periods, and access to curated products typically reserved for the financial elite.