Disruptive financial services are sailing into the mainstream
From day-to-day transactions, to wealth management, to business financing, Digital Disruption 2.0 continues to wash over banking and financial services.
While the industry anticipates dramatic changes ahead through innovations such as blockchain, artificial intelligence and robotics, our day-to-day banking routines have already undergone considerable transformation, powered by the social, mobile, analytics and cloud (SMAC) technologies of Digital Disruption 1.0. A few years back, the idea of using your phone to deposit a check was laughable. Today, mobile banking apps with remote deposit capture are common smartphone features.
Even disruptive fintech services such as Procure to Pay (P2P) payments, alternative lending and automated wealth management are experiencing strong adoption. For payments alone, the market is huge. Across the globe, the value of private payment, cash transfer and other monetary exchanges is about a trillion dollars – and most of it happens in cash.
P2P lending also continues to grow exponentially. U.S. providers including Lending Club, Prosper and SoFi collectively generated $6.6 billion in loans last year, up 128 percent from 2014. In France, small-business P2P loan volume grew almost 4,000 percent in 2015 from a year earlier.
Robo-advisor portfolio management services are also enjoying robust growth, a trend that will continue to gain steam as tech-savvy millennials become investors, and inheritors. Betterment and Wealthfront, the companies that have spearheaded the robo-advisory revolution, together account for $6 billion worth of assets under management. Vanguard’s Personal Advisor Service had more than $31 billion in assets under management in January 2016, after beginning 2015 with none.
And then there’s crowdfunding, perhaps the most disruptive of all the recent innovations. In 2015, crowdfunding generated about $35 billion in startup capital, more than doubling the amount in 2014, and exceeding the $30 million in venture capital funding last year.
That’s a sobering statistic for venture captials, who have to contemplate what it means for their business over the next decade. What sort of operating model will make sense as crowdfunding becomes an increasingly compelling alternative?
In my next post, I’ll offer some observations on the scope and speed of Digital Disruption 2.0.
For now, let’s sum it up in three words: big and fast.
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