Thursday, December 20, 2018

9 Finance & FinTech Trends for 2019

Each year we look at trends that will be relevant to our client base. Since a significant portion of experience has been with financial software companies, financial services and FinTech, here are 9 trends we think will be important in 2019:
  1. Trade wars, tariffs trade deals, globalization, deficits and the state of the economy will be a big story. China will be a big part of the story. And recession watch will be a significant angle, after 37 quarters of the longest expansion in U.S. history. For example, we expect a lot of how- to-prepare-for-the-coming-recession articles. We're not going to predict how the economy goes -- though an uncertain economy combined with a volatile stock market doesn't look good -- just that it will clearly a big story in 2019. 
  2. Brexit matters but not from a political perspective but for what it means for London. Our interest here isn't in the political implications. We feel that there will be a lot of coverage regarding the impact on London as an important finance center. Finance firms and those that provide services to them may find they need to shift their European offices from London to some other EU city. We would have bet that Germany would be the most logical successor to London, but with uncertainty around what happens after Merkle, we will want to hedge that bet. (Though compared to the unrest in France, Germany still looks like a better choice.) 
  3. A big year in iPOs? Some high profile unicorns -- including Uber (currently valued at $72B) & Lyft ($15B), Slack ($10B) and maybe Airbnb ($31B) are looking like they'll go public in 2019. There will be a lot of attention paid to how they do with the idea that their IPOs serve as a market indicator. That may not be accurate. Moderna went public this month and raised $604M, valuing the company at approx. $7.5B. But the stock immediately fell below its initial asking price. So hard to read the tea leaves on that. If they delay their IPO, that, too, will generate coverage -- and tell us something about the market.
  4. FAANG stocks will continue to generate ink. FAANG stocks are: Facebook, Apple, Amazon, Netflix and Google, and they will continue to dominate media coverage because a significant majority of Americans rely on them for information and entertainment. That's not going to change in 2019. (Keep in mind at least one of those companies isn’t profitable.) That said, Microsoft has almost stealthily become one of the most valuable companies but adding M to the acronym makes it unpronounceable. 
  5. The Cannabis market is growing strong. One issue that really hasn’t gotten attention: Because under federal law, pot is still illegal, the cannabis market remains a cash business – even in states that have legalized it. We expect three topics to get coverage: 1) Will banking laws change to allow legal cannabis retailers to accept credit card payments? 2) How much taxes is legal cannabis sales generating for each state? 3) How does HR handle employees who are work while high?
  6. Student debt is a big issue and will continue to get coverage. This is an ongoing story that we include in our list because, while obvious, if we did not mention it, someone might gleefully knock us for not mentioning such an important issue.
  7. The allure of the heartland for business and investment. The Midwest and other parts of the country that are not on the coasts have been slowly but steadily getting coverage over the past two years as being great, overlooked alternatives to expensive, overheating markets like San Francisco/Silicon Valley, New York City, etc. We think those articles will continue to hit in 2019. We also think economics of the heartland will take on additional importance as the 2020 elections approach, and voters, reporters and politicians realize there's still a strong feeling of have-notism among residents in rural communities. 
  8. The evolution of FinTech. Consumer-focused financial tech startups, known as FinTech, began as concepts to disrupt traditional banks by offering digital-first financial services. But because of the complexity, the initial wave of FinTechs focused on banking function at a time. We've reached a point when Fintechs are in a position to combine more offerings that are smarter, more dynamic and interactive than traditional banks' website or app functionality, offering new ways to bank, invest, pay and manage mortgages, track spending, etc. In 2019, we expect more FinTechs to be acquired by traditional banks but not just because of the FinTech's technology but because they provide access to millennials who may not be thrilled with traditional banks. There's also B2B FinTechs, which provide services to banks. We expect those to grow in importance but will be hard for them to get coverage outside of when they're acquired because they play a very behind-the-scenes role.
  9. The state of bitcoin. Bitcoin and blockchain went mainstream in media coverage in 2018 (as we predicted) and will continue to generate coverage in 2019. In a time of daily political chaos, we think more people will be interested, there will more skeptical coverage trying to make sense of the bitcoin market. We think it will continue to defy logic but that won't stop people from investing in bitcoins or the market reducing its volatility. 
Let us know if you think. We will publish another set of predictions in early January so stay tuned.

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