First, how did we do on last year’s predictions? Here are our predictions from last year with a yes, no, maybe self-assessment score:
- Bitcoin price will be volatile (no duh) but will end 2016 not much different from 2015. Bitcoin will fall deep into the slough of despond and entrepreneurs will avoid any mention of Bitcoin when fund raising. No. Got that one totally wrong about price (but right about slough of despond).
- XBRL will start climbing out of the slough of despond but won’t be recognized yet as moving into the plateau of productivity. Maybe. Saw a lot of real progress, but it is certainly not on most people’s radar. Maybe 2017 will see a breakout product.
- Momentum Capital (short term hype chasing) into Fintech will slow down but Innovation Capital (funding long term value creation) will increase because the reality of the opportunity is not impacted by the hype cycle. Yes. This was triggered by the Lending Club meltdown. You can pretty much track VC flows into Fintech based on Lending Club stock price. VCs liked the price decline as they could get into good companies at better prices
- More investment will flow into Underbanked as investors see the scale of the opportunity.Yes. The biggest beneficiaries are in India (eg Paytm) and China (which overtook the US for VC funding into Fintech).
- Consolidation will start in Lending Marketplaces. There will be a fierce battle for a winner takes most network effects market (similar to what we saw in ride sharing in 2015).No. This may still happen in 2017 as the market globalizes.
- The strange inversion we saw in 2015, when private companies were valued higher (on paper at least) than public companies, will end in 2016. The headlines will refer to Unicorpses. Yes.This will reach an ugly finale in 2017 with Uber (see 2017 Predictions).
- Analysts covering Banks will start referencing Fintech disruption when referring to a drop in profits at a major bank. No. I believe Fintech disruption was the root cause of the Wells Fargo scandal, but this is not a commonly held view.
- Moves by Big Tech and Big Retail into Financial Services will eclipse moves by Fintech startups and will worry bankers a lot more. Lots of talk about moves by GAFA (Google, Apple, Facebook Amazon) and BAT (Baidu Alibaba Tencent).
- Calls for regulating Fintech startups more intensely will follow at least one high profile blow up. Yes. Happened after Lending Club CEO ouster in May. But the reverse happened as well – easier Bank Charters in many jurisdictions.
- The Great Convergence between Banks and Fintechs commences, as both get judged on the same metrics by consumers,regulators and investors. Yes. We can see this in analysis of both Lending Club and Goldman Sachs Marcus.
Our predictions for 2017
- The end of the bank-driven phase of blockchain. The attempts by banks to coopt blockchain were like music CD retailers getting together to run MP3 music sharing sites or Post Offices setting up email services. Disruption means pain for some. Blockchain is disruptive to the current Financial Services world. The defections from the R3CEV consortium signals the end of this phase.
- We will see blockchain based real time settlement in equities markets move from R&D to live deployments. This may appear to contradict #1. However the disruption will come from a startup, not an existing Bank or consortium of banks. Banks will do well from the move to real time settlement (lower post trade costs) but they won’t drive this change.
- The InsurTech funding surge will slow down. This is because the early pioneers have to prove real customer metrics to get Series B & C rounds and as it becomes clear that Insurance incumbents are not asleep at the switch.
- Bitcoin price will go past its all-time peak of $1,242 (from 2014).. It will then settle back just below $1,000 for most of 2017. Unlike 2014, we won’t see a major price crash because of # 5 below.
- Bitcoin moves from its Darknet phase (illegal) to the early adopter Clearnet phase. This is when legitimate people charge in Bitcoin for legal transactions. This will start with cross border digital products. Because this brings new bitcoins into “circulation” with owners who also then want to pay in bitcoin, this starts a sustainable move to mainstream use which supports the price.
- Analysts covering Banks will start referencing Fintech disruption when referring to a drop in profits at a major bank. Carried over from 2016. I believe Fintech disruption was the root cause of the Wells Fargo scandal, but this was not a generally held opinion.
- Uber will not do an IPO and may do a private down round. This will signal the dramatic end of the public private valuation inversion (private higher than public valuations). This started in 2016 and will have its dramatic end in 2017.
- VC Fintech Funding in China, India, Africa and Latin America (the Rest) will be double VC Funding in America and Europe (the West). Even deals in the West will highlight growth in the Rest. Growth is the prize and growth is supported by a) middle class income growth b) no legacy technology constraints (“leapfrogging”).
- Most startup digital banks (“challenger” or “full stack” or “neobanks” will fail to get follow on financing. Investors will see more Incumbents get traction with their digital only spin offs and so they won’t see digital innovation as such a competitive moat.
- This one left blank for the big surprise. The big surprise may be triggered by macroeconomics and politics (as if we didn’t have enough of these in 2016), but will have a bitcoin element to the story.
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