Top themes spotlight: An easier way to split the bill

Fintech: An industry at an inflection point

We have all experienced the inconvenience of splitting a bill after an evening out with friends. There never seems to be an explanation for the 20-dollar shortfall, or why the wait staff cannot process any more than two credit cards per transaction. The good news is that with the advent of new financial technologies, or "fintech," the process of transferring money to service providers and among peers is becoming as simple as a few fingertip taps on a smartphone. We believe the fintech industry is at an inflection point and we expect to see the future financials landscape change significantly – opening up new possibilities across a number of vertical applications, including payments, insurance, and capital markets.

The process of transferring money is becoming as simple as a few fingertip taps on a smartphone.


Poised to disrupt financial services

We define fintech as the confluence of financial and technological innovation that facilitates banking and financial services. Fintech, in our view, is about digitalizing finance, which mainly takes advantage of digital services including social, mobile, cloud and analytics as well as emerging technologies like blockchain and artificial intelligence (AI). We expect to see strong growth in fintech over the next several years, with revenues increasing 10.5% by 2025, reaching an estimated USD 265bn. Growth in the industry is supported by increased connectivity with the proliferation of smartphones, improved technology infrastructure in growing cities, and demand from millennials for digital approaches to money management and payments.

Payments, in particular, are poised for disruption within the fintech space. Volumes of digital payments are being driven higher by a few key trends, including a shift to card-based payments and omni-channel online shopping. Beyond retail, we see additional volume of digital payments driven by business-to-consumer (B2C), business-to-business (B2B), and person-to-person (P2P) transactions.

Payments, in particular, are poised for disruption within the fintech space.


Adapters poised for outperformance

Going forward, we see new technologies such as real-time payments and fast Automated Clearing House (fast ACH) accelerating the pace of digital payments. In fact, a new payments clearing system called The Clearing House (TCH) should be rolled out later this year and will include features such as real-time messaging, settlement, and 24/7 processing. We expect this technology to be quickly adopted by a variety of financial services companies to bolster payment products offerings to customers.

We believe that the financial services companies that embrace fintech and maintain flexible business models are poised to outperform their less tech-savvy peers over the coming years. Investors, in our view, will be best rewarded by investing in a diversified group of fintech companies such as payment industry leaders, technology companies launching disruptive fintech services, and incumbent financial corporations with a clear fintech strategy.

Investors, in our view, will be best rewarded by investing in a diversified group of fintech companies.

Laura Kane

Head of Investment Themes Americas
Global Wealth Management
Chief Investment Office

Matthew DeMichiel

Thematic Strategist
Global Wealth Management
Chief Investment Office


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