Today, the Financial Health Network released its 2017 Snapshot paper. In this report, authored by members of the Financial Solutions Lab, we discuss the latest trends in fintech and provide an overview of the market segment as informed by our analysis of over 360 applications from 2017, the more than 1,000 applications in our first three years of challenges, and our discussions with entrepreneurs, investors, and industry leaders.
So what are we seeing in fintech?
Specialization may be for insects, but it also is quite the trend these days in fintech. Gone are the days of very general PFM products that seek to encompass users’ entire financial lives. In its place, we are seeing entrepreneurs increasingly target niches, solving specific problems elegantly and quickly. The greatest benefit from this approach tends to be the user experience: customer delight comes faster, and on-boarding friction is vastly reduced.
The key market segments remain relatively unchanged, but each is evolving differently. Credit continues to generate consistent activity, although it is generally limited to credit analysis and credit building, as actual lending still involves overcoming substantial regulatory hurdles. Savings is trending more towards automated tools and behavior modification as opposed to personal budgeting and categorization. While peer-to-peer payments have generated substantial interest among more established firms, most recent startups tend to approach payments as a part of their business model, rather than as an entire model. Insurance startups are still very early, with most entrants focused on distribution of existing products by legacy underwriters. Educational products are highly varied and numerous, but almost all have struggled to achieve scale.
Fintechs are becoming more adept at using business channels to achieve broad distribution. While in the past we often saw B2B2C marketing used as a “Plan B” after direct consumer marketing proved ineffective or expensive, we have been excited to see increasingly sophisticated implementations of this distribution approach. Furthermore, as traditional retirement and health programs become prohibitively expensive for employers, startups are working hard to position their products as alternative benefits.
Nonprofits continue to evolve as well, although it seems to us that their approach has generally shifted from in-house development towards technology partnerships with for-profits. The Financial Solutions Lab and the Financial Health Network more generally are highly supportive of this approach, and we’re working hard to help facilitate these types of relationships.
For a more detailed discussion, take a look at the paper.