SmallCapPower | January 27, 2016: Ready or not FinTech, or Financial Technology, is here to stay and it’s been one of the hottest technology areas of late. The real question should be: are there still opportunities for investors to make money in this space?
Discussing this topic at the Cantech Investment Conference in Toronto was Yair Weisblum, Partner, Financial Services Strategy & Operations, PwC, Dean Nicolacakis, Principal, Co-leader of Fintech Practice, PwC, Andrew Graham, Co-Founder and CEO of Borrowell, Randy Cass, CEO / Founder / Portfolio Manager of Nest Wealth Asset Management Inc., and Jake Tyler, Co-Founder and CEO of Payso.
Dean Nicolacakis began with a sobering statistic – the financial services industry globally spends US$300 billion a year on information technology, yet just $40 billion of that, he estimates, is being spent on innovation. And, all of the money being spent in the tech sector on solutions that were historically oriented towards financial services, is about $20 billion. Thus, he believes it’s an unprecedented time that’s not just a blip, but a fundamental shift that’s happened. First, there are about one billion people in the new middle class to be banked globally. Also, society has super powerful technology (smart phones) directly in the hands of almost every consumer. And, the capital requirement barriers to “pay in order to play,” he says, are completely gone.
Nest Wealth Asset Management CEO Randy Cass, meanwhile, asserts that there’s “no industry in the world that’s as broken as the Canadian wealth management industry.” He argues that the Canadian investor is the “worst-treated investor in the world” by the wealth management industry. Mr. Cass contends that Canadian investors can give up as much as 40% to 60% of their potential wealth in fees without ever knowing that they paid anything to the industry.
While some in the financial services industry see FinTech as a threat, the panel members seemed more than willing to act as partners. For example, Borrowell provides loans to consumers with good credit that want to consolidate high-interest credit card debt. The Company has then sold some of these loans to at least one Schedule-1 bank.
Yair Weisblum said FinTech has reached the prime time in 2015, with $12 billion plus invested globally last year. In Canada, he points out that several new players have entered the market and the even the banks have started to invest and partner with some of the “disruptions.” Randy Cass, though, believes that as far as the penetration of these services into the masses is concerned, “we haven’t even gotten to the top of the first inning yet.”
To that end, Dean Nicolacakis thinks that the wealth management and insurance sectors will be the next to embrace FinTech, to which Mr. Cass added that the adoption of this disruption will occur when companies that have no concept or interest in wealth management but have lots of goodwill with their customer base and have yet to monetize that, start to enter the space. That’s when you know that the industry has “woken up and true disruption has happened.”
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