The ongoing push for savings and regulatory fitness among finance professionals is likely to spur an increased adoption in 2017 of fintech solutions powered by artificial intelligence (AI).
That’s according to Henri Arslanian: newly appointed fintech leader for China and Hong Kong at PwC.
In his predictions for how the fintech industry will develop in the coming year, Arslanian notes: “While there has been much media focus on AI replacing human fund managers or traders, the most pressing [business] cases may be cost-reduction or compliance issues.”
Indeed, he says, AI can actually help to flag up problems such as money laundering or employee misconduct by “replacing costly manual processes”, providing a clearer picture of workflows.
In a related prediction, Arslanian tips regulatory technology – or ‘regtech’, for short – to become a greater force this year, for very similar reasons.
He points out that, while regulations introduced in the wake of the 2008 financial crisis drove the hiring of numerous compliance officers, regtech solutions – developed to help banks and corporates monitor and maintain their often complex compliance requirements – could increasingly assume their roles.
As for how the fintech industry itself will fare in the coming year, it is likely to undergo a trend towards specialisation, with each of the technologies that are so often grouped under the fintech banner building its own profile.
“This industry has grown so much in recent years,” says Arslanian, “that nobody can really claim to be a ‘fintech specialist’. Each of the many verticals of fintech – from peer to peer and payments to robo-advisory and blockchain – has become disciplines in their own right.
“This trend will continue in 2017, as the fintech industry matures and related disciplines such as regtech and insurtech [insurance technology] increase their dedicated followings.”
Amid those developments, though, fledgling firms could run into investment hurdles, with venture capital harder to come by.
“Bankers used to be a big source of angel capital for fintech start-ups,” says Arslanian, “especially across Asia. Due to job losses, many of these previously bullish bankers are becoming more cautious about start-up investments. This is directly affecting the fundraising landscape for early-stage fintechs.
“Unfortunately, this trend is likely to continue in 2017.”
However, Arslanian notes, there will be scope for Western fintech firms to fix Asia as their primary target market, using Hong Kong or Singapore as potential entry points.
“While there is tremendous fintech and regtech interest from banks in Asia,” he says, “the pool of quality homegrown fintech start-ups is limited. This presents a unique opportunity for fintechs to develop their R&D in the West and deploy it in Asia.”