Fintech is undergoing rapid change, with a new generation of stakeholders insisting on more technological innovation. In these times, we are witnessing the largest generational wealth transfer in history. According to Cerulli Associates, nearly 45 million U.S. households will transfer $68.4 trillion in wealth over the next 25 years. We are also seeing rapid developments in generative AI that will influence fintech.
The Future of FinTech was the topic of an event hosted by Blumberg Capital this week. A group of global fintech founders, industry leaders, and investors attended the event, listening to the panel discussion led by Lior Yogev, CEO & co-founder of FundGuard, a cloud-based investment management SaaS platform; SNPI co-chairman Eugene Kandel, chairman elector, Tel Aviv Stock Exchange; Citi Innovation Labs' global head of external innovation & venture investing, Ornit Shinar, and Blumberg Capital's senior director, Stanton Green. Bruce Taragin, managing director of Blumberg Capital, moderated the panel.
"The new generation is looking for technology tools to manage their funds, assets, and real estate assets," Yodfat Harel Buchris, managing director at Blumberg Capital, said in opening the event. “It's our role to offer this industry cutting-edge tools. Thanks to companies like Funguard and Sharegain (which created a digital platform for lending securities), we've been able to do that."
Fintech is an industry of trust, she said. “In spite of the financial crisis and the collapse of a few banks in the USA, traditional banking still has a high level of trust. The traditional banks and the big tech companies need to work together to serve the trust level and the consumer”.
“There is no doubt that the fintech market is growing. The growth rate is 17% a year. It is possible to take this industry 10 steps forward to provide better service to customers around the world”.
Taragin agreed that the fintech industry offers many opportunities. It's been a little bit of the best of times and the worst of times. On one hand, we're seeing a decline in valuations and activity has dropped by about 40%. On the other hand, fintech is actually 40% higher than it was in 2019 and 2020. In particular, we're focusing on B2B in the area of InsurTech, RegTech, capital markets, and Wealth Management”.
It’s all about trust
Shinar believes that the younger generation will not replace a bank or a banker quickly. "They want someone they can trust. We spend a lot of time making sure the young people understand what we do. There is a lot of trust building involved”. Green added that "it's very hard to understand those generational trends and the way they're using technology. From an investment perspective, we're looking at these embedded tools, based upon users and their trends right now. We're excited about because there is a higher network and landscape of different tools”.
According to Kandel, young people aren't as eager to succeed financially as previous generations were. “A lot of that money may be needed to sustain this generation, rather than to go into wealth management. In this regard, wealth management might decline because you are doing it for very long periods of time. Another thing is while the previous generation was more interested in financial return, this generation is more interested in impact. I believe it is the largest opportunity and the biggest shift in wealth management, and there must be some kind of platform to enable access to that work".
He added that "it's interesting to think about the intermediation of financial services because this new generation has two characteristics that seem to work in opposition. They want everything on the go, and without headaches, which implies many intermediaries. On the other hand, they have overconfidence, they have these AI, and suddenly they are smarter than anybody else, and they also want to do it themselves. So that's for less intermediation. So I don't know what's going to happen. But there are now systems being built and mostly sold to banks that allow you to actually do it yourself when you want”.
Regarding what they expect from large tech companies in the financial services sector, Green said that “In the old days, it was trusting the bank. And nowadays, the trust factor is increasing dramatically. For these other online platforms. My generation, you would never put a credit card on anything electronic. Google Amazon, Apple have all paved the way and they're going to continue to pave the way and then from that aspect”.
"There's no better time than now״
Regarding macroeconomic conditions and how they affect entrepreneurship and startups, Yogev said that "People are focusing more on durable businesses, which can be extremely profitable. Certain businesses can use this to attract the right attention to get the capital that they need to achieve their goals ”. He added that "there is never a good time to start a business, but if you have the right infrastructure - a good idea, a good team, and the ability to invest yourself, then go for it. I wouldn't wait two years for things to bloom again."
Green agreed: "Start your own business right now, there's no better time than now." Shinar said revenues are important, but she also said, "We're willing to bet on companies that are doing interesting things, that have great technology, even if their revenues aren't quite showing yet. Go do meaningful things and build real companies, and we'll back you up”.
Green also mentioned Gen AI. “Generative AI is being referred to as a moment of the internet, an iPhone moment. We are living in a disruptive time. Artificial intelligence can be used in a wide range of industries, such as supply chain or manufacturing. We're super excited about those places".
As for the impact of new AI capabilities on the tech industry, Yogev said that "it's really disruptive. It will make processes more efficient and make information more accessible to clients."
Shinar noted that "we've been investing a lot of time and energy in this space. The AI team in Israel is looking at everything we can do internally in partnership, through investments, etc.”. She added that "We're spending an inordinate amount of time not only examining what AI can do, but also trying to oversee what AI does and control its outcomes. We really do think this is the future. But we need to make sure that we have a responsible future”.
This article was written in cooperation with Blumberg Capital