Revenues generated by FinTech platforms will soar from around $263bn (£231bn) today to $638bn by 2024 as customers become more accepting of artificial intelligence (AI).
That is according to analysis by Juniper Research, which said that FinTech would become the “new normal” and fundamentally change how financial services are delivered.
Smart contracts, loan underwriting using AI to analysis non-traditional data, and personalised insurance based on the internet of things (IoT) are all set to become mainstream.
For insurance specifically, Juniper Research highlighted how actuaries used to manually calculate risk for insurance, and that customers would rarely cancel policies at renewal.
“However, the market is now vast, with consumers and businesses able to insure almost anything rapidly over the Internet,” the researchers explained. “Risks can be better understood as technology can thread together disparate factors to evaluate and price risk effectively.”
The report explains how incumbents are now attempting to replicate and partner up with FinTech firms.
Nordic insurer Tryg is mimicking FinTech approaches by opening an innovation hub in its Copenhagen headquarters, while Prudential has launched its PRU Fintegrate Partnership Programme.
Meanwhile, Allianz Italy’s Allianz1 allows customers to build their own products from the company’s portfolio of P&C, life and health insurance lines, which can be amalgamated into a single policy.
The researchers argued that incumbents use these strategies to appeal to users outside their normal target audience, such as millennials, to secure future revenue streams.
However, it is thought that direct entry, beyond partnerships, remains unlikely in the medium term because of heavy regulatory burdens introduced after the financial crisis.
“The distinction between the FinTech suppliers and traditional incumbents will blur in the 2020s,” said research author, Michael Larner. “Digital engagement will become the norm.
“The winners will be those that provide personalisation allied to an outstanding customer experience’.
Image credit | iStock
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