Despite a tough year for many FinTech startups and large industry players, the coming year promises many potential advances in the financial industry with the assistance of financial technology.

FinTech Trends for 2017

2016 was a less than a glamorous year in the world of FinTech, with SEC investigations, high-profile firings and reduced investment littering the landscape. By all accounts, it was a tough year for many FinTech startups and large industry players. Nonetheless, there were some positives that happened: Perennial tech powerhouses continued to grow, institutions across the industry ramped up R&D and acquisitions, and the market itself rallied to hit all-time highs by year end.

The coming year, which holds much uncertainty, also promises many potential advances in the financial industry and financial technology. Previous commitments to reduce regulation by the incoming administration could nurture an environment that is conducive to innovation and growth; this is something that can be either highly prosperous or treacherous in financial markets. As seen in the latter half of 2016, the federal government is willing to take steps that will incubate FinTech success. In September, the first bipartisan Congressional Blockchain Caucus was established to bring legislatures to speed on the new tech, as well as to help craft future legislation. Similarly, in December 2016, the Office of the Comptroller of the Currency, which oversees national banks, extended a new type of license to startups that process deposits, withdrawals, payments, and transfers. If nothing else, these changes show an interest for FinTech in the federal government — a trend that we expect to continue into 2017.

So, what else can be expected in the FinTech landscape as 2017 progresses?

Consumer-Driven Insurance

There is little argument that the insurance industry is ripe for disruption. Insurance companies have seen many of their services unbundled by young, heavily funded startups. Customers are also now reporting some of the lowest satisfaction scores of any industry. Consumer expectations and needs are rapidly shifting. As Jamie Dimon said, “Silicon Valley is coming,” and needless to say, it isn’t going to be kind to the insurance industry.

2016 saw a monumental shift to consumer-focused insurance products. Startups like Lemonade began to offer a modernized, delightful approach to insurance products that serves the user, not the corporation. In 2017, expect to see more agencies exploring business models that cater to the modern consumer’s dynamic demands. Pay-per-mile or on-demand offerings from startups like Metromile and Trov are placing consumer needs before outdated business models. Advances in Internet of Things technology will allow also insurers to provide more targeted coverage, even driving preventative rather than reactive care. Major providers will continue to reimagine their business models in order to stay competitive in this rapidly changing market.

AI That Empowers Independent Investors

For several years, startups like Betterment and Wealthfront have explored the ability of artificial intelligence to automate individual investing. 2017 can expect to see plenty more young companies carving out a niche in this same space. More importantly, larger institutions will build out automatic investment options using AI in order to retain large portions of their investment pool.

In 2016, several large players experienced some success in the space. After building their own robo-advisors, Vanguard and Charles Schwab quickly passed both Wealthfront and Betterment in total assets managed. This year, expect to see many more institutions build their own robo-advisors, capitalizing on the massive market share to eclipse the success of a few startups. These corporations just might win the value-based competition, considering, according to Morningstar CEO Joe Mansueto, robo-advisories need “$16-40B of net assets to even break even” in an industry with extremely high customer acquisition costs.

…and Revolutionizes Industrial Players

Next year, AI-based investment tools will bleed beyond independent investing and venture into institutional shops. While hedge funds and investment banks have historically used predictive models to build their portfolios, 2017 is the year that these technologies will go mainstream. It is likely that large-scale advisories will make AI-based tools available at scale. In this future, a local investment advisor will be able to access high-power models to make predictions about a portfolio. The analysis that was previously only available at the top of the pyramid will quickly disseminate among the masses.

On the opposite end, top-of-the-line investors will be able to harness the power of even more advanced artificial intelligence to unlock new opportunities in the market. Some of these advancements will be made by enduring leaders the likes of Two Sigma Investments. Many others, however, will be small upstarts comprised of leaders from across the industry. Expect to see the formation of new hedge funds that take advantage of data analysis at scale.

Blockchain Will Find Its Focus

For a long time, startups that made claims of leveraging the blockchain or cryptocurrency seemed to have an instant path to investment. Almost overnight, some of the largest financial institutions poured their money into researching this previously uncharted territory. The market, it seemed, was due for a rude awakening. Perhaps the most notable stumble was the failure of the DAO, the darling venture capital fund of decentralized finance. Eventually, the hype died, and many realized the unsettling truth: There are many steps to make before blockchain becomes mainstream.

2017 will not see the death of blockchain, but rather an initial scaling back of its ambitions. Small and large players will find competitive edges in areas of banking, insurance, and real estate. These applications will lay a crucial foundation upon which blockchain will eventually scale. By the end of 2016, a commitment by the banking industry could already be seen. In August, a conglomerate of Santander, UBS, BNY Mellon and Deutsche Bank joined forces to develop a cryptocurrency system that modernized interbank transfers. This year, expect to see more large organizations jump on these opportunities to leverage bitcoin in specific parts of their business, often in ways that are already being tested by startups.

Rising Adoption of the Mobile Wallet

The mobile wallet and contactless payments via smartphones have been on the rise for years now. But, expect in 2017 for people’s wallets to be thinner than ever — and not because people will have less money. In 2017, more and more people will use their smartphones to make mobile payments, which will make carrying credit and debit cards and obsolete traditions of the past.

Why are digital, mobile payments beginning to overtake manual payments as the preferred method of handing over cash?

First, consumers have become more and more comfortable making online payments — especially as internet security technology becomes more advanced. Also, last year saw a huge growth in the number of mobile payment options. Today, consumers can choose from a host of different mobile wallets in which they can store their payment information: Google Wallet, Apple Pay, Samsung Pay and Android Pay, among many others. As smartphones get more and more sophisticated, nearly all devices will have built-in wallets, encouraging people to use this convenient option over the more cumbersome, inconvenient option of pulling out and swiping a plastic card.

Utilization of Biometric Security

As more people switch to mobile payments, there will be an intricate need for improved cybersecurity, especially as the world sees cyber conflict and crime taking center stage.

Expect companies to turn to biometric security tactics this year — that is, the security technology that uses a person’s bodily features — for authentication. Some examples of biometric security measures could include facial or voice recognition, fingerprint identification, or iris scans. Biometrics are so promising because their accuracy and reliability may eliminate the need for more complex validation processes. In the coming year, many finance applications and mobile wallet-type technologies are likely to use biometrics to secure people’s financial information.