The next fintech evolution is happening in wealthtech

There is a lot happening in the world of wealthtech, and for good reason. A confluence of consumer psychology, technology, and macroeconomic developments has created the perfect window in which to build the next fintech behemoth.

The first set of changes, while in many cases macro driven, are best understood through the lens of the consumer where three salient trends stand out.

One, the spike in inflation over the last couple of years has driven a strong and emotional mass anxiety that money sitting passively in a bank account is worth less and less over time.

Two, in case nobody noticed, we are in the midst of a pretty spectacular stock market boom despite all the negative political headlines. This, along with rising inflation, has driven a strong fear of missing out and has pushed many people to look for ways to join the party. So while inflation caused fear, the rising stock market has triggered that other driving force in finance, greed.  

Three, consumers are now increasingly comfortable transacting larger and larger amounts online without ever speaking to a person. Whereas the idea of handling transactions in the hundreds of thousands if not millions of dollars without speaking to somebody would have caused trepidation in the majority of people a decade ago, that is no longer the case. In fact it is fair to say that the opposite is true now, where having to speak to somebody is usually a sign in people’s minds that something has gone wrong!

The second set of changes are technology and industry driven, and are best understood through the eyes of the entrepreneurs who are looking for the next exciting company to build.

One, the world of fintech has now evolved such that thanks to infrastructure providers like QED investment Atomic, building a new wealthtech platform has become easier, faster and cheaper.

Two, AI has created an opening to not only build faster and better, but also create a wedge product such as a trading coach that can help those looking to protect and build their wealth avoid common pitfalls and mistakes. These pitfalls are especially pronounced in the world of day traders where sadly many that are looking to build wealth end up depleting it.

Three, as the amount of offerings on both the public side (ever cheaper and more targeted ETFs for example) and private side (sought after private equity and venture capital funds) have proliferated, those asset managers are looking for distribution for their funds and are increasingly happy to partner with new distribution channels to consumers who are hungry for access. And given the more sophisticated APIs and fintech infrastructure, connecting to those funds is much easier.

Finally, entrepreneurs are now also increasingly aware how to best monetize wealthtech customers. Building AUMs is not cheap, and takes time and patience (as well as capital). However embedded fintech solutions in payments and FX, not to mention lending propositions such as Lombard loans (credit secured by a share portfolio) opens up the way for rapid and substantial monetization beyond the world of AUM driven commissions.

Of course, we live in the world of venture, and risk is an ever present part of all that we do. Wealthtech has a long list of pitfalls that daring entrepreneurs need to overcome. Competition is strong, there are numerous legacy platforms, building AUM takes time, CACs are steep and on the more day-trading oriented platforms the consumer benefit is far from obvious.

The good news is that mitigants to all those risks exist, and we will look at those in our next blog. For now, if you are building in this space, let us know if QED can help. And as for robots making us rich, that’s already happening, and if you are not benefitting from it you are probably falling behind!