Post #904 – November 29, 2021
An Explosive Legal Micro-Niche: FinTech.
There is a dramatic changing of the guard taking place in the Financial Services Industry that will impact every law firm serving clients in that sector. From opening accounts to insurance underwriting and credit profiling, FinTech startups are flipping conventional business models. With significant venture capital dollars flowing into the FinTech ecosystem, “challenger” banks are threatening to wipe out banking behemoths faster than Blackberry was taken out of the cellular telephone market. 1 out of every 5 Venture Capital dollars went into Fintech thus far in 2021 (2700+ deals in US, 1800+ in EU and 110 in Canada) with 206 Global Fintech Unicorns.
Here are a handful of over 20 Micro-niches:
• Asset Management. Ever heard of buying stocks or mutual funds without having to pay a commission fee? FinTech companies like Robinhood are enabling investors to trade for free in exchange for their data. They forward this data to high frequency traders who can then influence the price of the asset.
• Alternative Insurance Underwriting. Two people with the same height and weight, both non-smokers and who don’t drink alcohol will be given the same life insurance premium. However, one might be an exercise freak, while the other a couch potato and more likely to die of diabetes. Now with intelligent and self-learning algorithms, InsureTech companies can determine whether or not to give insurance, provide different terms and conditions, and offer alternative payment options.
• Digital Banking. Imagine your traditional brick and mortar bank going completely online — no physical office, no bank tellers, no mail. Challenger banks are now offering no-frills individual and business bank accounts through a complete digital infrastructure.
• Peer-to-Peer Lending. Peer-to-business (P2B) lending is when a business borrows money from one or multiple individuals. FinTech companies create platforms to match borrowers with lenders and usually take a fee from the borrower’s repayment.
• Small Ticket Loans. Banks and other lenders don’t want to underwrite smaller ticket loans because of the low margins and high costs in setting up and recovering them. FinTech companies are delivering impulse buy mechanisms (buy now & pay later, or BNPL) and one-click buy buttons on e-commerce websites to enable customers to buy quickly without having to enter any form of authentication or credit card details.
Corporations are increasingly vulnerable to the acceleration of technology that’s eating every industry — and nobody is staying in their lanes. With capital flowing like never before, the number of insurgents poised to eat an incumbent’s lunch are multiplying every day.