Fintech Becomes Grounded

It’s been a crazy few years for fintech.

Financial technology companies have been able to do no wrong. There’s been a lot of excitement around the development of new ways of making money, managing money, and even making payments.

However, as Inc. reports, this might be the year that this sector becomes somewhat grounded.

Here are three of the areas that Inc. reports are likely to see a little bit of a change in the coming year:

1. Startups Could Be Acquired

As more venerable companies look for ways to remain engaged with millennials and technology, fintech startups could see some action.

Rather than trying to keep up with what’s happening with apps and technology, it might make sense to move forward with acquiring fintech startups or forming partnerships.

Just look at MasterCard at CES. The company is forming partnerships, developing its own fintech, and generally looking to stay ahead of the curve.

Inc. reports that more startups are likely to be acquired as companies look to boost their ability to take advantage of fintech for the long haul.

2. More Scrutiny for Fintech Companies

In May 2016, the situation at LendingClub blew up. Problems with loan sales resulted in the ousting of a CEO.

The issues with LendingClub had many scrambling for more transparency from financial startups in general.

While fintech isn’t likely to be in big trouble, the heady days might be over. Or, at least, things are changing a little bit.

Now, these startups are likely to need to share more about their processes and revenues. There might be more vetting.

Plus, with the interest from older companies and venture capitalists alike, there is a good chance that these fintechs could become more orderly in their efforts to create business plans and show hard data to back up their results.

It’s kind of a reining in, but it ultimately shouldn’t mean the end of fintech. It just likely means that the sector as a whole is “growing up.”

3. Valuations Should Become More Realistic

Finally, Inc. reports that fintech valuations are likely to become more realistic. Right now, more than 20 companies in the space have valuations of at least $1 billion.

That seems a little high. But fintech is hot, so things are a little crazy right now. However, valuations might come down as more questions are asked and as things cool off.

It’s hard to value fintech companies and other technology companies because everything is so new. Plus, many of these companies don’t have solid revenue yet, or even a way to reliably monetize.

Bottom Line

In 2017, fintech and fintech payments are likely to continue to grow in popularity. We’ll see more of these companies, apps, and products.

However, things seem to be moving in a direction that allows for fintech to move solidly into its adolescence. A bit of slowing while business leaders test the climate of a new U.S. President, as well as an evaluation of what has been working (and what hasn’t) up until now, means that we’ll see a tempering.

Where do you think fintech is going in 2017?

I'm Miranda and I'm a freelance financial journalist and money expert. My specialties are investing, small business/entrepreneurship and personal finance. The journey to business success and financial freedom is best undertaken with fellow travelers.

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