Vertical ML/AI Startup Creation Weekend

Sector analysis

Vertical description

FinTech or financial technology is used describe new tech that seeks to improve and automate the delivery and use of financial services. ​​​At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones.When fintech emerged in the 21st Century, the term was initially applied to technology employed at the back-end systems of established financial institutions. ​Since then, however, there has been a shift to more consumer-oriented services and therefore a more consumer-oriented definition. Fintech has expanded to include any technological innovation in — and automation of — the financial sector, including advances in financial literacy, advice and education, as well as streamlining of wealth management, lending and borrowing, retail banking, fundraising, money transfers/payments, investment management and more.

How big an opportunity space is this, how is it growing, and what’s driving that growth?  

The global banking industry is worth $8 trillion. Americans have $5.5T saved in preparation for retirement. US financials services grouped with insurance makes $4.6T in revenue each year with a 3% growth rate. Wealth management platforms are worth $1.9B and growing at 13%. The financial advisory market is worth $55B and growing at 5%. The personal finance software industry is expected to be worth $895M this year, growing at 6% annually. The P2P lending market will be $460B in 2022 and is growing at 51% each year. The financial app market is growing 13% each year and will be worth just over $100B in 2019. Growth is spurred by technology adoption, economic cycles, and consumer demand.

What are the segments/pockets?

The most useful way to segment the focus area is by financial service provided, working your way through the banking industry. Budgeting, banking, insurance, mortgages, retirement, tax planning, estate, investing, etc.

What is the technology spend and trend in this category, or the revenue growth rate of companies in the category (whichever is applicable)?

Banking and securities are the highest spenders on IT as a % of revenue at 7.16%

Certain segments within FInancial services are spending less that others, capital markets is spending much less  than average and growing slower. Consumers have shown they’re willing to spend on new technology solutions and finance businesses have begun capitalizing on this trend.

What are the proof points that success may be rewarded?

• Previous winners:
  

  • Edward Jones
    

  • Credit Karma
    

  • Sofi
    

  • Affirm
    

• Recent M&A:
  

  • Cotiviti by Verscend Tech ($4.9B) - analytics driven payment accuracy
    

  • Financial Engines ($3.2B) - online investment manager platform
    

  • WePay by JPM ($400M) - advances smart payment platform
    

• Rising stars:
  

  • Nerdwallet ($105M) - expert info and tailored recommendations in finance
    

  • Happy Monday ($72M Raised) - combining psychology and money to live happier
    

  • Juvo ($54M raised) - establishes financial identity for billions of people who have no credit
    

• Early seeds:
  

  • Spring Labs ($15M seed) - transparent, secure, credit identity on blockchain
    

  • Zero ($11M seed) - cashback on debit card
    

  • Grove ($8M seed) - personalized financial advice
    

At a high level, what problems are there to be solved using technology?  

• Can ML/AI improve personal finances in new ways?
  

• What part of financials services/banking can be automated?
  

• How can we educate those who want to learn finances?
  

• Can we Provide transparency in plain english?
  

• How can we prepare for the recession?
  

• Can we save people or make people more money?
  

What current trends are driving change in this category?  

• Interest rates changing
  

• Robo advising
  

• Quantitative Investing - Algorithms
  

• Cryptocurrencies, or the death of
  

• Financial Transparency (ESG)
  

• Business credit
  

• Bank Agnostic - Banking as a service
  

• Zero cost products
  

• Tax Reform
  

• Smart Contracts
  

• Partnering with banks
  

• Predictive fraud detection
  

• Cyber security
  

• Smarter lending
  

• Cashless and mobile payments
  

• Financial coaching
  

• Credit card amenities
  

How specifically can ML/AI change the game in this category?  

• Improve efficiency, limit waste
  

• Automate labor
  

• Simplify previously complicated processes, e.g. loan approval
  

Investment hypothesis / rationale

The average  consumer is becoming more cognisant of their finances and in turn will continue to seek new services to help them. This focus area is historically rich with right tailed opportunities and likely has many more to come. Everything man does is governed in some way by money.

What adverse conditions / headwinds are there for a play in this space? What makes it difficult?

• Government regulation
  

• Recession
  

• Legal Issues
  

Data sets

Your novel business idea should be grounded in real-world data with plausible machine-learning/analytics on top. We've compiled a collection of datasets from which to gain inspiration. Note that you are not restricted to basing your idea on the data sets below. You may discover other open source data sets that inspire your creativity or you may bring your own proprietary data sets if you wish.

Many of the datasets below are from Kaggle, Figure-Eight (Crowdflower), Data.World, etc. The advantage of these datasets is that many have been cleaned and normalized and are ready to be explored with ML and data science tools. Note that the use of these datasets is often intended for research purposes only. Be sure to read any associated license agreements to understand if there are commercial restrictions if you plan to continuing using the data after the workshop is over.

Resources

• https://www.cbinsights.com/reports/CB-Insights_Fintech-Trends-2018.pdf
  

• Mckinsey: Synergy and disruption - Ten trends shaping fintech
  

• Mckinsey: Fintech Decoded
  

• https://www.pwc.com/gx/en/industries/financial-services/assets/pwc-global-fintech-report-2017.pdf
  

• https://www.ey.com/Publication/vwLUAssets/EY-capital-markets-innovation-and-the-finTech-landscape/$FILE/EY-capital-markets-innovation-and-the-fintech-landscape.pdf
  

• https://www.pwc.com/gx/en/financial-services/assets/pdf/technology2020-and-beyond.pdf