We wrote previously about fintech in 2017, regarding wider trends, and also reviewed 2016. 2016 saw the beginning of building acceptance and trust between fintechs and incumbents, so 2017 should see a more stable and symbiotic relationship between the two. In this article we are going to take a look at particular companies and alternative ways to invest. INN spoke to various companies’ CEOs and experts, to get insight on their own activity, and additionally, their thoughts on the general direction investors should be looking to find the action.
If two words described fintech in 2016, it would be blockchain and Brexit. Both share similarities; just as blockchain broke free of simply supporting bitcoin, Britain have (so far) proved they can go it alone in the fintech space, without the EU.
2017 should be interesting as fintechs and incumbents spark off one another to create new ideas. Collaboration is a keyword for all in 2017. There will, however, be challenges. Funding startups is a gamble so emerging players will have to establish themselves somehow. Investors should watch for those who succeed in making a name for themselves. Large institutions that partner with fintechs, and vice versa, will be stronger.
INN talked to Leigh Travers of DigitalX (ASX:DCC), a company providing blockchain based software solutions. He predicts more companies will file patents on the work they are doing with blockchain technologies in order to protect their ideas. The company has filed patents for AirID, proprietary technology that creates a digital ID on a blockchain. Digital identity transactions with blockchain solutions allow users to build up a credit score, breaking new ground in terms of providing financial privacy with blockchain. Travers told INN that, “we’ve honed in on a specific value and use for blockchains which is the best way of hosting shared databases in a way that is secure and tamper-proof for the purposes of automatic processes and consumers.” In December, DigitalX announced a partnership with Paykii, a leading provider for Latin American Bill-Pay coverage. This is a prime example of a mutually beneficial partnership.
Analysts make their selections
Haywood Securities’ technology analyst, Pardeep S. Sangha, follows fintech companies on the TSX Capped Information Technology (InfoTech) Index (TSX:XIT), which is up 3.5 percent year-to-date. In a research note, he wrote that DH Corporation (TSX:DH), a software company that provides financial service solutions to banks and corporations, is is one of the fund’s top holdings and Sangha projects increased revenues for this company over the next few years. In agreement is Raymond James’ analysis; DH Corporation are due an estimated 10.2 percent revenue growth in 2017.
PI Financial’s Technology Analyst, David Kwan, chose TIO Networks (TSXV:TNC) as the Q3 and Q4 Top Picks, which bodes well for continued success. TIO process financial transactions via the cloud. We reported on them in November and they have key catalysts ahead, including an acquisition announcement, a potential graduation to the TSX and strong Q4 results. PI Financial forecast revenues of $117.5 million in FY17.
Other investment opportunities
It isn’t just companies investors should look out for. If the Winklevoss brothers manage to get their unprecedented bitcoin ETF approved, investors could have easy access and exposure to the cryptocurrency and it would allow analysts to really take the temperature of the market.
Jason Granger and Charlie Shrem of Intellisys, a capital management firm, are venturing into the first private equity investment offered as a digital ledger security – a platform powered by blockchain. The aim is to provide transparent investment portfolios, “becoming a showcase for blockchain projects looking for recognition from larger investors.” The project launches in the new year. In their most recent news, they have extended “a gesture of transparency to potential investors”, by announcing an initial token offering memorandum (ITOM), planned for January 15, 2017 and running for two months. In an interview with INN, Shrem said “right now we are working on purchasing the first two companies” – so watch this space.
Kevin Hobbs, CEO of blockchain firm Vanbex Group, highlighted the Equibit blockchain as something to watch in 2017. Equibit looks to overhaul the Over-The-Counter (OTC) markets system with a decentralized platform, encryption that outstrips current financial standards and provides shareholder data and dividend payouts faster. In a pre-sale push, investors can reserve equibit units through a crowdsale, opening at the end of January 2017.
The test for blockchain in 2017 will be whether its applications can go from being used passively to proactively with consumer demand and investor interest driving progression forward. Fintech is a fast growing area and investors would do well to keep informed as developments move apace and continue to transform the world around us.
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Securities Disclosure: I, Emma Harwood, hold no direct investment interest in any company mentioned in this article.