What Business Opportunities Can be Captured as Banking Evolves in the Next Decade

What Business Opportunities Can be Captured as Banking Evolves in the Next Decade

Zion Market Research's findings indicates that as of August 2022, the worldwide fintech-as-a-service platform market size is expected to increase to over $949 billion by 2028, with a compound yearly growth rate (CAGR) of about 17%. 

A report issued by the Treasury Department in November 2022 describes in detail how big and small businesses are providing financial services at actual consumer points of need, opening up a new market for startups, small businesses, and regional banks to diversify their product offerings and compete with national banks and institutions. 

What we currently think of as banking will evolve into the foundation of our daily digital activities, taking on new forms and legal requirements. Here are the top Three banking trends and opportunities that Entrepreneurs can leverage, to capture the market.

1. A New Crop of Fintech Companies will Spawn from the Transfer of Wealth By Gen Z.

Gen Zers financial habits and behaviors will shape the next decade of banking, as the wealth transfer proceeds discreetly. By 2031, their income will have surpassed that of millennials, and it will have increased 5x by 2030 to $33 trillion, accounting for more than a quarter of global revenue. 

Survey results released in November 2022 by the Stanford Graduate School of Business, the Rock Center for Corporate Governance, and the Hoover Institution of 2,470 investors indicated significant demographic differences, with younger shareholders indicating want fund managers to pursue ESG objectives.

As a result, Fintechs and BaaS (Banking as a Service) platforms will emerge, catering specifically to young wealth and focusing on concierge-style wealth management. And as it spreads out the red carpet for young people, the banking industry will continue to become more democratized.

2. The Embedded Financial Ecosystem Will be Improved By Additional Regulations.

Several McKinsey partners coauthored an article in October 2022 that stated embedded finance generated $20 billion in revenue in the U.S. alone in 2021. Today's consumers have access to "buy now, pay later" services for online purchases, one-click payments on Uber, Amazon, or Walmart, and the ability to plan vacation and lodging with built-in insurance options.

Embedded finance's infrastructure is still in its early stages, and the business has developed swiftly without any oversight or quality control. Regulators will get more involved as the business develops, leading to more specialized, effective banking products. In the end, customers will benefit since a better banking product will be produced.

3. The Normalization of Crypto Through Regulation.

One of the pillars of decentralized financial currencies continues to be the future of finance. It will manifest itself in a number of ways over the next several years, including through securities and legislation, the debut of the first consumer enterprise product, and an increase in use cases outside of finance.

Utility and private business token investments, which are equity certificates produced on the blockchain often linked to a firm's shares, may soon be subject to Securities & Exchange Commission (SEC) regulation. This oversight will be appreciated and bring about adequate investment-risk disclosure, but it will also mean that they are no longer available to everybody.

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New Chatbots Change the World, but Can You Trust Them?

Can New Chatbots Could Change the World, but Can You Trust Them?

OpenAI is among the many companies, academic labs and independent researchers working to build more advanced chatbots. These systems cannot exactly chat like a human, but are close to mimic the human behavior. In the recent past, OpenAI, one of the world’s most ambitious A.I. labs. released ChatGPT. 

After the release of ChatGPT — which has been used by more than a million users — many experts believe these new chatbots are poised to reinvent or even replace internet search engines like Google and Bing. Unlike the current search engines, these chatbos can serve up information in meaningful sentences, rather than long lists of infinite links. They can explain concepts in ways that people can comprehend. Above all, they can deliver facts, while also generating business plans, term paper topics and other new ideas from scratch.

Around five years ago, researchers at Google and labs like OpenAI started designing neural networks that analyzed enormous amounts of digital text, including books, Wikipedia articles, news stories and online chat logs. Scientists call them “large language models.” Identifying billions of distinct patterns in the way people connect words, numbers and symbols, these systems learned to generate text on their own. A neural network learns skills by analyzing data. By pinpointing patterns in thousands of cat photos, for example, it can learn to recognize a cat.

Experts have warned that companies do not control the fate of these technologies. Systems like ChatGPT, LaMDA and Galactica are based on ideas, research papers and computer code that have circulated freely for years. With ChatGPT, OpenAI has worked to refine the technology. It does not do free-flowing conversation as well as Google’s LaMDA. Data scientists who were allowed to used Google's LaMDA, or Language Model for Dialogue Applications, outside Google through an experimental Google app, AI Test Kitchen, reported they were consistently amazed by its talent for open-ended conversation.

Companies like Google and OpenAI can push the technology forward at a faster rate than others. But their latest technologies have been reproduced and widely distributed. They cannot prevent people from using these systems to spread misinformation.

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Robinhood Introduces New Non-Custodial Crypto Wallet for 10,000 Users

Robinhood Introduces New Non-Custodial Crypto Wallet for 10,000 Users

What's the difference between a Custodial vs a Non-Custodial Wallet?

Let's first by clarifying the difference between a custodial vs a non-custodial wallet. In essence, it has to do with private keys that are associated to digital wallets. This private key enables crypto owners to perform transactions from their digital wallets. A Custodial digital wallet is where the digital wallet service provider (like Coinbase or Kraken) hold on to the private key on behalf of the user. 

A non-custodial digital wallet is where the users holds the private key and is responsible for protecting their assets and proving ownership of the funds. This decision of custodial vs non-custodial wallets is done upon the purchase of the cryptocurrency by the user. There are pros and cons to both, primary have to do with security. The custodial wallets may be considered less secure as if an exchange or provider is hacked, the primary keys are compromised. With non-custodial wallets, if the user loses the private key, users could lose access to the funds.

What is Robinhood doing then?

Robinhood is rolling out a beta version of its non-custodial crypto wallet to 10,000 beta customers - which was announced in Q2 '22. The product is called Robinhood Wallet and will be the company’s first internationally-available app. The offering will be done with Polygon, a popular layer-two blockchain that plugs into Ethereum and makes the network faster and cheaper to use. The beta users will be able to purchase the Polygon MATIC token on Robinhood’s main exchange app and transfer it to their Robinhood provided wallet. 

Additionally, beta users will be able to fund their wallets using USDC stablecoin tokens, trade and swap crypto and connect to dApps to earn yield, according to the company. Furthermore, users will also be able to access dApps directly on the Polygon network, including DeFi apps such as Uniswap, Balancer and Kyberswap, and metaverse games such as Decentraland.

Aren't Gas* or Transaction Fees Too High for a Blockchain Network?

*Gas or Transaction Fees, are transaction fees done on the blockchain network. Similar to a standard financial institution, every transaction has a different cost associated to it. In the blockchain world, many computers are using electricity to compute and verify transactions taking place. The fees are compensation to users, who provide the compute power to run and validate the transactions.

The value-add or differentiator according to Robinhood is that, it won’t charge Robinhood Wallet users network or gas fees for transactions, differentiating it from popular non-custodial wallets such as Metamask and Coinbase Wallet. 

Seong Seog Lee, Robinhood crypto product manager has stated that gasless swap feature is, “an important step in lowering the friction for users to get started doing on-chain things.”

One of the reasons that Robinhood can probably forego the gas fees, is that Ethereum recently has gone through a merge, where it has switched from Proof-Of-Wor (PoW) to Proof-Of-Stake (PoS). This change will reduce Ethereum overhead by approximately 99%. Another reason for low or no cost, is due to partnership with Polygon, which uses "Layer 2" solution for processing transactions built on top of an existing blockchain. The goal with a layer 2 solution is to increase transaction speed and reduce costs by “rolling up” work before recording it on the primary blockchain.

Does Robinhood offer a Custodial Wallet and What's Next?

Yes it does - Robinhood rolled out a custodial crypto wallet to its users earlier this year and says it plans to complete a full rollout of the non-custodial wallet to 1 million+ users on the waitlist after the beta is complete, sometime before the end of 2022. 

According to Lee, the next steps for the Product Team is to build out multi-chain support for the wallet beyond the Polygon ecosystem. “I think there are two or three main considerations [around going multi-chain], Lee said. “The first is, we do want to get this initial wallet out into the world and see what user feedback is like. I think the demand for multi-chain is something that we’re going to keep at the forefront if a lot of users are asking for it … I think number two is, if we think that going multi-chain ends up delivering a better, more liquid decentralized trading experience, that’s also something that will prompt us to go multi-chain. And the third is, in the future, as we look into use cases like NFTs, we think multi-chain might be a great, great way to achieve that goal.”

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50% of Consumers Don't know about Metaverse, Business Must Solve this Problem

50% of Consumers Don't know about Metaverse, Business Must Solve this Problem

In February 2022, marketing automation platform Klaviyo, published their results of a survey of 1000-3000 people, on the understanding of the "Metaverse" by the masses. Some interesting insights, spanning both United States [US] and United Kingdom [UK]:

General Consumer Sentiments:

[US] 49% of US consumers aren’t aware of the Metaverse.

[US] 17% of US consumers believe the metaverse is just Facebook.

[US] 78% think it’s just marketing hype

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Rolls-Royce Predicts that Flying Taxis will Be Fully In-Service In the Next Few Years

 

Read about our 4 trends: From Space Travel to Metaverse, 4 Trends that will shape 2022

Rolls-Royce, may be better known for expensive cars, like the Phantom, is also the engine maker for airplanes like the Airbus SE and Boeing Co. For past few years, Rolls-Royce has been developing electric propulsion aviation system and expects that fully-electric small aircraft taxis will be commercialized with in three to five years. 

Can Rolls-Royce stand behind these claims?

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Three years ago, when Rolls-Royce set out to build the world’s fastest electric aircraft, it teamed up with YASA, and aerospace engineering startup Electroflight. This led to genesis of Spirit of Innovation:

In 2021, Spirit of Innovation, a single-seat, electric-powered propeller plane, smashed the zero-emission speed record, hitting a top speed of ~556 kph (345 mph) over a distance of 3 kilometers.

The firm is now working to deliver two electric aviation propulsion systems: one for an electric vertical take-off and landing (eVTOL) vehicle, and another for a small commuter plane for Nordic regional airline Widerøe.

"Our focus at the moment is on urban air mobility: the eVTOL market with four to six passengers where we see viable product around 2025 and 2026," Spirit of Innovation head Matheu Parr told Fortune. "There's a market just behind that we call regional air mobility that would be fixed wing aircraft with nine to 19 seats and within that range we believe you can look at all-electric and hybrid-electric aircraft in 2028 to 2030."

How is Rolls-Royce planning to compete and win in this business?

Airline industry is one of the most competitive market, when it comes to margins. According to one report, "40 airlines failed in 2020". Outside the pandemic, one of the main cost factor is fuel. To address this primary factor, a slew of companies, ranging from startups to incumbents, are developing alternative source of power. These options include sustainable aviation fuel, or SAF, hydrogen, fully electric, and hybrid-electric. 

Rolls-Royce’s electric propulsion system can be used by both eVTOLs and commuter aircraft. Additionally, Rolls-Royce plans to invest ~$105 million over the next decade to develop its electric flight business. In 2019 the firm also acquired Siemens eAircraft, which held the previous speed record.

The first commercial application of P-Volt, a battery electric system developed by Rolls-Royce, will have ~600 kilowatt hours of power, enabling flying 6-8 people ~80 nautical miles, Rob Watson, president of the company’s electrical division, shared in an interview.

“We are confident in the technology. Now we need to scale it so it can have a meaningful economic influence,” Watson added. “I think that’s where you see urban air mobility and regional air mobility, aircraft with 8-18 seats, becoming a real possibility in the next three to five years.” 

What's next for Rolls-Royce?

Rolls-Royce is working with suppliers for battery cells, as it approaches the crucial stage of certification, Watson said. While Rolls-Royce will design and assemble the packs, it won’t manufacture battery cells, he said.

“We need to make supply selection decisions in the next year, year and a half,” Watson said. “We’re making decisions about our strategic suppliers this year.”

“Batteries are not yet on par with jet fuel in terms of energy density, but they are sufficient for up to 100 nautical miles, a far enough range to enable air taxi services for suburban and metropolitan destinations,” Parr said. “To fly four to six passengers that distance, our math says, you need battery packs that are about 200-220 Wh/kg,” Parr estimated. 

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