2018 had its fair share of disruption in the FinTech space, but for the most part, companies and investors sat out the end of the year market fluctuations and are cautiously — and perhaps optimistically — looking to 2019. The latest downturn is definitely not unexpected, and if the market continues to soften as most have predicted, we expect to see more acquisitions in FinTech, as investors tighten their belts.

Here are our thoughts on what potential market moves might include:

Chinese FinTechs make another go at the US market

As highlighted in the MIT Technology Review, the Chinese market is much more innovative and disruptive than the US FinTech Market. While the Alipay-Moneygram tie-up failed with regulators, it won’t deter the ambitions of these cash-rich companies.  Notably, Alipay, TenCent, Fosun, CreditEase and PingAn continue to be ever-present at US FinTech conferences, networking, looking to deploy capital, and tempting entrepreneurs with cash offers. Expect to see Chinese companies buying smaller FinTech companies that allow them to fly below the radar of regulators, yet buy and scale with US teams that have strong operating reputations.  

Betterment or WealthFront might get acquired by a smaller incumbent who’s looking to chase down Vanguard and Schwab’s market dominance

Wealthfront got a bump with a $75M investment earlier this year, but some claim that raising money at this stage (10 years in) is a delay tactic if they’re seeking acquisition. Perhaps a “marriage between two leading independent robo advisors is next,” claims Timothy Welsh of Nexus Strategy. He also states that “if robo advisors were going to disrupt, they would have already.” A very debatable stance, in our opinion. But if a merger isn’t in the cards, it’s certainly likely that acquisition is on the table.

The economics of “set it and forget it” firms might catch up with robos as market prices soften

Robos haven’t had to deal with a down market since their inception. As we head into 2019 and likely more volatility, how will they respond and, perhaps more importantly, how will their clients? With a down market and poor returns, will investors stick it out with a “set it and forget it” or will they just say “forget this” and move their funds back to an incumbent? And, though most robo investors are Millennials, will they be ok getting communication about downturns from their advisors solely via email or social media? More importantly for the bottom line, it will be very telling to see if an electronic relationship has the same stickiness as a personal one. According to Greg Curry, a fee-only financial advisor with Pillar Advisors in Louisville, Kentucky, “In a down market many clients need hand holding and the value of interaction with a human financial advisor can be the difference between them sticking with a well-conceived financial plan and investment strategy and making moves that are detrimental to their financial future out of fear.”

With the loss of Robinhood, APEX Clearing looks to sell

Now that Robinhood has built their own clearing system from scratch, what does that mean for APEX Clearing? The last time a major brokerage built something similar was Vanguard, in 2008. It was only five years ago that Apex claimed it was the only company that had the technology to make Robinhood possible. And while right now Robinhood Clearing will only be used on its own platform, they haven’t ruled out the possibility of commercializing it. So, what does this mean for other FinTechs? Is Robinhood Clearing the potential go-to for these solutions? Or, with Robinhood’s recent insurance snafu surrounding their checking and savings account announcement, did they tarnish themselves as a trusted platform/partner?  

N26’s move to the US from Europe will gain ground in the investment world based on their API platform approach

The German mobile bank just received the largest equity financing round in the FinTech industry in Germany to date, as well as one of the largest in Europe. According to their Americas CEO, Nicolas Kopp, they’re “a technology company with a bank license.” Because N26 was built from scratch, and their European roots means they have to comply with PSD2, they’re prepared for open banking protocols. Their design was specifically built for mobile — to be both visually appealing and user friendly, and they support/use APIs, not siloing technology for different lines of business, creating a seamless user experience. And they’ve AI-enabled their platform, allowing them to create more personalization at scale. We’re curious to see what else they have up their sleeve.