The 3 M’s in FinTech’s Future

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[Editor’s note: This is a guest post from Biz2Credit. Biz2Credit is a Bronze Sponsor at LendIt USA 2016, which will take place on April 11-12, 2016, in San Francisco. At LendIt, CEO Rohit Arora will be speaking on the panel “Lending As A Service: The Future of Online Lending?” and doing a presentation on SMB lending.]

Technology and Demographics will power FinTech over the next 3-5 years and beyond. Unlike other factors which could be a fad or a passing trend, we know that technology is constantly evolving and US demographics are changing, so these are powerful growth drivers that will be around for a long time. The 3 M’s for the future of FinTech are Mobile, Millennials and Minorities. We are already seeing the effects in Biz2Credit’s business of funding small business access to credit.

Mobile: There is rapid device convergence to the smartphone platform. In the past two months, Biz2Credit has seen mobile traffic grow by 60% over the prior two quarters and for the first time, the final week of February saw mobile overtake other forms of access such as the desktop or laptop. Small business customers are within their offices or in front of their TV after work to search and apply directly through their mobile device. Convenience and a good user experience through mobile will be critical for FinTech’s success in the future.

Millennials: The Millennial generation comprises adults who are 35 years or younger. While the leading edge of baby boomers has already crossed a threshold of 65 years and today number about 75 Million, the Millennial generation is the same size or larger at 76 million. As boomers retire they are transitioning their businesses through sale or otherwise to the younger age bracket. Millennials are also very adept with digital technologies and smartphones having grown up with them, and their expectations and usage of a digital platform are well-suited to the promise of FinTech.

Within Biz2Credit alone, the share of funding to new businesses with decision makers 35 or younger is up by 7 percentage points in 2015 versus 2014, from 13% to 20%.

Minorities: Nearly as important as the millennial generation is the growing diversity of the US population. By themselves, there are 55 million Hispanics in the US, not to mention Asians, African Americans or Native Americans. Hispanics are attracted to entrepreneurship, and a recent study by Stanford found that they are particularly represented in Construction and Healthcare, among other industries. Within Biz2Credit, funding to Hispanic businesses has grown by 124% in the second half of 2015 compared to the same period of 2014. This is more than double what Biz2Credit has encountered for majority businesses.

Looking at the latter two of the 3 M’s , demographics are generally considered to be relatively slow-moving and longer-term, but their impact within FinTech is already visible.

While not an ethnic minority, around 30% of US businesses are owned by women who face similar challenges to minority business owners. In 2015 women-owned businesses increased average annual revenues by 12% over 2014. On average, they still lag male counterparts on key credit metrics such as annual revenues and net charge-off rates, but their values are improving over time. More detail can be found in Biz2Credit’s Annual Study of Women-Owned Business in 2015.

The 3M’s discussed here – Mobile, Millennials and Minorities – are equally applicable on the consumer side as on the small business side for access to credit. Companies that are FinTech or otherwise who effectively integrate the 3M’s into their strategies and processes are likely to grow and succeed.

The host of this blog, LendIt, is the largest conference series dedicated to connecting the global online lending community. Our conferences bring together the leading lending platforms, investors, and service providers in our industry for unparalleled educational, networking, and business development opportunities. LendIt hosts three conferences annually: our flagship conference LendIt USA as well as LendIt Europe in London and LendIt China in Shanghai. Visit our home page to register for the next event and to subscribe to our newsletter.

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