“Fintech“ gets bandied about a lot. Yet few people understand it especially when it comes to bitcoin and blockchain. Writing this post reminded me of Albert Einstein’s quote: “If you can’t explain it to a six year old, you don’t understand it yourself.” Only now, the twist might be that the six year old understands it, while the fifty year old remains clueless…
For those of you not familiar with fintech, it refers to businesses involved with leading edge technology to make financial transactions more efficient e.g. Venmo, ApplePay, Acorns, mobile banking etc. Big financial institutions, after initially dismissing fintech as a fad, are now busily developing their fintech capabilities to streamline their back-office systems.
And what about blockchain? It’s the freely available database that underpins the digital currency bitcoin. It can replace existing methods of transmitting assets and currencies. Scores of institutions are racing to use blockchain to simplify the way securities are traded, settled and recorded. All these endeavors fall under the fintech umbrella. (Source: Bloomberg)
ETFs (exchange-traded funds) are the fastest-growing, biggest disruptors in finance:
- Mario Gabelli, a leading investor, advisor and financial analyst, let the cat out of the bag recently when he said on CNBC: “I’m a dying breed, it’s all about ETF’s now.”
- The growth of ETFs also tells me that people have more trust in algorithms than in people’s decision-making which is not surprising given that 80% of active managers fail to outperform ETFs (Source: S&P)
- Also explains why investor/commentators on CNBC increasingly have that “deer caught in the headlights” look. They know their days are numbered as ETFs become the dominant force in the investment world.
- Finally, Warren Buffett, interviewed on CNBC SquawkBox yesterday morning, had this bit of advice: “Anyone who relies on financial advisors is wasting their money” (vs. investing in ETFs).
Read on below for more on ETFs, Blockchain, Bitcoin and Insurtech (watch the video from Metromile – great info!).
Here are some key facts on ETFs (Sources: BlackRock, CNBC)
- Half of US investors plan to invest in ETFs in 2017 with millennials leading the pack (Source: BlackRock)
- ETF investors are younger, more active in the markets, and more engaged in managing their finances (which is odd given that ETFs are a more passive investment…)
- The U.S. ETF business is approaching $3 trillion in assets (vs. $16-trillion in mutual funds)
- ETF assets are predicted to grow by 23% to $5.9 trillion by 2021.
- ETFs saw $288.6 billion of inflows in 2016 while mutual funds had $90.8 billion in outflows.
- In 1999, there were 36 ETFs with a total value of $32 billion. In 2016, there are 1,944 ETFs with $2.5 trillion under management.
Blockchain Buzz Still Going Strong
- In 2016, Business Insider’s blockchain research was the most-read by their capital markets clients
- Digital currency bitcoin jumped to a record high in February as investors speculated that the first bitcoin ETF will receive regulatory approval shortly in the United States.
- The total value of all bitcoins in circulation is now close to $20 billion, around the same size as Iceland’s economy.
- Metromile is emerging as a leading player in the new category of “insurtech.”
- It is a start up that offers pay-per-mile insurance. The premise being that if you drive 200 miles a week, you should not have to pay as much as someone who drives 1000 miles. They claim their service saves most people $500 a year.
- Watch the video – it’s a very cool idea if it gains traction!