Fintech is sweeping the globe. In the real estate sector alone, according to Deloitte’s recent survey, real estate tech startups grew from just 176 new businesses a decade ago to more than 1,200 in 2017. Investments have increased more than tenfold in RE tech and fintech startups over the last ten years. With all of this capital interest there are 3 key reasons we should be watching RE fintech startups in 2018.
What They Are
First, understanding what fintech startups are and what they do is important to realizing the potential impact for CRE professionals. Every sector of the real estate industry is seeing new fintech startups including insurers, bank lenders, investment managers, transaction processors, and more.
Utilizing technology, these new companies are finding ways to speed up and simplify the ways that real estate professionals do business. Just for example, property managers are using fintech startups that provide customer retention services, payment processing, data analysis, and capital sources all from a single online platform.
Crowdfunding is another area where fintech is revolutionizing the way that CRE pros access funds for real estate developments and investments. According to a report by CB Insights, one of the top RE fintech firms attracting the most money from investors is the crowdfunding site RealtyShares along with several RE fintech startups.
Who They Help
Individual investors no longer have to rely on traditional banks for capital. Investor platforms like eREITs and many online lenders help lower the buy-in costs enabling average income earners to become big time investors. More information is available to consumers giving them the tools to make smart investment decisions, secure capital, and find real estate on their own without the need for a third party or agent.
Furthermore, a recent survey by Bain & Co. shows that a large majority of consumers trust financial products offered by fintech more than long established traditional banks. When it comes to millennials and those behind them, nearly 75% of them are more willing to rely on new financial instruments created by fintech startups than traditional lenders.
3 Reasons Why We Should Care
All professionals working in the CRE industry should care about these new RE fintech startups. In one way or another, they will inevitably affect the way that we all do business. Here are 3 reasons why we should care:
#1: Access to New and Various Sources of Capital
It’s not just individuals who are benefitting from fast easy capital using fintech firms. CRE firms can utilize new RE fintech investment platforms to find new investors and funding sources. Simple fintech startups that create databases where CRE professionals can network and connect tenants with building owners, developers with architects, and agents with buyers will have a growing impact on CRE in 2018.
#2: CRE Related Services that Improve Efficiency
RE fintech startups are improving the overall efficiency of real estate transactions. From streamlining the underwriting process to accessing big data analysis in order to inform decisions about acquisitions and developments, there are RE fintech startups to watch that will further improve efficiency.
#3: Partnership and Investment Opportunities
Though RE fintech startups have the potential to disrupt the industry by eliminating the need for an agent to be the go-between for buyers and sellers, there are more opportunities for partnering with and investing in RE fintech startups. By collaborating with these new businesses, CRE professionals can improve their businesses while taking advantage of access to the tools created by the many new RE fintech startups coming online in 2018.
What to Watch
Look for continued growth in the RE fintech sector this year. Projections estimate that online lenders alone will quadruple in value within five years to over a trillion dollars. Fintech startups that become one-stop shops for real estate businesses will be the biggest winners in this arena in the future.