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How are the big trends in fintech like virtual reality, the blockchain, and big data analytics dictating trends in proptech?

It is worth keeping in mind that trends in proptech are controlled by the same forces that drive trends in other parts of technology such as fintech. So when it comes to goals like improving the customer experience, in proptech this means making it easier for customers and investors to search for properties that are appropriate to them and ensuring that the customer’s financing needs are met with as little friction and cost as possible. We could also add the importance of a process that is clear and transparent, so that both property seller and property buyer/investor feel equally informed at each step.

Consider also, as my colleague Julie Muhn pointed out, that some of what is most exciting in the proptech world in 2017 is not necessarily fintech. One of the areas of almost unanimous prognostication was the prediction that technologies like virtual reality and augmented reality would become a larger part of proptech . The range of adoption of VR and augmented reality technologies in real estate and property technology is wide – from a cardboard shade wrapped around a VR-enabled Samsung smartphone to vertigo-inducing immersive environments produced by boutique design firms. This variation represents a real interest in the technology, however, and opens up an entirely new way for properties to be marketed to, and even built for, prospective buyers.

Virtual Reality

Taking a close look at VR in proptech, the main use case of the technology is to provide virtual walkthroughs of both existing and to-be-developed properties. In addition to offering a more engaging experience for prospective property consumers and investors, VR and augmented reality can save design, development, and construction costs via “virtual refits.” Other potential uses of VR and augmented reality include real estate advertising that is detectable by wearable technology or smartphones.

One company in this space is ArcMedia, a U.K.-based design firm that works with upscale property developers. Interviewed by proptech analyst James Dearsley, ArcMedia managing director, Ben Bancroft, discussed the connection between VR and proptech, saying:

Virtual reality is an excellent tool for property developers to demonstrate their product to prospective customers before a hole has even been dug in the ground. Visualizing unbuilt spaces is something ArcMedia has been doing for 14 years, and the advent of this new generation of VR hardware means we can display those spaces in a more immersive and engaging way than ever before.

Bancroft is optimistic about the role VR will play in proptech, suggesting that both the technology and the “output quality” are at a good level. He is hopeful that while the technology may appear to be a high-end “indulgence,” that it will eventually enter the “everyday psyche” of the average property buyer. “What starts at the luxury end of the market usually creates demand in the mass market,” he said, “and businesses will respond when there is consumer expectation for the product.”

Other interesting companies working on VR and augmented reality for the proptech market include a pair of American companies, Circle Visions and Matterport.

Read more:

• Virtual Reality: How Tech is Changing the Way You Buy and Sell a Home – NerdWallet
• Virtual Reality in Real Estate – James Dearsley.com
• Here Are Four Ways Mixed Reality Will Impact CRE Going Forward – Bisnow
• What will PropTech look like in 2017? Hear from the industry’s pioneers – LendInvest Blog

Big Brains and Big Data

The use of big data and big data analytics in proptech is more ubiquitous than virtual and augmented reality technology. Using big data, geolocation, mapping, and machine learning to present prospective property consumers and investors with the most relevant and attractive offerings is a fundamental way big data technologies are making the process more efficient. Big data is also linked strongly to artificial intelligence – increasingly vital in analyzing mass and/or unstructured data – and machine learning – a chief consumer of big data. And all three are playing a greater role in everything from asset value analysis and trend forecasting to due diligence and contract review.

Almost anyone who has looked to buy or invest in property in the past year or two has likely taken advantage of proptech’s embrace of big data. Examples range from searching for a new home via the Zillow’s and Trulia’s of the world to comparing financing options with a solution like Blend (FS16) or on a platform like Sindeo (FF16), to the more sophisticated applications of companies like Envestnet | Yodlee (FE17) and its Mortgage Asset Verification solution, and Experian (FF16) and its mortgage affordability platform.

Other interesting companies in this area are firms like Geophy, which bills itself as “real estate meets big data.” Geophy aims to improve transparency in the property market by developing a global platform of objective, independent real estate information. Urban Intelligence provides property planning information including search and mapping for U.K. property developers.

Read more: 

• Big Data in Real Estate – JamesDearsley.com
• Househunting and Proptech – VMI Studio
• PropTech: Big Data (and Blockchain) – Cameron Most, Glenny LLP

Proptech and the Blockchain

By the end of the 21st century, everything will better with a little Blockchain in it. But between now and then, there remain skeptical voices uncertain of the degree to which blockchain technology will disrupt any given industry – and proptech is no exception.

Compared to virtual reality and big data analytics, the role of blockchain technology in proptech is much more controversial. While some suggest that any significant use of the blockchain in real estate technology is several years away, others see opportunities to improve loan origination and execution, increase ownership transparency, and enhance transaction security and integrity via the smart contracts and distributed ledgers of blockchain technology. Writing about blockchain technology and mortgages, Pamela Johnston and Tim Davis of PwC note origination, fulfillment, settlement flows, servicing, and the secondary market as the areas where the technology holds the most promise. “We think blockchain could be relevant at every stage,” the two write.

Much of the interesting innovation around blockchain and real estate is happening at the level of government partnering with financial institutions, institutional technology organizations, or fintechs. The Eastern European republic of Georgia announced at the beginning of the year that it was introducing a blockchain-based platform to better store real estate documents. The nation is working with bitcoin mining company, Bitfury. Sweden also announced a similar blockchain-oriented land registry system that will begin testing this month. Sweden is working with blockchain startup ChromaWay. Also recently we learned that the Bank of China (Hong Kong) and HSBC are working together to build a blockchain for sharing mortgage valuation information.

One interesting event to keep an eye on is the Blockchain Accelerator for Mortgage Lending launched by consulting firm, Synechron, last September. The program is one of six the consulting and technology services provider is sponsoring, all designed to “leverage Synechron’s deep domain expertise in financial services and high-end software engineering to dramatically speed time-to-market for blockchain initiatives.”

Read more:

• What might blockchain mean for the mortgage industry? – PwC Financial Services Q&A
• How blockchain is simplifying the US mortgage market – International Business Times
• Mortgage Industry Eyes ‘Blockchain’ Technology – Mortgage Bankers Association
• Banks adopt blockchain for mortgage valuation system – Financial Times
• Blockchain for Mortgages: Compelling But Premature? – CoinDesk
• Major Hong Kong Lenders Plot Blockchain Mortgage System Launch – CoinDesk

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It’s a developer’s world and we just live in it. Application programming interfaces (APIs) are not new to banking, but they are certainly becoming more accepted. It’s a trend we’ve seen across the financial services industry, and even incumbent players are getting into the game. Over the past couple of weeks, we’ve seen a stack of news indicating the demand for APIs is alive and well. Peruse online and hard-copy publications and you’ll find a lot of support for developers: see Citigroup’s launch of its developer hub; Dwolla’s (FS 2015) shift in focus from consumer app to becoming a platform; and the launch of Monitise’s (FF 2007) FINkit platform.

This is the end of the banks vs. startups era. Banks are now leveraging startups to help them compete against other financial institutions. The reason comes down to simple economics. In general, it is more efficient for a company to focus on its core competency and outsource supporting aspects of its product or service. (For a deeper dive into this concept, check out this episode of Freakanomics Radio.) J.P. Morgan CEO Jamie Dimon explained it best when he said, “There is stuff we don’t want to do, or can’t do, but now more than ever there is somebody else who can do it—and probably well. In order to take advantage of that, there has to be collaboration on both sides.”

Digging even further, this collaboration between banks and startups is also leading to a global trend of banks deepening their product lineup by offering a wider range of products and services. This new variety of offerings extends beyond the traditional scope of serving a client’s basic financial needs. Finextra recently covered a McKinsey study that explored how banks are beginning to offer fringe services that fall within the realm of insurance, retail services, and small business products such as bookkeeping and expense-tracking platforms.

USAA positions itself as a one-stop-shop for clients’ holiday needs.

By plugging in third-party APIs to their website, banks can create a holistic ecosystem consumers will consult to fulfill multiple needs. By becoming a platform that offers consumers a range of services, banks can make themselves a go-to website or app and stay top-of-mind when clients are looking to purchase insurance, plan their taxes, search for travel deals, or buy a car. USAA exemplifies one-stop shopping fulfillment with its website’s tagline: “Do all your holiday shopping right here.”

For fintech followers, one of the most interesting things about President-elect Donald Trump is the fact that his most prominent Silicon Valley supporter was and is Peter Thiel, the self-described “conservative libertarian” co-founder of Finovate alum, PayPal.

Good evening. I’m Peter Thiel. I build companies and I’m supporting people who are building new things, from social networks to rocket ships. I’m not a politician. But neither is Donald Trump. He is a builder, and it’s time to rebuild America.

PayPal co-founder Peter Thiel addressed delegates at the Republican National Convention in the summer of 2016.

Where I work in Silicon Valley, it’s hard to see where America has gone wrong. My industry has made a lot of progress in computers and in software, and, of course, it’s made a lot of money. But Silicon Valley is a small place. Drive out to Sacramento, or even just across the bridge to Oakland, and you won’t see the same prosperity.

Thiel’s relationship with Trump has only intensified since the election. The PayPal co-founder has joined the President-elect’s transition team and is rumored to be under consideration for a position within the administration. That said, for better or worse, fintech probably will not be a focus of the Trump administration, Thiel support notwithstanding.

“Better or worse” is the question on everyone’s mind. For some, the comparisons between a Trump victory and the Brexit vote in the U.K. suggested a near-term, “wait-and-see” pullback in fintech investment. For others a Trump administration would mean labor shortages and potential brain-drain as a stricter immigration policy worked its way through the workforce. Note that Trump’s nominee for attorney general, Alabama Senator Jeff Sessions, has supported legislation that would reduce the number of H-1B visas by more than 20%. And now that we know that the Trump presidency will be accompanied by a Republican Senate and House of Representatives, broader regulatory changes—reform or repeal of Dodd-Frank, the return of Glass-Steagall—are also poised to present challenges for fintechs across the industry.

So which fintechs seem best positioned to take advantage of the kind of policy changes we can expect from a Trump administration? Lenders in general and alternative lenders like student-loan facilitators are among the most likely winners. From increases in interest rates to regulatory relief to renewed competition from the private sector, the landscape for lenders is the one most likely to change based on policies that are most likely to be enacted. Writing for S&P Global Market Intelligence, Eric Turner explains:

With already strong brands and copious amounts of borrower data, digital lenders in this space could see an increase in originations if the federal government exits the student-loan business. While these lenders have historically focused on refinancing student debt, largely because of the inability to compete with government rates and guarantees, the door may now be open to a broader array of products including direct origination.

Turner cites SoFi’s decision to leave the direct market for MBA student loans and the company’s ill-fated return to and re-exit from that market, as the kind of opportunity that alternative lenders may circle back to. He notes that the Republican platform for 2016 states that the “federal government should not be in the business of originating student loans.”

“The United States Senate, A.D. 1850” by Peter F. Rothermel

The outlook is less certain for other aspects of fintech. How would digital payments companies fare in a world with a weakened, or nonexistent, Consumer Financial Protection Bureau (CFPB). Changes in the fiduciary responsibility of investment advisers might have presented a challenge for some robo-advisors (and an opportunity for some technologists) were we facing a Clinton administration. But with Trump—and advisers like Anthony Scaramucci—a move in the opposite direction seems more likely.

If lenders have something to look forward to over the next four years, are there areas of fintech with something to lose? A broader concern is that Republican opposition to “net neutrality” could change the incentive structure around open-source development in a way that could hurt innovation. Writing in American Banker, John Adams saw the potential of a significant impact from a shift in policy away from the “open internet.”

The stakes are particularly high for fintech firms, a large portion of which rely on open-source development or technology toolkits that decentralize innovation, allowing businesses to become payment companies with minimal coding. A significant amount of money has already poured into this market, notably PayPal’s transformative $800 million acquisition of Braintree, the development platform used by Uber, Airbnb, OpenTable and TaskRabbit.

In other words, without an open internet, there would be no Uber.

This goes beyond the kind of “Technophobe in Chief” remark from the wits at GeekWire, and worries over Trump’s feud with Amazon’s Jeff Bezos. Instead, it reminds us that any changes Washington brings to fintech will have as much to do with Republican control of Congress—and, barring an epic filibuster fight, a sympathetic Supreme Court, as well—as they do with having Donald Trump in the White House. Even without a specific agenda for fintech, the policies long sought by the GOP are more likely to have an effect on the opportunities for alt lenders, the responsibilities of robo-advisers, and the environment for open development and innovation, than the policies of the President-elect.