This year has seen diverse and unpredictable headlines across the spheres of politics and social issues. It’s fitting, then, that Invesdor assess the financial sector too. 2015 saw $19.1 billion invested in Fintech projects, according to a KPMG report, a record amount for the industry. Companies operating within the Fintech industry typically favour innovation and transformative business practice, altering the status quo for the sector in which they operate. Where to from here for companies within the Fintech sphere? Today, Invesdor assesses how 2016 has shaped the trajectory of Fintech and what lies in store.
The Fintech stats
Prognosticators from within Fintech industry have speculated about the prospect of a Fintech bubble. Since 2011, we’ve witnessed global investment in this area amount to $19 billion from a starting point of $2.4 billion. Traditional lending may still outpace Fintech investment, but $10 billion was lent by Fintech companies in the US in 2014, a significant sum. This is perhaps owing to a growing mistrust or wariness of consumers in traditional investment platforms, as 2014 saw a staggering 3x growth in Fintech venture investment, as we see these investors grip our financial services increasingly.
In the book “The Future is Fintech”, it was claimed “[the banks] must have a clear plan in place in order to adapt to and benefit from Fintech-fuelled changes”. Even traditional finance companies acknowledge they must adjust to the popularity and effects of the new sector. Innovation is notably mentioned, as companies funded by fintech investment truly manifest the idea of ‘game-changing’, a somewhat overused term within the industry. For example, Mondo, which raised $1 million in 96 seconds as the fastest crowdfund ever, or the trading platform eToro, or Transferwise, all offer exciting alternatives to traditional finance.
Users seek transparency, ease, efficiency and modernity, as such, those companies driving innovation are those that will have better hope at attaining ‘unicorn’ status. By selling solutions to the consumer and subverting the typical path of financing channels, new startups appeal to the new generation of consumers – traditional financial institutions must keep apace.
The Fintech future
From governmental support to media acknowledgement, the disruptive industry has received a groundswell of attention and encouragement. The Future of Fintech awards, established by the Financial Times, are similarly matched by the progress of equity crowdfunding legislation. The UK has established a startup sandbox with favourable conditions put in place by the FCA with a view to aspiring entrepreneurs to flourish. This broad support across sectors is reflective of a popular appeal of the industry matched by interest from investors and consumers alike.
Even members of the traditional finance industry have established Fintech companies that merge their experience of traditional finance with the appeal and freedom of the Fintech realm. Our global financial services industry increasingly features Fintech companies and disruptors to traditional finance. Their cycle may be at an early stage, but regulation for the crowdfunding industry, as it becomes increasingly liberal and widespread, at least is set to match the incredible popular interest.
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Richard Andrée Wiltens is a commentator within the fintech sector, who has written for an array of international investment platforms. His career has spanned from investment banking to financial technology firms, backed by an education in economics and finance.