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As the fintech industry continues to mature, new segments are taking the lead when it comes to growth.
A study by PwC and UK-based fintech accelerator Startupbootcamp FinTech London looks at, among other things, the percentage of total applications to the accelerator constituted by startups in different segments of fintech.
These numbers indicate which areas of the fintech industry have the most growth potential in 2017, which are reaching maturity as indicated by fewer new startups, and which exhibited steady development between 2015 and 2016.
Here are several of the study's main findings:
Three fintech segments saw the largest growth in the overall share of applications. These were cloud and core processing solutions, which grew from 14% in 2015 to 22% in 2016; "smarter, faster machines" (i.e. artificial intelligence (AI), machine learning, and blockchain technology), up from 12% to 16%; and "shifting customer preferences" (i.e. customer segmentation and product personalization solutions), up from 11% to 14%. Application growth in these areas is probably in part the result of evolving technology in such segments, as well as growing consumer willingness to interact with their financial services providers in different ways.
Three segments saw a decline in the overall share of applications. These were "cashless world" (i.e. digital retail payment solutions), which fell from 19% in 2015 to 17% in 2016; "empowered investors" (e.g. robo-advisors), down from 17% to 11%; and emerging payments rails, down from 11% to just 3%. These declines suggest that fintechs already operating in these areas, particularly in payments, have established their positions and are discouraging startups from attempting to challenge them.
Three segments maintained their share of applications. Crowdfunding's application share rose just 1% from 6% in 2015 to 7% in 2016; alt lending's share stayed stable at 6%; and new market platforms (for capital markets, specifically) saw a slight increase from 4% to 5%. This suggests that while there may be some firmly established players which dominate these areas, newcomers think there are still problems that their larger peers have not effectively addressed.
Going forward, we are likely to see funding growth correspond with application share. The study's findings offer a reliable if narrow indicator of which segments will see growth this year. As such, we are likely to see the most investment deals emerge in the areas of cloud and other core technologies, AI and machine learning, and customer data analytics, as they continue to evolve rapidly and present untapped opportunities for investors to seize.
We’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs. No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.
The battle already underway will create surprising winners and stunned losers among some of the most powerful names in the financial world: The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:
Traditional Retail Banks vs. Online-Only Banks: Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees
Traditional Lenders vs. Peer-to-Peer Marketplaces: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful
Traditional Asset Managers vs. Robo Advisors: Robo advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.
As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.
After months of researching and reporting this important trend, Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has put together an essential report on the fintech ecosystem that explains the new landscape, identifies the ripest areas for disruption, and highlights the some of the most exciting new companies. These new players have the potential to become the next Visa, Paypal or Charles Schwab because they have the potential to transform important areas of the financial services industry like:
Retail banking
Lending and Financing
Payments and Transfers
Wealth and Asset Management
Markets and Exchanges
Insurance
Blockchain Transactions
If you work in any of these sectors, it’s important for you to understand how the fintech revolution will change your business and possibly even your career. And if you’re employed in any part of the digital economy, you’ll want to know how you can exploit these new technologies to make your employer more efficient, flexible and profitable.
Among the big picture insights you'll get from The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry:
Fintech investment continues to grow. After landing at $19 billion in total in 2015, global fintech funding had already reached $15 billion by mid-August 2016.
The areas of fintech attracting media and investor attention are changing. Insurtech, robo advisors, and digital-only banks are only a few of the segments making waves. B2B fintechs are also playing an increasingly prominent role in the ecosystem.
It's not all good news for fintechs. Major hurdles, including customer acquisition and profitability, remain. As a result, many are becoming more willing to enter partnerships and adjust their business models.
Incumbents are enacting strategies to ensure they remain relevant. Many financial firms have woken up to the threat posed by fintechs and are implementing innovation strategies to stave off disruption. The majority of these strategies involve some interaction with fintech firms.
The relationship between incumbents and fintechs continues to evolve. Fintechs are no longer viewed exclusively as a threat, nor can they be ignored. They are increasingly viewed as partners, but that narrative alone is too simple — in reality, a more nuanced connection is taking hold.
This exclusive report also:
Assesses the state of the fintech industry.
Gives details on the drivers of its growth.
Explains which areas of fintech are gaining traction.
Outlines the range of current and potential models for fintech and incumbent interaction.
The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry is how you get the full story on the fintech revolution.
To get your copy of this invaluable guide to the fintech revolution, choose one of these options:
Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the fast-moving world of financial technology.
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