2016 has seen political pundits assess the future of their landscape in the face of seismic changes – it’s time for the financial sector to examine itself too.
The pace of innovation across the Fintech sphere, amounting to $13.7 billion invested in 2015, has reached new heights. It’s conventional wisdom that Fintech companies prize innovation, transform business practice and affect national regulations. But how substantial is the future of Fintech investment?
Equitise weighs in on how the Fintech sphere is set to shape traditional finance in 2016 and beyond.
The Figures
2015 produced figures that negate the recent scepticism surrounding the so-called Fintech “bubble”. From 2011 to 2015, global investment in Fintech companies grew from $2.4 billion to over $19 billion. North America saw $10 billion lent by Fintech companies in 2014, which may not reach levels set by traditional lending, but is nonetheless significant.
Decline of consumer confidence in traditional lenders matched with 3x growth in Fintech venture investment since 2014 means the Fintech sphere is gradually shaping financial services and more. The Bank of New York Mellon issued an e-book entitled “The Future is Fintech”, in which it stated “Without a doubt, the “era of Fintech” is upon us and banks can’t merely be mindful of this; they must also have a clear plan in place in order to adapt to and benefit from Fintech-fuelled changes.” Innovation is the keyword, exemplified in the disruptive products Fintech companies put forward – such as the first mobile bank, Mondo, also the world’s fastest crowdfund raise ($1 million in 96 seconds); trading marketplace eToro; peer-to-peer transfer service TransferWise.
In the age of transparent finance, digital services that appease the crowd drive innovation and equal the 30 or more ‘unicorns’ (Fintech startups that have been valued at $1 billion or higher) the industry has recently celebrated.
“The new Fintech technology startups are now mostly selling their solutions directly to consumers and businesses instead of selling to the traditional FI channel.” - Bruce Wallace, CEO of Silicon Valley Bank
Why is Fintech the Future?
The Financial Times has recently announced its “Future of Fintech” awards, indicating the groundswell of good faith around the disruptive industry, matched by worldwide regulation encouraging innovative startups. Whether it’s the evolution of equity crowdfunding legislation or the UK’s ‘startup sandbox’ in which the FCA allows them to thrive, innovative legislation demonstrates governmental awareness of the capabilities of Fintech. Equally, leaders from traditional finance, such as former Barclays CEO Antony Jenkins, have launched Fintech startups as they weld their knowledge into the alternative finance sphere.
“Change will come from a combination of new entrants and traditional players who have the necessary funds to make a difference” – Jeff Schumacher, CEO at BCG Digital Ventures
Going Forward
Emerging Fintech companies are capturing an increasingly large portion of the multi-trillion dollar global financial services industry. While the cycle of Fintech companies is in an early-stage, the pace of regulation and investment from an array of investor types demonstrates the faith in, and changing landscape for, the future of investment. As the Trans-Tasman's leading equity crowdfunding platform, Equitise is proud to be at the forefront of the Fintech scene in the Southern Hemisphere. Our platform encourages innovation, as seen in our syndicated investment scheme, as well as our consultation to the Australian government on crowdfunding legislation. Like any Fintech company, we embrace the exciting potential and swift evolution of the industry.