In 2015, global fintech investment will top $20bn, up from $12bn in 2014. There are wide-ranging estimates of the number of fintech players around the world today, but some say it’s surpassed 10,000. In China, there are over 2,000 marketplace platforms alone. The big banks are clambering over one another to invest in (or play with) blockchain. And it is not just the Shoreditch hipsters or the ex-Mossad agents of Tel Aviv that are in on the act. It is now possible to take a loan from Paypal or get inventory financing from Amazon.
So one thing is clear: the market is hot. And as I speak at fintech and banking events around the world, I am often asked: “is fintech going to be the next dot-com bubble and is that bubble about to burst?” My answer to this is a resounding “no”. Why?
If you look at the fintech “ecosystem”, you will see two main camps: the disruptors and the enablers. Up until now, the disruptors have had the most attention and the lion’s share of investment from venture capital and private equity. In KPMG’s Fintech 100 rankings – which highlight the 50 leading established fintech businesses and 50 of the most intriguing “emerging stars” – businesses such as the automated investment adviser Wealthfront and the peer-to-peer lending platform Funding Circle feature highly. They are growing rapidly and taking market share from the incumbent financial institutions. I don’t see any slowdown in the growth momentum of these disruptors, as they are clearly striking a chord with the consumers using their services.
But if 2015 was the year of the disruptor, 2016 will be the year of the enabler: when the big global banks get serious about fintech and start to massively increase their investment. Most of the big banks have hundreds of millions of dollars in funds ready to put to work and the signs are that this will increase.
We have recently seen BBVA invest in Atom Bank, for example. I believe others will follow suit or establish their own “bank within a bank” – digital-only versions of themselves free from the legacy IT issues that make the big banks slow and costly to run. They will also continue to invest in payment wallets, biometric security and digital identity, gamification, fintech focused on financial inclusion – the list goes on.
The result of all this activity will be an increase in global fintech investment from $20bn to $30bn in 2016. There are many businesses, be they disruptors or enablers, that have gone past merely proving their concepts and there is no reason for them to lose steam.
As we have seen from KPMG’s Fintech 100 list, fintech is not geographically restricted to the typical tech haunt of Silicon Valley; it is truly global. The UK has established itself as a world leader (18 of the 100 are from Britain, which is more than anywhere else) and this is directly linked to the importance of London as a major global financial centre. However, we are also seeing a burgeoning scene in China. Shanghai-based online insurance firm ZhongAn took the top spot in the list.
Fintech still has a long way to go before we see a truly transformational change across financial services, but the change will come and it will come from the disruptors and the enablers, and from all corners of the globe. The proverbial winds of change are only getting stronger.