Forget the Valley. If you want to know where the action is in fintech, look north. According to a new report from Accenture, Chinese investors contributed 45 per cent of the $US9.5 billion that poured into the sector last year.
And the money continues to roll in, according to the firm. “Global investment in financial technology (fintech) ventures in the first quarter of 2016 reached $US5.3 billion, a 67 per cent increase over the same period last year, and the percentage of investments going to fintech companies in Europe and Asia-Pacific nearly doubled to 62 per cent.”
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Richard Lumb, Accenture’s group chief executive — Financial Services, said that the drive for fintech innovation is spreading well beyond traditional tech hubs. “New frontiers like robotics, blockchain and the Internet of Things are bound less by geography than by the industry’s ability to adopt and scale clever ideas that improve service and efficiencies,” he said.
“The so-called ‘Fourth Industrial Revolution’ is a global phenomenon that brings new innovation, and digital companies that compete and collaborate with traditional financial services. Bank customers stand to gain from this.”
In the report, called “Fintech and the evolving landscape”, the authors write, “While fintech is the poster child that continues to grab headlines, there are signals that the market is reaching the next level of maturity and moving into the mainstream. A cool-down in investment growth in some geographies, expansion in others, increasing deal sizes, successful IPOs and the elimination of weaker players are all helping to drive more realistic investor expectations of fintech.”
And they caution that the ever-evolving start-up scene is not the only source of opportunity for investors. “Technology giants such as Google, Apple, Facebook, Amazon and Alibaba (GAFAA) are redefining the customer experience and increasingly playing around the periphery of financial services.”
For the banks, under increasing pressure to reduce costs and build more profitable and lasting relationships with their customers, there may be a need to lean more on larger technology and platform players who “may offer a more attractive set of rails on which to deliver services to customers.”
As such, say the report authors, “… incumbent banks are increasingly looking to fintech to enable them to continue operating a vertically integrated model, or find a specialist role as a platform service provider.”