A recent explosion in startups focused on the investment management industry now lead the pack, according to the report, “Accelerating change: London FinTech 2015 - 2016”. Launched today (23rd March 2016) by Startupbootcamp and PwC, Accelerating change outlines the key trends and patterns seen in FinTech over the past 12 months and predicts developments and challenges for 2016 and beyond.
The authors highlight one of the biggest trends as the decline in the prominence of payments as the main focus of innovation, with other areas of FinTech gaining ground. Startups focused on the investment management industry now head the recent explosion of FinTech disruption and innovation.
The report addresses the hype and challenges surrounding blockchain, alongside the pressing need for incumbent corporates to find a way to work effectively with startup companies in order to keep pace with the rate of change and make the most of the opportunities in front of them.
Innovation in the payments sector has reached a certain level of maturity and one of the biggest trends of 2015 was the decline in relative terms in payments innovation as a whole compared to other trends.
Scale is one of the most obvious barriers for startups looking to enter the payments market - a viable payments business requires a very large volume of transactions, and both payers and payees are drawn to payment solutions that have the biggest scale and reach. For example, there are many startups trying to corner the remote mobile payment solutions market (e.g. customers pre-ordering coffee during their commute) - but a dominant player has yet to emerge; corporates therefore face a difficult challenge in choosing which platform to use.
Asset and wealth management
Over half (5 from 9) of the final cohort in Startupbootcamp’s FinTech London accelerator programme were focused on the investment management industry. 20% of applications to the programme were investment management focussed
2015 was the year investment management staked its claim in FinTech. Up until now the industry has seen little disruption and innovation but 2015 saw an explosion of investment focused startups working on B2C, B2B, robo-advisery, big data, machine learning, equity research, automated portfolio selection. We expect the number of startups entering the investment market to continue to grow in 2016.
FinTech will transform the way the investment industry operates and empower investors to make better decisions. The industry as a whole is facing cost pressures as fees continue to be pushed downwards and regulation is forcing a clear delineation between fund costs and corporate costs.
Relationships between corporates and startups continue to be tricky as incumbents struggle to keep pace with the innovation and culture of FinTech companies. Acquisition was the traditional route but seems to have fallen out of fashion – many companies found that, by bringing the startup within the corporate entity, the value was eventually drained. PwC believe the best approach lies in putting the company at the heart of an ecosystem of FinTech companies and drawing on the best solutions in the market to provide value for customers.
Steve Davies, UK and EMEA FinTech leader at PwC, commented: “The heart of the FinTech problem often lies in the inherent culture of ‘slow and steady’ found in large financial corporations and success will come from incumbents and startups working together.
“Companies should focus on what they do best and then work with relevant FinTechs for innovation to support their strategy.”
The hype around blockchain hasn’t yet been matched by real change in the markets – with the exception of Bitcoin. Many companies are still struggling to get to grips with the basic practicalities of using the technology. Blockchain is, however, here to stay and 2016 will be the year companies engage in a wide range of test scenarios with a number of breakthroughs, pilot programmes and institutions working together to build a blockchain ecosystem continue to be announced.
Nektarios Liolios, Co-Founder and Global CEO, Startupbootcampe FinTech and InsurTech said: ““FinTech startups emerged because they felt that there was a lack of innovation within the industry and so decided to try and solve the problems themselves by utilising new technologies.
“The financial services industry is slowing waking up to the inevitability of change around it and regulators are looking to facilitate, rather than hinder, the disruption.
“There’s still so much work to be done and neither financial institutions nor startups can do it alone, the key will be to work together.”
Accelerating change: London FinTech 2015 – 2016 uses proprietary market intelligence, from 2015 and 2016, as well as experience accelerating companies, to draw out key trends and patterns in FinTech. Three contrasting data sets were analysed – applications for the Startupbootcamp FinTech London 2015 accelerator programme, total investments raised by UK FinTech companies in 2015, and the UK results from the recent PwC Global FinTech Survey.
Startupbootcamp received over 400 applications from 54 countries for its London FinTech programme in 2015. Annual investment for FinTechs in the UK rose by 35% to US901m across 72 deals in 2015.
PwC UK is a sponsor of Startupbootcamp FinTech London.