FinTech startups are increasingly focusing on building smarter, faster machines as they seek to gain a better understanding of artificial intelligence and its potential to solve customer problems, a new report by the Startupbootcamp FinTech London programme and PwC can reveal.
Working with hundreds of startups and financial services companies, the report’s authors have seen a significant change in culture over the past year. Almost 1 in 7 (16%) of applications to the incubator programme in 2016 looked to build new prototypes and many were focused on Artificial Intelligence (AI) and machine learning.
The ‘ Start-up view: a year in FinTech ’, report analysed application data from Startupbootcamp’s FinTech accelerator programme alongside the volume of deals in the UK FinTech market in 2016.
FinTech startups are beginning to focus on solving real customer problems using AI and machine learning. Over the past few years FinTech’s focus on AI and machine learning has been driven by a need to further understand and develop the technology with no clear concept of how to implement it in daily life. Recently, however, many more startups have begun working with financial services firms, using this technology to identify and solve real-life customer issues. Enterprise Bot, a member of the 2016 Startupbootcamp cohort, is a good example. Using AI, they have developed virtual assistants who can be used by banks to improve customer service.
However, there is a disconnect in the interest shown in this area from startups and investors, with the report showing that, for many investors, it remains too soon to invest in smarter, faster machines. Investment in this space, particularly in blockchain, is being driven predominantly in-house by financial companies themselves. Despite the 16% of applications to Startupbootcamp focusing on smarter, faster machines just 9% of investment focused on this area.
Despite Brexit, the UK will remain a global FinTech centre
UK-based startups made up 34% of all applications to Startupbootcamp in 2016, up from 22% the year before, demonstrating the constant growth of innovation and wealth of talent in the UK. The UK’s FinTech sector has continued to progress following the EU referendum, with FinTech ‘bridges’ being built between London and China, South Korea, Singapore, India and Australia.
Through running successful FinTech accelerator programs in Europe, Asia, the US and Latin America, Startupbootcamp has seen startups find new ways to tackle difficult financial challenges and apply those solutions in emerging markets.
Like other sectors, FinTech is not immune to the uncertainty surrounding Brexit, but the European FinTech sector is in a healthy position. Regulators across Europe and further afield are following the UK’s example as they seek to foster an agile and innovative environment, showing continued support for the UK FinTech scene. Concerns around Brexit have been minimal and mainly hypothetical, explained by the fact that most early stage startups tend to be predominantly focused on their domestic market.
Collaboration is key as relationship between startups and incumbents matures
Early perceptions of FinTech are shifting. Where startups were once seen as a threat by existing financial services players, the emphasis is now shifting to collaboration. While it has taken a while for startups and incumbents to find ways to work together, Startupbootcamp and PwC have witnessed a clear increase in cooperation to solve important problems – both for customers and for the companies themselves.
As the relationship matures, incumbent financial services firms continue to struggle with measuring and reporting their success partnering with startups. Nevertheless, the atmosphere of collaboration and mutual understanding is positive and expected to accelerate.
Francisco Lorca, managing director of Startupbootcamp FinTech London, said: “Despite political, economic and financial uncertainty causing people to believe FinTech might be derailed, at Startupbootcamp we have yet to see any real impact. This year, we have seen the sector’s entrepreneurs, including the Startupbootcamp FinTech 2016 cohort, consistently proving that they have genuinely transformative ideas to offer – and that these ideas are commercially viable. One can only imagine what will come next, but both incumbents and start-ups should be prepared to embrace the change”
Steve Davies, EMEA FinTech leader at PwC, said: “While questions remain on how big players can measure their success in FinTech, the reality is investment in innovation is now necessary for financial services companies to keep pace with competitors both within and outside their own industry.
“The FinTech industry is not immune to broader political and economic uncertainty but the UK remains very well placed to lead the way. As the UK’s position in Europe post Brexit becomes clearer, startups from across the world will continue to travel here to work with international investors, partner with leading financial firms and develop under a forward thinking regulator.”
The full report, The start-up view: a year in FinTech, can be found online.
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Startupbootcamp FinTech is Europe’s leading accelerator focusing on financial innovation and is partnered with industry giants such as; MasterCard, Rabobank, Lloyds Banking Group, PwC, Intesa Sanpaolo, arvato Bertelsmann, Route66 Ventures and Cognito PR to provide the expertise, exposure channels, APIs and access to a network of industry professionals that most early-stage FinTech startups would not be able to access otherwise.
Startupbootcamp FinTech intensive 3+1 month program provides startups with an intense structured, mentorship, office space in the heart of London, funding and access to a global network of investors and VCs, for up to 10 selected FinTech startups across the globe. For three months, the selected startups collaborate with 400+ mentors, partners, and investors to build world class FinTech companies, with the ultimate goal of becoming industry leading players.