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Although investment in financial technology has dropped in 2017, market watchers believe that the quality of the commitment has improved.
In 2016, investments in fintech totalled some USD 24bn, versus USD 45bn in 2015, according to KPMG. “There are more discerning investors in the market today,” said Murray Raisbeck of KPMG. “People want to see their investments yield some return.”
Raisbeck said it was possible that fintech had entered a period of normalisation, that the initial burst of enthusiasm had peaked and that more considered, more selective investment is taking place.
However, in a subsequent panel, looking at the C-level perspective around the payments landscape, the audience showed greater enthusiasm for fintech investment in the payments chain than payment networks or non-bank providers.
Raisbeck said the political landscape may have something to do with the pent-up opportunity around fintech. Europe looks quite subdued at present, although there are a number of hubs springing up across the continent. As well as the UK, Germany, Netherlands, France, Sweden and Switzerland, there are positive stories from Poland, Czech Republic and other markets. In the Americas, the US has seen less early stage financing but there is a considerable amount of second round funding in process. In Canada and Brazil there are also opportunities emerging.
Going forward, there are hopes that InsurTech and RegTech will create momentum in the fintech space. “We have seen some encouraging signs in 1Q and 2Q,” said Raisbeck. “We are hugely upbeat about the landscape.”
While it was acknowledged that banks will always provide the “rails” for payments, Token.io’s Yobie Benjamin said consumers themselves will drive the development of payments.
Earthport’s Daniel Marovitz, felt the most effective payment is one that is invisible and “so effortless and integrated”. Admitting that the market has not reached that level of efficiency, he added that “when we get there, we’ll stop talking about frictionless payments.”
The panel moved on to discuss data and the question of ownership. Banks are behind the curve when it comes to interpreting and managing data. “A bank knows what their customer is buying, but a company like Google knows that sort of information three months before a bank even becomes aware,” said Marovitz.
Benjamin foresees a “flourishing of banks in Europe” as they start to grasp some of the opportunities. But Marovitz sees the banking sector receiving a significant wake-up call. “Banks don’t know what is going to happen but they won’t believe the scale of it when it does hit them,” he said. Despite the seismic shock, he doesn’t envisage millions of people turning their backs on banks. Other panel members felt there is still enough trust in banks for the model to be turned around. “They still have the customers and the reach,” said Kelley Knutson of TSYS.