Fintech in 2018 – collaborating for the future of fintech
The innovation we have witnessed in the fintech sector, from areas as diverse as regtech, insurtech and payments, has been one of the most exciting aspects of the financial services ecosystem in 2017.
As the fintech sector matures, it’s time to take stock and think about how we can continue to ensure that the success of innovative new solutions is assured.
Fintech is defined by innovation, yet the strategies by which fintech companies and products are introduced into the market and remain properly funded and supported need to be improved. Development strategies need to become as innovative as the technology solutions they are trying to promote.
Success in 2018 will be defined by greater collaboration, be that between financial service organisations and fintechs or different geographic regions, commitment to collaboration can promote the success of start-ups, financial services incumbents and fintech hubs across Europe.
The amount of fintech start-ups which do not manage to scale is well-documented. According to Forbes, around 90% of tech start-ups fail; we can see this rate replicated in the fintech space.
One of the biggest challenges for fintech in 2018 is going to be developing strategies for sustainable growth.
Start-ups and scale-ups are becoming less interested in long periods of approval with banks, consultants and incubators and the subsequent high demand levelled on them for, what can often be, low returns.
Financing models which allow fintechs to maintain control of how they want to grow their company will become increasingly popular. Better relationships will benefit the fintech while generating returns for investors: greater control over products by their developers can ensure the continued investment of their time, expertise and ideas into its success. This approach will require longer term relationships with financers that do not end after a six-week programme.
Consequently, long term access to capital will allow fintech start-ups to invest in areas of their business which will allow them to scale. Talent remains one of the primary drivers of growth in the sector and with a general deficit across Europe, accessing the right person for the right job will continue to grow in difficultly. Talent acquisition on a new scale will be required to meet the needs of increasing technological stresses for fintechs: artificial intelligence (AI), big data and blockchain projects will be unprecedented in their need for talent.
Changes in financing and talent acquisition might not be drastic in 2018, but it’s coming. For the start-up who wants to scale up and become a real competitor in financial technology, new strategies which will bring their product from conception stage to entry into the market need to be prioritised. For financial services incumbents, re-thinking how they acquire new fintech technology is the route to leveraging new technologies to expand their offerings. Success requires meeting in the middle and considering and finding methods of strengthening relationships between incumbents and challengers.
A combination of things can make a location a good fintech hub: open and supportive regulation and legislation, an established financial services infrastructure, access to prospective clients and ready access to funding. However, in 2018, we’re going to have to consider if this is enough.
No fintech hub is an island, and the road to success requires leveraging talent from across Europe to meet the goals and ambitions of country-specific fintech sectors.
In Europe, there are few cities or regions which can claim that they have all the factors that allow them to be self-contained. Even then, a dearth of talent in these areas can impact their ability to compete.
For smaller countries, who cannot leverage pre-existing financial infrastructures, like say Paris or Frankfurt, will see a race simply to capture investment for their city could be a race to the bottom. They should be considering how they can encourage greater regional, or even pan-European, collaboration to promote their own success. The development of cybersecurity, know your customer (KYC) and blockchain projects requires tapping into the deep talent pool that exists across Europe.
Funding too cannot be siloed regionally. For the best solutions, financial services players have to view the financial ecosystem as increasingly integrated. The innovative solution of tomorrow is just as likely to be found in an up and coming fintech hub, like Warsaw, Prague or Belfast, as it is in Berlin, Stockholm and Amsterdam. Real game-changing innovation requires breaking out of regional silos.
If fintech hubs want to succeed they need to collaborate both with established financial services players and each other. This requires a different way of thinking for the hubs themselves, but also from investors looking for sizeable returns in the sector. Leveraging talent and expertise, from across Europe and from across the financial services sector, can aid the development of innovative new proof of concepts and scale projects ambitiously.
Keeping the pace in 2018
The financial services industry is evolving continually; for fintech to keep up and remain successful, it needs to keep apace.
A large factor is re-thinking the strategies by which businesses grow and achieve their goals. This requires a re-calibration of scale-up and start-up accelerator models and encouraging greater collaboration in the sector.
No doubt when we look back on 2018, the parameters of our sector will have changed again. However, the rate at which the future of fintech is realised is not a given. The success of growth strategies, which utilise greater collaboration between fintech and financial services and among fintech hubs, is going to massively impact what heights the sector can reach in the next year.
By Fabian Vandenreydt, executive chairman, B-Hive