Having the opportunity to interact with digital finance professionals and innovators from around the world gives Crowd Valley a strong insight into market trends. These trends give a fantastic overview into market demand that is shaped by investors, borrowers, financial institutions and regulators alike.
“In the U.S., 33 percent of millennials (ages 15-34) believe that within next five years they will not even need a bank”. - McKinsey & Company. Global Payments 2015: A Healthy Industry Confronts Disruption.
It is difficult to conceive a reality where banks stand redundant and, while the probability of such a happening is highly unlikely, a large number of individuals globally are adopting a new set of expectations for the infrastructure that supports their pecuniary activities on a p2p, p2b level, e-commerce, or for cross border transactions.
The Global Fintech Hubs Federation (GFHF), has been announced on August 25, 2016, on initiative of Innotribe and Innovate Finance, to foster innovation across the world’s financial services industry and help startups and institutions gain visibility into new markets. Stakeholders from more than 20 cities around the world, including London, Shanghai, Frankfurt, Istanbul and Nairobi, have already decided to join the federation, with more groups to come.
The adoption of equity and debt crowdfunding has left most if not all policy makers and regulatory bodies challenged to find the right framework to properly regulate the array of platforms launching into the market. These platforms have given accredited and retail investors alike access to alternative investments they would not otherwise have. One area overlooked by most investors and now being addressed by regulatory bodies is investment liquidity. Venture capitalists and business angels traditionally would achieve liquidity with the acquisition of the investment. Crowdfunding differs, an IPO or acquisition isn’t out of the questions but it certainly is less likely.
What is Insurance Technology (InsurTech) all about? It’s a sub-sector of Fintech that is growing fast and vigorously, with annual investments that increased fivefold in the past three years, totaling $3.4bn of funding poured into the sector since 2010. Insurance behemoths are paying attention like never before.
Digital finance or fintech is a strong phenomenon on the tip of everyones tongue. The applications however are still often elusive as organizations search how these macro trends impact their existing operations and seek out where they are uniquely positioned and can compete in the market of tomorrow.
The last quarter of 2015 saw a reduction in investments into the fintech sector, with a sensible decrease from the incredible numbers of the previous quarters. Market analysts started to become skeptical that the industry could continue to grow at the same pace, with a slowdown for the start of the year that was foregone. However, the reality turned out to be a different story, with another record quarter of backing for new innovation in the financial services sector.
It is no surprise that digital finance adoption has spread globally to provide more streamlined and efficient processes compared to its legacy counterparts. At Crowd Valley we often get asked the question, “What platforms are most successful” and “What verticals have had the best uptake”. For the former it relies on a well balanced matrix of experienced operations, quality deal flow and its community. Like any financial institution around the world, no amount of marketing can overcome poor investment prospectuses, higher than average defaults or general bad operational management.
When citing the growth of the fintech market, its common to see indicators such as VC investments in the market referenced. However accurate these numbers are, 2014 and 2015 have continued a dramatic increase in the pace of investment. Another factor that’s often harder to quantify, is the adoption among the incumbents and established market participants in the sector but arguably its at least as indicative of a larger trend.
Current headlines are dominated by traditional institutions becoming minor or even major players in fintech platforms globally. This week it was announced that BlackRock made an investment of £12.7 million in Funding Circle. Similar activity is mirrored by companies such as Goldman Sachs, JPMorgan and DBS in Singapore. While these large institutions are making waves in the digital finance space, similar size opportunities are being exploited by community banks and institutions in the form of local P2P networks.