December 27, 2015
FinTech has become one of the hottest topics in the tech startup scene and will continue to dominate in 2016. For entrepreneurs, that stands for a great chance to get their slice of the financial market cake, while banks have started to realize the threat and invest heavily in startups themselves.
In fact, FinTech is nothing new. A cash counting machine is in a way also financial technology, and these gadgets have been around for quite some time. What is new though, is the use of the Internet, mobile apps and Big Data. The space is huge and ranges from startups developing mobile banking apps to online trading platforms such as TRADE-24. FinTech companies use the latest technologies to provide financial institutions and customers with a variety of modern tools that help dealing with finances on the go.
Currently, investments mainly come from banks and insurance companies. They are competing for the most innovative technologies and the smartest heads and invest heavily in startups. Alone in 2014, FinTech investment has increased threefold from $4.05 billion to $12.2 billion. The lion's share of global FinTech investment comes from the US. However, Europe is becoming more active as well and especially London experiences the emergence of more and more FinTech companies.
Financing in the US Is Still Significantly Easier Than in Europe, but London Is Catching Up
Obtaining FinTech financing is significantly easier in the US rather than in Europe. American companies get around 80 percent of global investments. However, financing in and around London has been growing at twice the rate of the Silicon Valley since 2008. The most sought-after are startups that develop technology related to banking, payments and lending.
The American market is significantly more mature and has already seen some bigger acquisitions and successful IPOs, such as for example Intralinks, which now has a market cap of more than $500 million. Europe is lagging behind, but becomes more competitive at the very early stage. It has become easier to get Series A funds, but investors for subsequent rounds are still missing, says Bain Capital. Almost half of all financing in London was first-round, compared to 27 percent in Silicon Valley.
Accelerator Programs Provide Guidance and Enable Startups to Gain Insights Into Banks' Needs and Technological Challenges
Banks and investors do more than simply give the money. They also provide networking opportunities and bring together their finance expertise and young FinTech innovators. Hence, the FinTech accelerator programs are steadily getting popular. The most interesting programs in 2015 where “FinTech Innovation Lab” and “Citi Ventures' Accelerator Program.” Keep an eye on them in 2016 as well!
FinTech Innovation Lab was launched by Accenture and the Partnership Fund for New York. It takes place in New York and meanwhile also in London and Hong Kong. The goal is to speed up innovation in the fields big data and analytics, cyber security, risk management, mobile and wireless payments and compliance. It's a twelve-week program that brings together large and established banks and young FinTech startups. Since 2012, it has raised almost $90 million and 38 startups have already participated.
Citi Ventures announced their accelerator program in December 2014. The bank cooperates with the Plug and Play Technology Center and focuses on mobile payments and cyber security. Similar to the FinTech Innovation Lab, this program also offers mentorship, product ideas and feedback from experienced bankers.
Outside of Silicon Valley, Accelerators Have Started Their First Programs in London, Hong Kong and Singapore
Apart from those two, there's a number of excellent accelerator programs held regularly around the globe . Some are open to pitches worldwide, such as Anthemis or the Innotribe Startup Challenge. Others have their focus on Europe, for example Barclays' accelerator program or Level 39.
Moreover, the Asian market has become more attractive as well. Especially Hong Kong and Singapore are playgrounds for FinTech companies. Accelerators such as Startup Boot Camp have launched their first programs in the region as well.
The FinTech continues to evolve rapidly and could completely change the way how financial institutions operate. If you are considering to tap into this market, 2016 may be your best year to start!
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