Subscribe

The fintech future is here

Viewing the below chart of web searches, you could be forgiven for thinking that fintech has only really emerged in the past year. But the financial services sector has been innovating with technology for centuries – so why has it got so big recently?

"With more capital comes more innovation, and more opportunities for startups and disruptive technologies to change how people interact with financial institutions."
Toby Heap & Ian Pollari, Co-founder of H2 Ventures & Global co-chair of KPMG's Fintech practice

Click image to zoom Tap image to zoom

Source: Google

The coming together of financial services and technology is nothing new. It will come as no surprise to know institutions have been using technology to improve their middle and back offices for as long as computers have been around. We used to call this banktech.

In fact, banktech can be traced back to the 18th and 19th centuries when traders would use carrier pigeons to get an information advantage over their competition. Nowadays, banktech is more likely to refer to super computers running complex algorithms to process high speed trading.

Fintech has become a catch-all term for technology associated with enabling the financial services industry. So, why the recent spike in interest?

BIG OPPORTUNITY

Click image to zoom Tap image to zoom

This is happening now because consumers are at the point where they are comfortable having completely digital financial relationships with relatively new brands, which they were not comfortable with about five years ago.

When H2 Ventures and KPMG launched a global search for the best fintech startups in 2014, we noted investment for new fintech ventures  had grown from less than $US930 million for the whole of 2008 to over $US1 billion in the month of October 2014 alone.

With more capital comes more innovation and more opportunities for startups and disruptive technologies to change how people interact with financial institutions.

When the CEO of Goldman Sachs says “we are a technology firm", it is clear just how much new technology is reshaping the world of finance. Here in Australia, we've also seen a sea change in the sector.

Government and major industry players have not just gotten behind fintech, they have put their wallets where their mouths are – funding the launch of Sydney's Stone & Chalk in August this year and aiming to promote the city as a global fintech hub.

INCOMING TRENDS

In our 2014 Fintech Innovators report, the logic of Australia backing fintech was supported by the performance of Australian and Kiwi fintech startups. Xero locked in a top 10 finish with startups like SocietyOne and Metamako also included in the top 50.

We hope to see similar levels of Australian representation in the 2015 list which just opened for nominations last week.

After all, Australia's big four banks regularly appear in the global top 10 rankings and our superannuation industry manages over $A2 trillion in assets, so we certainly have a strong financial sector upon which to fashion the next generation of global fintech businesses.

So what trends have we seen that could shape the 2015 Fintech Innovators list?

  • Marketplace lending to continue its growth – there are currently over 25 P2P, online lending and crowd-funding platforms in Australia alone and it is one of the most active areas within fintech.
  • Robo-advice is coming of age. In the US, robo-advisory firms raised $US290 million in venture funding in 2014 and the results of this investment are being felt in the finance sector as new technologies are rolled out.
  • Insurance is the next frontier for Fintech, having largely been passed by in the first waves of disruption. Many sources are saying the insurance sector is ripe for disruption.

In November when H2 Ventures and KPMG release the Fintech 100 2015, we will have a better idea if our hypotheses are correct. One thing we can be certain of is with new technologies and new applications reshaping the world of finance every day, the one constant is change.

Toby Heap is a co-founder of H2 Ventures, Ian Pollari is global co-chair of KPMG's Fintech practice. Nominations for the Fintech100 are open until 31 October 2015.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

editor's picks

20 Jul 2015

The fintech goldrush is here

Patrick Maes | Former General Manager Strategy & Planning, ANZ

A lot has been said about the relationship between banks and fintech start-ups. Many have implied an adversarial relationship or spoken of banks needing to take an acquisitive approach (via corporate ventures).

31 Mar 2015

Fintech and crowd funding, inflating the next bubble?

Andrew Cornell | Managing Editor bluenotes

Disruption, particularly in financial services, is one of the hottest investment themes going.

04 Mar 2015

What could Silicon Harbour do for fintech in Australia?

Jayne Opperman | Former General Manager Technology, ANZ

If you’ve seen The Imitation Game or know about the calculation machine (computer) used by the British during World War II to break enemy codes, you may wonder how Silicon Valley in the US is the centre for innovation and the computing industry, rather than Bletchley Park in the UK.