What is Fintech?

Considering some definitions provided by Oxford English Dictionary (n.d.) and Shueffel (2016), Fintech is represented by a set of computer technologies that are to assist in and enable financial services to improve such aspects as customer service or data processing. Despite that some definitions presume its centrality to financial services, some highlight its external nature, as a variety of processes being added to existing infrastructure (for example, the addition of new technology like automated processes or machine learning). The term among the folk has started its rise in 2011, with some rare mentions to skyrocket starting from 2015, as many aspiring post-crisis startups and technologies began to receive prominence.

Common Features of Fintechs

Fintech organisations tend to have a variety of similar traits that are worth highlighting. 

1. Fintech businesses are “need-focused,” which means they unbundle financial services and rely on customisation to create personalised solutions.
2. They tend to expand the services of incumbents to previously ill-covered customer groups or create totally new forms of service.
3. Customers, as a result of their strategically central role in developing the businesses’ value propositions, are facing the blurring line between who makes products and services and who utilises them, since the creation of a platform frequently entails just bridging the network rather than fully separating each participant.
4. Quite often one of the premises is to take out third parties or additional steps of the process.
5. The need for expansion and fresh views on user experience/user interface are pushing forward the simplicity and “playfulness” of brand interactions.

Fintech Landscape

In its quest to capture the landscape of Fintech in Australia, KPMG (2020) divided Fintech among the following domains (plus a couple of other we considered essential):

Fintech Origins

In a study report published in 2015, Arner et al., (2015) attempted to evaluate the evolution of Fintech. “The term’s roots may be traced to the early 1990s and related to the ‘Financial Services Technology Consortium,’ an initiative started by Citigroup to assist technical collaboration efforts,” write Ibid. Indeed, the authors’ source, an article published by the media site American Banker, references a Citigroup initiative called “Fintech” that began in the early 1990s (Hochstein, 2015). The American Banker also released another story titled “Friday Flashback: Did Citi Coin the Term ‘Fintech’?” on the term Fintech. “[t]he story below published in American Banker in August 1993, and features the first use we could discover of the now-trendy phrase ‘Fintech’”, according to an editor’s note (Ibid). It references Fintech as a project label used by Citibank. This is the first paper cited by Hochstein (2015) and subsequently Arner et al. (2015) when claiming that the term Fintech originated in the early 1990s.

Despite this, the word Fintech was coined in 1972. Mr Abraham Bettinger, from Hanover Trust, provided the following definition in a scholarly article detailing models on how he had analysed and solved daily banking problems encountered at the bank (Oshodin et al., 2019): “Fintech is an acronym that stands for financial technology, combining bank expertise with modern management science techniques and the computer (Bettinger, 1972). Bettinger’s work was not wholly overlooked during his lifetime, as evidenced by an early reference of his work by Warschauer several years after (Oshodin et al., 2019). Even so, it’s possible that the Citibank Fintech project’s imitators in the early 1990s were unaware of Bettinger’s study and chose the same title for their initiative by chance. It is important noting at this time that neither academia nor practice can be definitively recognised as the birthplace of the word Fintech, given the phrase was coined by a practitioner in a scientific journal article.

History of Fintech

Yet, the development itself did not seem to start that late and could be associated with early 1950s, as the first stage of the transit from physical means of information exchange to digital among financial service providers. It could be linked to first attempts to create a credit card by Diners Club International (n.d.), or progress on Federal Reserve Wire System. According to Nelson (2018), in late June 1967, Barclays installed the first ATM. Though quite coarse when it comes to functionalities, such as a limit of £10 or frequent bugs, it has marked a huge leap forward as it lifted long queues and expanded the service opening time.

Later, the 1970s showcased some other major shifts such as the FINRA-led creation of Nasdaq, which could partly be regarded as the first digital exchange. Though, it needed years to shift from the over-the-counter nature and meaningfully automate reporting and trading (Widder, 1992). One would also mention the creation of SWIFT, i.e. the framework for international bank communication. Its exchange software and messaging standards created a fertile ground for automated and unimpeded interaction between thousands of institutions (SWIFT, n.d.).

Then, the process gained momentum: the 1980s opened the stage for online banking (yet only partial); the 1990s popularised e-commerce and introduced more participants to this movement. Though the biggest impact was brought by the global shake-up, as old institutional arrangements have not only led the world economy to turmoil but also gave birth to a massive distrust in the system by people. As a result, ideas for alternatives were welcomed, ranging from less conventional ways to improve the legacy systems (i.e. make them more transparent or reduce transaction costs) to totally new ways of thinking (like that proposed by blockchain). As some of these endeavours have proved utterly successful, more attention has been paid to corresponding ventures in the following years. Though, it is not yet known whether this phenomenon will peak and fade any time soon, or whether any single set of arrangements will displace the other.

Fintech-related Terms

Thanks to some research provided by Deloitte (n.d.) and CFTE’s older publications, here one could find a list of some of the most common terms associated with Fintech, and thus be able to expand their knowledge.

Fintech Examples

1. Lufax

Once focused on P2P lending, Lufax is a technology-driven online Internet financial marketplace that provides retail credit and wealth management services. 

2. Tinkoff

Made as an experiment for the Russian market, Tinkoff is the region’s digital banking champion, highlighting openness and big data solutions.

3. Brex

Brex, a shining example of a Silicon Valley unicorn, fills a developing vacuum in banking ambitious tech startups, assisting them with cash management and credit needs.

Fintech Regulation

The centricity of technology has provided massive regulatory advantages, as many entities to challenge the traditional incumbents were not subject to regulatory scrutiny. However, as they were increasingly becoming full-fledged players in the industry, be them independent organisations or vassals of larger traditional banking institutions, they are now getting exposed to existing regulation or supplied with the new one.

The major driver of this attention, however, is the state’s sensitivity to potential contagion effects, as consumer bases of the former are growing remarkably. Special attention is currently paid to blockchain-related phenomena, as state representatives and major institutions behind are utterly uncomfortable with potential economic shocks, Ponzi schemes, loss of central power and transaction transparency/irreversibility.

Fintech Largest Centres

fintech startupsrobo advisorsbuy or selltraditional bankingstock trading app

The post What is Financial Technology (Fintech)? appeared first on CFTE.

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Since 2014, the top 50 Fintech startups as listed by a KPMG report recorded an annual CEO turnover rate of 9%. This is lower than the turnover rate of 11% for companies in the S&P 500, although slightly higher than the 7.94% expected of private firms in the United States of America.

In the five years since 2014, 19 out of the 50 startups went through a CEO change while independent (ie. before any acquisition deals). It can be argued that the higher rate of CEO turnover among the S&P 500 is down to the fact that more of these firms are public and have lower growth rates when compared to the Fintech startups, with growth being negatively correlated with a change in leadership.

This may now change among the Fintech 50 as four of them have since gone public, with two already public to begin with at the time of the report’s publication. In addition, the turnover rate of leadership has increased since studies determining this exact statistic were first conducted. 

However, despite startups having a reputation for high turnover rates, the Fintechs listed have displayed impressive consistency with regard to changes among their management positions. How have they done this?

The details and more will be available in the Fintech 50: Back to the Future Report available on July 22. Sign up here to automatically get it, for free, upon release.

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The “Fintech 50: 5 Years in Fintech” report by CFTE presents their milestones, investment deals, growth and talent trends. We examine their hiring, survival rate, changing business models, success against incumbents, and expansion both geographically and in terms of market share.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups, and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast-growing startups such as Revolut or Shift Technology.

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17 startups in the 2014 KPMG report can be categorised as B2B players, and like their B2C counterparts, they have also rapidly grown since the release of the report, reaching a total of 4.4 million businesses today. The forerunner is the accounting firm Xero, boasting a client base of 1.8 million businesses, followed by payments companies SumUp and Stripe, with both numbering at least 1 million clients.

The 11 Fintechs that do provide information on their database have on average 396,000 business clients. Out of all the B2B startups in the list, it is highly likely that Square has the largest clientele, but it has not made public any business client data growth since disclosing that it was serving 2 million businesses back in 2016. If we assume that the company has maintained slight growth year-on-year, it is highly possible that it remains the leader in the pack.

So how have these companies maintained steady and healthy growth since the release of the report?

The details and more will be available in the Fintech 50: Back to the Future Report available on July 22. Sign up here to automatically get it, for free, upon release.

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The “Fintech 50: 5 Years in Fintech” report by CFTE presents their milestones, investment deals, growth and talent trends. We examine their hiring, survival rate, changing business models, success against incumbents, and expansion both geographically and in terms of market share.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups, and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast-growing startups such as Revolut or Shift Technology.

Latest posts

• Extrapreneurship – The Future of Entrepreneurship in Fintech
• How AI is Being Used at Investment Banks – Trade Settlement
• What is eXtrapreneurship?
• How AI is Being Used at Investment Banks – Trade Processing
• Will AI Take My Job?

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The post #Fintech50: B2B Startups in 2014 Top 50 Fintech List Now Reach Over 4 Million Businesses appeared first on CFTE.

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Of the 50 Fintechs listed in the 2014 KPMG report, 33 can be considered to be part of the B2C segment, with their client base today numbering a whopping 315 million! This is a sum that is greater than the 306 million clients serviced by City, Bank of America and HSBC combined, and almost equivalent to the entire population of the United States of America!

Out of the 33 companies, 29 provide publicly accessible data – with an average of 10.87 million clients served by each. Crowdfunding platforms were also categorised as B2C firms in our #Fintech50 report, with investors considered as clients. The average figure is just below the 11 million served by Canadian Imperial Bank of Commerce, and just over the 10.76 million brokerage account serviced by Charles Schwab.

This growth can be largely attributed to the success of several companies, namely WeCash (130 million users), Credit Karma (85 million users), M-Pesa (33.4 million users) and Coinbase (25 million users). Is the ease of service provided by these firms in their respective segments a key factor in the rapid scaling of their customer base?

The details and more will be available in the Fintech 50: Back to the Future Report available on July 22. Sign up here to automatically get it, for free, upon release.

——————-

The “Fintech 50: 5 Years in Fintech” report by CFTE presents their milestones, investment deals, growth and talent trends. We examine their hiring, survival rate, changing business models, success against incumbents, and expansion both geographically and in terms of market share.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups, and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast-growing startups such as Revolut or Shift Technology.

Latest posts

• Extrapreneurship – The Future of Entrepreneurship in Fintech
• How AI is Being Used at Investment Banks – Trade Settlement
• What is eXtrapreneurship?
• How AI is Being Used at Investment Banks – Trade Processing
• Will AI Take My Job?

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The post #Fintech50: B2C Startups in Top 50 Fintech List Now Reach Over 315 Million Clients appeared first on CFTE.

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The five most successful Fintech startups in the 2014 KPMG report, namely Square, Stripe, Coinbase Robinhood and Credit Karma, are collectively valued at a staggering US$71 billion today. This can be attributed to their focus in acquiring customers as cheaply as possible, allowing them to steadily build up a database of hyper-focused and -segmented users. Although their initial business was built on low margins, the curation of such relevant customer data allowed them to expand into higher-margin operations.

In the case of Credit Karma and Robinhood, they advertised free credit checks and trading respectively, allowing them to obtain millions of customers rapidly. Today, Credit Karma boasts 85 million users, allowing them to sell this data for potential borrowers while Robinhood has six million, which now gives them leverage to rebundle their product offerings, making it more profitable to themselves. In addition, Robinhood now offers premium services for a fee to users, while Credit Karma has branched into offering mortgages and other borrowing opportunities to consumers.

The most valuable startup of the five, Square, currently has 15 million monthly users on its cash app alone, with a further two million businesses onboard. Beginning as a business payments service, Square now uses its customer data to determine if clients qualify for financing. Launched in 2014, its lending program Square Capital has recorded impressive growth of 50% year-on-year, lending more than US$500 million in Q1 of 2019 alone!

This strategy of offering a better or cheaper version of an existing service, before expanding or branching out into other financial services is known as rebundling, which you can learn more about in our Fintech course.

The details and more will be available in the Fintech 50: Back to the Future Report available on July 22. Sign up here to automatically get it, for free, upon release.

——————-

The “Fintech 50: 5 Years in Fintech” report by CFTE presents their milestones, investment deals, growth and talent trends. We examine their hiring, survival rate, changing business models, success against incumbents, and expansion both geographically and in terms of market share.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups, and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast-growing startups such as Revolut or Shift Technology.

Latest posts

• Extrapreneurship – The Future of Entrepreneurship in Fintech
• How AI is Being Used at Investment Banks – Trade Settlement
• What is eXtrapreneurship?
• How AI is Being Used at Investment Banks – Trade Processing
• Will AI Take My Job?

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The post #Fintech50: Most Successful Fintechs Focus on Acquiring Clients and Data First appeared first on CFTE.

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A good yardstick for measuring growth for a company is the number of employees that it has. Today, the top 50 Fintechs as listed by KPMG back in 2014 employ more than 27,000 people – a total that is equivalent to 81% of the entire financial service workforce in the city of Bristol, and 74% the size of renowned investment bank Goldman Sachs!

Collectively, the group of 50 Fintechs added at least 8,061 jobs in the past two years (for firms that data was available for), which marks an impressive growth of around 43%. The average startup in the report boasts a workforce of 558 employees, highlighting the growth pattern of not only these companies, but the viability and sustainability of the global Fintech ecosystem as a whole.

So why have these companies successfully grown to the point where their employee numbers have increased exponentially year-on-year?

The details and more will be available in the Fintech 50: Back to the Future Report available on July 22. Sign up here to automatically get it, for free, upon release.

——————-

The “Fintech 50: 5 Years in Fintech” report by CFTE presents their milestones, investment deals, growth and talent trends. We examine their hiring, survival rate, changing business models, success against incumbents, and expansion both geographically and in terms of market share.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups, and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast-growing startups such as Revolut or Shift Technology.

Latest posts

• Extrapreneurship – The Future of Entrepreneurship in Fintech
• How AI is Being Used at Investment Banks – Trade Settlement
• What is eXtrapreneurship?
• How AI is Being Used at Investment Banks – Trade Processing
• Will AI Take My Job?

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The post #Fintech50: 2014 Top 50 Fintechs Employ Over 27,000 People Today appeared first on CFTE.

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Whether you have heard of the companies Future Advisor, Borro, LearnBest, Yodlee and Metamako, or not, they pack a serious punch in the world of Fintech. These five firms listed in the KPMG top 50 Fintech list were acquired at various stages after the publication of the report in 2014, for a collective total of more than US$1 billion.

Of the five, only Metamako’s valuation at acquisition was undisclosed, with the valuation of the rest averaging US$270 between them. This is an exit rate that is comparable to industry expectations, but their valuations at acquisition are not.

Using historic exit rates by funding round for US tech firms, it is expected that out of approximately 50 startups selected at random, there would be about ten exits instead of eight (including acquisitions). However, it is also pertinent to note that the valuation of these were much higher compared to the average tech exit.

Around 1% of US tech startups exit with a valuation of US$500 million or more, while five of the Fintech top 50 already exited at this valuation, which is an exponential increase on the expected rate. Is the growing awareness of Fintech a factor in this?

The details and more will be available in the Fintech 50: Back to the Future Report available on July 22. Sign up here to automatically get it, for free, upon release.

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The “Fintech 50: 5 Years in Fintech” report by CFTE presents their milestones, investment deals, growth and talent trends. We examine their hiring, survival rate, changing business models, success against incumbents, and expansion both geographically and in terms of market share.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups, and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast-growing startups such as Revolut or Shift Technology.

Latest posts

• Extrapreneurship – The Future of Entrepreneurship in Fintech
• How AI is Being Used at Investment Banks – Trade Settlement
• What is eXtrapreneurship?
• How AI is Being Used at Investment Banks – Trade Processing
• Will AI Take My Job?

Next Events[MEC id=”3937″]

The post #Fintech50: 5 of 2014’s Top 50 Fintechs Acquired For Over US$1 Billion Combined appeared first on CFTE.

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Since December 2014, the top 50 Fintech firms as listed by KPMG have not kept up with the general funding pattern of the industry. This is largely down to their success as Fintech startups, meaning they did not need to raise more equity funding from venture capitalists. Four out of the 50 have had IPOs since, with Xero having an IPO as far back as 2007 .

The four firms with IPOs, Funding Circle, Square, Lending Club and OnDeck, have a combined market cap for US$32.6 billion, which boils down to over US$6.5 billion per company on average. However, it is important to note that the US$30 billion valuation of Square substantially raised the overall average, which would have been US$599.65 million without it.

Three of the four are SME lenders, with two of them being peer-to-peer platforms. However, all three of these startups have since experienced a rocky road post-IPO, with their market capitalisations dropping since going public. Square, the payment firm, has been the most successful, with a current valuation of 10x its IPO. But how and why has it performed much better than its counterparts?

The details and more will be available in the Fintech 50: Back to the Future Report available on July 22. Sign up here to automatically get it, for free, upon release.

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The “Fintech 50: 5 Years in Fintech” report by CFTE presents their milestones, investment deals, growth and talent trends. We examine their hiring, survival rate, changing business models, success against incumbents, and expansion both geographically and in terms of market share.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups, and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast-growing startups such as Revolut or Shift Technology.

Latest posts

• Extrapreneurship – The Future of Entrepreneurship in Fintech
• How AI is Being Used at Investment Banks – Trade Settlement
• What is eXtrapreneurship?
• How AI is Being Used at Investment Banks – Trade Processing
• Will AI Take My Job?

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The post #Fintech50: 4 of 2014’s Top 50 Fintechs That Went Public Now Have a Combined Market Cap of US$32.6 Billion appeared first on CFTE.

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The 50 firms highlighted by KPMG in its “50 Best Fintech Innovators” report back in 2014 were certainly industry shakers. Collectively, the group raised a total of US$3.5 billion in funding up through 2014.

In a good sign for the group, their collective funding rose US$6.1 billion since 2014 (to US$9.6 billion overall), marking an increase of 170% since the report was released. This indicates growth and success for these firms, no doubt thanks to the greater awareness of Fintech around the world today.

However, what is interesting is that it is only a small fraction of what the Fintech industry has raised. From 2014 to 2018, private equity, venture capital and various mergers and acquisitions have contributed US$338.5 billion to Fintech firms, with funding averaging 36% in growth year-on-year.

Have these firms been left behind or is the world simply catching on to the benefits and advantages of Fintech?

The details and more will be available in the Fintech 50: Back to the Future Report available on July 22. Sign up here to automatically get it, for free, upon release.

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The “Fintech 50: 5 Years in Fintech” report by CFTE presents their milestones, investment deals, growth and talent trends. We examine their hiring, survival rate, changing business models, success against incumbents, and expansion both geographically and in terms of market share.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups, and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast-growing startups such as Revolut or Shift Technology.

Latest posts

• Extrapreneurship – The Future of Entrepreneurship in Fintech
• How AI is Being Used at Investment Banks – Trade Settlement
• What is eXtrapreneurship?
• How AI is Being Used at Investment Banks – Trade Processing
• Will AI Take My Job?

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The post #Fintech50: 2014 Top 50 Fintech Startups Received US$9.6 Billion in Equity Funding appeared first on CFTE.

We would have expected 17, rather than 2, to fail if they were standard US startups. The selected fintech firms were, on average, 4.7 years old in 2014, and 34% of US startups that survive 5 years don’t survive another 5, according to the US Small Business Administration.

The details and more will be available in the Fintech 50: Back to the Future Report available on July 22. Sign up here to automatically get it, for free, upon release.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups, and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast-growing startups such as Revolut or Shift Technology.

Latest posts

• Extrapreneurship – The Future of Entrepreneurship in Fintech
• How AI is Being Used at Investment Banks – Trade Settlement
• What is eXtrapreneurship?
• How AI is Being Used at Investment Banks – Trade Processing
• Will AI Take My Job?

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The post Fintech Startups Don’t Die appeared first on CFTE.