The Rise and Rise of Fintech – Now Unbundling Our Banks
By Jeffrey Tobias.
There is a lot of hype around Fintech and what it's potentially doing to the banking system globally, and Australia’s in particular. Is it real? Is it a threat? Time will tell. What is important however is to understand the extent to which entrepreneurial companies are coming after the financial services sector. And they are. In a big way.
According to a recent report from KPMG and CB Insights, Investment into VC-backed fintech companies rebounded in Q1’16, reaching a record high number of deals on $4.9 billion of investment. A substantial part of the increase over last quarter stems from two $1 billion+ funding rounds to China based Lu.com and JD Finance.
In Q1’16, the two largest fintech deals occurred in China, representing almost half of all global investment. Q2’16 is expected to bring more of the same given the already announced $4.5 billion dollar funding round to Ant Financial, which closed in April.
China continues to be led by large deals and we see other regions completing deals in both the smaller and mid-sized categories. In the US, while Betterment and Oscar Health Insurance raised $100 million+ funding rounds, there was also a significant number of $25 million + financings. Meanwhile, in Europe, strong deals occurred in the UK, Germany and Ireland – highlighting the range of European fintech hubs and the growing maturity of the European market.
Emerging companies generally don’t attack incumbent players head-on, but rather focus on tackling specific verticals (hence the term “unbundling, coined by CB Insights). Said another way, might global banks like Wells Fargo, Bank of America, and Citi lose their competitive edge not to large, entrenched competitors, but because emerging startups inflict upon them a death by a thousand cuts?
The graphic below details companies attacking bank services ranging from robo-advisor wealth management services like Wealthfront and Betterment; small business loan companies like Prosper and Kabbage; personal loan startups like LendUp and Oportun; apps that offer new models for banking like Moven and Digit; and many more. This infographic focuses on US startups, but when you look at the picture, you will be horrified. And you should be.
It really is death by a thousand cuts, and it will be no different in Australia.
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Managing Director, The Strategy Group
Dr Tobias is an accomplished innovation consultant and entrepreneurship strategist, drawing expertise from the academic, entrepreneurial and corporate worlds. Jeffrey’s commercial and business experience is particularly focussed on lean startup, design thinking and leadership. Prior to The Strategy Group, Jeffrey was Cisco’s Global Lead for Innovation in the Internet Business Solutions Group helping Fortune Global 500 companies improve customer experience and grow revenue by transforming how they do business.
Jeffrey is a professor of innovation and entrepreneurship teaching MBA students at the Australian Graduate School of Business at the University of New South Wales. An active angel investor, Jeffrey is on the board of various well known startups. Jeffrey’s corporate background includes leading global innovation strategy at Cisco, working with large corporates such as Adobe, Westpac, Telstra, Woolworths, and Perpetual.
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