Fintech by the numbers

Incumbents, startups, and investors adapt to fintech evolution

From disruptive threat to enabling partner, fintech has entered a new phase of its evolution. Our insights track the development of the fintech market and examine how banks, insurers, and investment management companies are tackling fintech transformation initiatives.

Closing the gap in fintech collaboration

As fintechs mature, incumbent financial institutions expect more from them, demanding practical solutions that address specific problems rather than “cool” but generic ideas. Understanding the current state of the fintech market and learning how to engage and collaborate with these tech-driven startups can enable innovation that drives true transformation and differentiation in the marketplace.

However, challenges remain that can hinder collaboration, including internal organisational and cultural issues and external issues such as regulation, lack of industry-specific expertise, and difficulty demonstrating a clear value proposition. To address these challenges, incumbents need to determine how they will measure success and establish a faster, systematic collaboration process. At the same time, fintechs need to hone their knowledge of the business of financial services and establish a clear value proposition.

While most incumbents seek more advanced fintechs, innovative ideas from new startups might provide a fresh perspective that could have dramatic impact. As the fintech ecosystem evolves, a more symbiotic relationship is beginning to emerge. Fintechs are typically free from the internal and external issues incumbents face, and incumbents can supply much needed capital and the institutional knowledge fintechs need to develop innovative solutions to real problems.

The relationship between incumbents and fintechs will continue to evolve—likely at an accelerated pace—as fintechs continue to drive transformation for FSIs. To advance collaboration, financial institutions and fintechs need to be more open-minded, tolerant, and accommodating and understand the mutual need for coexistence and codependency.

Closing the gap in Fintech Collaboration

Fintech by the numbers

In the past few years, we appear to have entered a new phase in the evolution of the financial technology sector. The thinking of many financial institutions has evolved, and they're now seeking to team more with emerging technology companies to gain access to new markets and products, greater efficiencies, or just the "secret sauce" that makes innovation go. At the same time, many fintechs themselves have sought to join with large financial institutions to expand into new markets, gain industry and regulatory knowledge, and even simply cash out.

There are countless articles and reports about fintechs these days, but how much of the analysis is grounded in fact? And how much is mere speculation? We wanted to understand the evolving ecosystem with data as the foundation. In particular, we were interested in the nature, type, and scale of engagement between fintechs and both investors and traditional financial institutions.

To understand which businesses and solutions were gaining and losing, we analysed the pace of new company formation, amount and type of investment, and the most meaningful geographic regions for fintechs. Our key findings include:

  • New company formations are in decline over the past two yearss
  • Funding in many categories is still on the rise, especially in certain banking and commercial real estate categories
  • New funding sources are emerging, suggesting that we're entering a phase of consolidation and maturation
  • Fintech acquisitions and initial public offerings (IPOs) are also ramping up
  • There continues to be meaningful regional variability in fintech creation and investor interest
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