Time for fintech to deliver on its promises
Anne Boden

A FleishmanHillard Fishburn report reveals if the fads will continue or op

By HABHAJAN SINGH

Investors want to start seeing real returns this year, after pouring massive investments in the area of financial technology (fintech), according to a group of global financial services and fintech experts surveyed by an international communications firm.

So, is the party really over for the fintech companies? That question is certainly on the minds of investors and those who have been dabbling in the fintech space.

“The massive investments in fintech in the last three years have generated thousands of new companies, but I think that the peak of expectations is really over. A chunk of companies will not find any market fit or will have limited traction,” said UK-based Kantox Ltd CEO Philippe Gelis.

What will happen?

Kantox Ltd CEO Philippe Gelis

A chunk of companies will not find any market fit or will have limited traction, says Gelis

“A chunk of companies will not find any market fit or will have limited traction. So, in 2018, I expect the first wave of companies disappearing; the market is definitely maturing.

“There is no doubt that in the long run the opportunity to disrupt the financial industry is huge and investments will go on, but in a more rational way,” he said.

Gelis, who leads the company dealing with technology for currency needs of customers, was one of the 30 experts surveyed by FleishmanHillard Fishburn.

The firm had recently released a report entitled “FinTech in 2018: The Fads, the Fears and the Future”, capturing the responses of the select experts.

On the same topic, Margaris Advisory founder and venture capitalist Spiros Margaris believes that the sector is set to witness further consolidation or partnerships of fintech startups with each other, incumbents and increasingly, with tech giants.

“The challenges that come with the big fintech industry growth, such as increased customer acquisition costs, high burn rate, or slower than expected consumer adoption of the fintech value proposition will force many startups to look for partners or saviours,” he said.

From the banking perspective, one industry expert noted that the real challenge within the sector was monetisation of the large growth in customers in the medium to long term.

A bank founder said most investors have put large bets on companies that have experienced growth and large brand awareness, but often have made little by way of revenue. “Investors recognise the innovation and potential within these products, and many fintech businesses have been very successful in raising funding this year. However, longer term profitability of these propositions remains to be seen,” said Starling Bank Ltd CEO/founder Anne Boden (picture).

The UK-based bank is regulated by the UK Financial Conduct Authority and the Prudential Regulation Authority.

The report noted that mainstream buzz around fintech had picked up like never before in the last 12 months, including the soaring highs of bitcoin, tempting non-experts to consider the tantalising potential for high rewards.

At the same time, the report also noted the emergence of regulations on the horizon that promises to shake the industry to its core.

“What’s interesting is that our experts identified that an overhyped fad and the future of finance are not necessarily mutually exclusive. Take artificial intelligence (AI) for example — even a number of AI providers we spoke to admitted that the technology was hugely overhyped in 2017,” she said.

She said the expectations were frequently overestimated — often by enterprises that are not directly involved in the development of the technology.

“That’s not to say that AI won’t completely alter the financial services industry in the future, but likely in a more measured way that begins with fundamental shifts in back-end processes, rather than consumer-facing robotics that grab the headlines,” she said.

The experts recognised that there was a fine line between being excited about the future of finance and its potential, and over-hyping.

“Clients of financial services too; whether consumers or other businesses are increasingly able to see through overly exaggerated claims and are crying out for rhetoric-based in realism. As such, authenticity in communications will be as important as ever for the sector in 2018 and beyond,” she said.