For this article, we might as well start at the beginning: what is a FinTech? This word is the contraction of the words "Financial" and "Technology". Invented by our Anglo-Saxon friends, it can be translated into French as “Financial Technology”.… But still?
Technological innovation, agility and the ability to offer customers better and cheaper services: this is what qualifies FinTechs and differentiates them today from traditional banks. Their field of action extends from alternative financing of companies to online payment, including savings management, loans, bank account aggregators, etc. "A real complete ecosystem has emerged" announces Alain Clot, president of France Fintech 2016.
FinTechs generally offer a technological break from what has always existed in order to improve the user experience. For the record, 2015 would be the year when FinTech became mainstream (KPMG) with an explosion in the amounts invested in startups in the sector, then followed by the big established players in finance. Since that year, investments in FinTech have steadily increased to reach 365 million euros in France against only 5 million in 2010.
To better understand the wide range of FinTechs, let's try to understand the differences between FinTechs on the market and what they offer to meet customer demands:
Example: 100% digital “neobanks”, without an agency, which offer an account and a rechargeable payment card at low costs (Nickel Account, Morning, N26), online money pools like Leetchi or LePotCommun, payment applications like Lydia or personal finance management (Bankin, Linxo), as well as wealth management tools (dashboard like Grisbee) or automated investment (robo-advisors).
B2B Fintech with financial services targeting companies of all sizes, SMEs or large accounts. These fintechs offer, for example, factoring, currency transfer or prepaid cards for business expenses and expense reporting.
Fintechs serving as intermediaries between project leaders and investors who can be professionals or individuals. This is the case with fundraising platforms (crowdfunding, donations). Example: crowdfunding in donations with or without rewards (KissKissBankBank, Ulule), crowdlending (loans to SMEs, like Lendix or Lendosphere) and crowdequity (capital financing, like Sowefund)
Fintechs specializing in a very specific field such as insurance (Insurtech) or bank regulatory compliance (Regtech). Example: from comparator, like Fluo, to collaborative insurance like Inspeer or Otherwise, and 100% digital health insurance, like Alan; in customer knowledge or “KYC” in the jargon) like Fortia or Neuroprofiler.
Or fintechs that offer services for other fintechs or companies that want to sell online payment services such as Programme Managers (E-Pay Space).
This list is not exhaustive, but it gives a good idea of the incredible pool of opportunities and growth potentials that this new market opens up.
« Few people know what a FinTech is ... Yet many people use them without knowing it »
Today in your daily life, you unwittingly use many services available thanks to FinTech. Indeed, we are more and more accustomed to accessing instant and personalized services: fast and personalized customer services, intuitive and easy-to-use applications to transfer money or even the provision of prepaid cards or of electronic purses. Today, FinTechs and Neobanks capture more than a third of account openings. In fact, according to the ACPR by 2020, the number of FinTech customers will have tripled in three years to reach 13.3 million.
This attraction for these new services can be explained by several factors:
• The dematerialization of means of payment with a rise in the use of electronic money
• Lower costs: for example, a FinTech is on average 80% cheaper than a traditional bank (on the part of the Neobanks)
• Flexibility and speed: reduced deadlines, real-time money transfers, enough to appeal to more than one user
« An explosion of activity in perspective »
As we have seen, by 2020, the regulatory authority in France (the ACPR) provides for a tripling of online account openings, and uses will become more democratic. Investments in the world are also on the rise with 111.8 billion dollars in 2018, i.e. a growth of 120% compared to 2017 and will not stop increasing in the years to come. Technological innovations, combined with strong regulatory changes, will boost activity.
Experts plan for 2019 an intensification of the consolidation process, particularly in financing and payments, which will push fintechs to internationalize and therefore to innovate to offer new solutions for their users. The trends are on the rise and we can predict a very dynamic future for FinTechs!
E-Pay Space team