In the early days of FinTech, I remember quite a few people talking negatively about the potential impact of FinTech. The reasons were plentiful: missing investors, incumbents not interested to collaborate, high entry barriers, no mass market interest… Just to name the most popular ones. In their eyes, FinTech was just a hype and will disappear in the near future. Quite de-motivational opinions for anybody who was considering to switch from traditional banking to a FinTech player.
Hopefully these people still did the switch, as none of this turned out to be true. Just going through the biggest news in this still very young year, you will see plenty of indices to disapprove the statements from above:
Claim #1: Missing investors
Just the biggest and most recent investment news of solarisBank (EUR 56.6m), AtomBank (GBP 83m) and N26 (USD 160m) can easily prove this statement wrong. Besides the pur amounts being channeled into these FinTech players, also the names of the investors are promising: major investors were the traditional incumbents BBVA, ABN Amro, Allianz and Visa. If you add the names of Deutsche Bank, Deutsche Börse and PayPal to this list, you will realise that all relevant kinds of players of the financial service industry are involved. And it does not stop there, also industry outsiders are lining up to invest in FinTech companies. Most importantly the new N26 investor Tencent. The conclusion? There is a big interest from various industries and players in FinTech.
Claim #2: Incumbents not interested to collaborate
Do I need to point out that incumbents and other players are interested to team up with FinTech startups? If you believe so, please have a look at this infographic or join a conference of your choice and have a look at the panel / presentation regarding “FinTech vs. banks: Friends or foes?”.
Claim #3: High entry barriers
FinTech is probably not the easiest industry to enter. However, when you overcome high barriers there is usually also a higher reward for it. And if you just take a look at the opportunities for FinTech entrepreneurs and young startups that are available right now, you will realise there is plenty of support available.
While going through the company life-cycle there are many ways of getting support to build your FinTech startup: hackathons, coworking spaces, online material, accelerators and incubators, investment funds and of course way too many events. Furthermore, never was the regulation in financial services so pro-innovation as it is, at this moment. PSD2 is definitely not perfect, but it has a massive impact on mindset and working style in the industry. Other regulations will follow, FinTech players will invest more into lobbying and soon regulatory barriers might even decrease further.
Claim #4: No mass market interest in FinTech solutions
It might not be very easy to get the average Joe excited about a new FinTech services. But FinTech is becoming more and more mainstream. Advertisement of FinTech startups in subways is the new normal (also in Berlin: Kontist, N26) or the recent massive coverage of interest rate fight between German Check24 and Smava. There might still be some time to go, however, just compare it to a few years ago how many of your non-FinTech friends have heard about Bitcoin, Robo advisors, banking chatbots or Open Banking. The trend is clear.
Claim #5: No exits
The final claim was about the missing success stories of successful FinTech ventures. No players would be interested in purchasing a FinTech startup. Luckily, recent news also have some stories to disapprove this. The incumbent Experian took over ClearScore and also FinTech startups took over each other: Challenger bank Tandem acquired Pariti. Especially the Experian / ClearScore acquisition is a clear signal that entrepreneurs that build FinTech companies can become financially very successful. An important message to all early stage founders that all the hustle/hassle could be worth it from a financial aspect as well.
The FinTech landscape has changed a lot since these claims were commonly made. The development in the past years has made these people quiet. Everything a successful founder requires is now available in FinTech: investments, public interest, regulation and support from many sides. This sounds like a pretty good cocktail to me. Cheers to FinTech!