Our relationship with money, whether physical or virtual, is being reinvented by revolutionary startups called fintechs. This new scenario was assessed by CB Insights, who released a report listing 250 fintechs that are transforming banking around the world. As an enthusiast of the entrepreneurial ecosystem, and in particular the financial sector, I decided to focus and look into the list, review the fintech firms selected one by one, and understand the business models behind this industry.
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My idea was to combine my professional experience with the “thirst” for finding out about these initiatives, and analyze this research in order to supplement new findings, such as more representative categories,startup locations, among other things. The report takes into account rising private companies, financial viability indicators, growth potential, activity scope and business model. I delved deeper in order to look beyond this information. And, upon“dissecting” the report and making connections between some findings and analysis, a few points were worth highlighting:
- The power of Uncle Sam: out of the 250 fintech firms from the list, 131 are headquartered in the United States. San Francisco and other cities close by (79 in California) represent the highest concentration of fintechs, however, New York also has a significant number (33 in total).
- China, Asia’s financial capital: the country is in 2nd place in the fintech numbers list. Despite this position, the number of companies is four times less than the USA; there are 30 startups, with greater concentration in the cities of Beijing and Shanghai;
- European Market: the UK has 24 out of 250 startups highlighted, especially in London. Germany and India appear to be tied in 4th place with both countries on 11 fintechs each;
- Brazilian companies: 4 national fintech companies were highlighted: Creditas, Easynvest, GuiaBolso and Nubank- in other words, a little more than 3% of startups. However, the country is doing exceptionally well within this sector - a good example was the prominence given this year by the biggest Banking Technology event in Latin America, CIAB, which dedicated space and special programming to the topic.
- A total of 22 Countries: from the countries present in the report, the one that is surprising is Israel. Although Israel has been appearing in various studies on innovation, it had a small part here, with only one representative, EverCompliant, which focuses on cyber risk and fraud detection. The country has been standing out as a cyber security hub around the world.
In addition to those highlighted above, it is still worth noting that between the 17 categories in which the list frames, three focus on the greatest number of startups: payment processing and infrastructure with 26 fintech companies, capital markets and trading figure with 21 startups and insurers, and which were also included (despite there now being an innsurtech category), and completes the top of the categories with 20 representative companies.
Among the fintech firms that make up the list, Polychain, cataloged as a Blockchain company, caught my attention. It has a very succinct and purposeful site and, in times of digital transformation in which themes such as blockchain, cloud computing, cyber security and virtual currencies are high, it makes for a startup that, without a doubt, in worth keeping on the radar.
Analyzing in a general way, what appears with much emphasis is a disintermediation movement, in particular the banks. You can also see the reduction or elimination of fees, de-bureaucracy of processes that can be slow with review and release of credit within minutes. Another aspect is the rapid development of APIs, which allow the solutions to be “plugged” to other sites, systems, and solutions. Machine Learning, Big Data, and Artificial intelligence are also technologies present in many initiatives. The use of machine learning algorithms has served to deliver faster and more intelligent services to users.
The report also goes back to an extremely important topic and is highlighted by these startups: the user friendly experience. Simple and uncomplicated solutions are usually the words used to describe these initiatives. To the detriment of this, a large area of market growth in the UX area is expanding, in addition to the needs of the consolidated fintech firms. As for the talent that is behind these businesses, the number of openings in the data science area at these startups is also significant.
Lastly, it is worth understanding and noting the most popular areas of the 250 fintech firms:
- Wallet and Money Transfer;
- Processing & Payments Infrastructure;
- Capital Markets & Trading;
- Real Estate Investing;
- Wealth Management;
- Personal Finance & Mobile Payment;
- Financial Services & Infrastructure;
- Regulatory & Compliance;
- General Lending & Marketplaces;
- Personal & Consumer Lending;
- Business Lending;
- Mortgage Lending;
- Credit Score & Analytics;
- Merchant Services.
Article by Caroline Capitani, VP of Business and Innovayion at ilegra, global technology and business company.