FinTech Results 2016: Banks and Regulators
1. In 2016 traditional banks across the world finally realized the upcoming big changes in the whole financial and banking industry (I don’t use too buzzy word “disruption” anymore ) and are clearly getting more and more active in the FinTech space. Partnerships and product integrations, accelerators and innovative labs, direct investments and venture debts , corporate VCs and fund-of-fund investments — banks started to use all available mechanisms in order not too lose in the digital war with the new hungry players.
1. Barclays, Goldman Sachs, Citi, Santander and BBVA are leading the fintech show, however their investment approaches are different. While GS, Citi and Santander invest with the main target to get a direct return on investments, BBVA and Barclays make more strategic investments aiming to get both — financial return and value for core banking business.
2. In 2016 top Southeast Asian banks, considering global trends and experience, started to follow Chinese/HK/Japanese/Korean megabanks with playing active role in FinTech in Asia, to name a few:
DBS, OCBC, UOB from Singapore; MayBank, CIMB, Hong Leong and RHB from Malaysia; Siam Commercial Bank and KasikornBank from Thailand , Mandiri from Indonesia and many others.
SE Asia will be an interesting case to test fintechs and banks cooperation: in this region banks started to be active in FInTech before the market was actually formed, meaning that they will have a significant influence on the future of the whole fintech industry and it’s intriguing how (and if) they will be able to manage it.
2. Banks and Fintechs partnerships across the world are growing, mainly in Wealth Management, P2P/P2B lending and Blockchain
An extensive interest was shown by banks and financial institutions
partnering with robo-advisors, digital wealth managers. In addition, there is a growing tendency by banks to partner with P2P and P2B lending companies (Santander, UOB, Belfius Bank, Alfa Bank, etc).
Asian banks are widely partnering with Fintech accelerators in order to pilot new products with fintechs residents. Many pilots were initiated in 2016 between blockchain companies and banks worldwide (SG, SCB, Barclays, etc)
3. Direct investments, Venture Debt and M&A are getting more and more popular tools to execute digital strategy for top banks
Considering this list of investments, it’s clear that most of banks are looking for strategic benefits for their core business, that is why most of investments are made into complimentary companies: those which product can be integrated into bank’s product line, and mainly used as a new digital channel for clients acquisition as well as better service and support.
However our observation in 2016 that several banks has already started to invest into fintech in order to diversify their core business and hedge their risks for the long-term play, without a target to integrate fintechs into existing banking business.
4. Central Banks are also in the FinTech game: the UK sets the tone, SE Asian regulators are becoming the most active and fastest
Central Banks of Asia became the most active regulators in the fintech space globally: Singapore, Hong Kong, India, China, Malaysia, S.Korea, Japan launched dozens of useful initiatives (licenses, guidelines, sandboxes, incentives etc) to help fintech industry to mature within the regulated environment.
Most of activities are focused on establishing an early stage infrastructure and development, to name a few:
However the UK and Europe regulators are still the benchmark for the whole world: Open Banking Standard, PSD2, Fintech licenses for neo-banks are the most notable regulation changes in the global fintech industry:
The US fintech market is quite mature and regulated, however several initiatives happen there as well, mainly aimed on shaping certain sectors within an industry:
Overall trend towards active involvement of Banks and Regulators into FinTech industry gives all other players, such as entrepreneurs, startups and investors, a clear sign that the industry is getting mature and sustainable, and can develop further as a stand-alone market, providing more opportunities for building new businesses with the support of government and existing incumbents on the market.
Read also:
“Top5 observations of the global FinTech market in 2016”
“FinTech Results 2016 in Asia: China became the new Leader in the FinTech worldwide”
Fintech Results 2016: Blockchain and InsurTech
P.s. If you are interested in FinTech/BlockChain/InsurTech, please take a look at our semi-annual research “Money of the Future” (download at http://fintech-research.com/) and feel free to contact us directly.
Partner and Investment Director at Life.SREDA
