Strategy& Denovo Q2 Fintech Recap

Full report: https://drive.google.com/file/d/0ByxruexVvBhga3NKUGxXa1ZETW8/view?usp=sharing

Executive Summary:

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The un(der)banked: FinTech’s largest opportunity. Mobile money services have proven to be an effective gateway for financial inclusion among the un(der)banked, a demographic that could evolve into a US$3 trillion payments volume opportunity. But mobile money services are a fraction of the opportunity and have converted only a small fraction of the unbanked population into users of additional services. For example, we see $360 billion in unmet banking deposit demand, with insurance facing more than $20 billion in uncaptured premiums in the U.S. market alone.

Mobile has been the enabling technology, and money services act as the entry point for the un(der)banked. Access, trust, and tapping into evolving consumer behavior will drive the sustainable conversion of this demographic to the formal financial system. With 42% of the global adult population still absent from the formal financial system, the financial services and FinTech industry is in a rare position to drive not only economic and innovation change, but also social change.

Innovators are starting to move beyond money services to address lending, insurance, and even the savings area. With innovation occurring in multiple functional banking areas aimed at the un(der)banked, incumbent financial institutions can now consider an aggregate financial inclusion strategy based solely around these emerging FinTechs.

A look ahead

Wealth management has lagged other areas of financial services in responding to change. With the ensuing $30 trillion that will transfer to millennials over the next 30 years, these firms will need to consider the “socialization” of wealth management in order to capture the opportunity.

RegTech update

U.S. regulators released draft rules for payday and installment lenders, and innovation-focused forums were held in Washington, D.C., on the future of FinTech in financial services. The U.S. Supreme Court also let stand the Madden v. Midland Funding LLC ruling from a Second Circuit court, relevant for the marketplace lending space.

Horizontal look

We look at the blockchain ecosystem as several “stacks” are starting to form. Areas including standardization of communications protocol, maturity of the programming language, demonstration of business use cases, and ability to manage risk within regulatory adherence will be influential to adoption of the technology.

DeNovo FinTech funding recap

Funding of DeNovo FinTech companies continued to trend lower in the second quarter, with funding down 26% from the first quarter.

InsurTech has been the outlier in the midst of aggregate FinTech industry downtick, with average sequential growth of 12% over the last two quarters, as the space is now attracting greater interest in addressing new methods of distribution among small-to-medium business and contract workers.

(Full report: https://drive.google.com/file/d/0ByxruexVvBhga3NKUGxXa1ZETW8/view?usp=sharing)