Investments in financial technology across the Asia-Pacific region surged in 2015 – from about $880m in all of 2014 to nearly $3.5 billion in just the first nine months of 2015, according to a new report by Accenture.
Payments are a hit
Payments looks to be the most attractive market in FinTech as it constituted 40 per cent of all investment deals in 2015 in the APAC region.
Lending took second place as it took a 25 per cent share of the investment deals.
Whilst these figures are bound to be welcome news to companies focussing on payments and lending, they will concern banks who traditionally dominated those two services.
“Major non-traditional financial services companies have been investing in fintech payments in China for the past year. The increasing deal size should serve as a wake-up call to financial services companies in China and across Asia-Pacific that if they do not offer truly useful, customer-friendly digital solutions, competitors will step into the breach not just on the retail front but also in commercial transactions,” says Beat Monnerat, senior managing director at Accenture and the company’s Financial Services lead in Asia Pacific.
However, the smaller companies that are threatening banks are also sources of great opportunity for them. Jon Allaway, senior managing director of Accenture’s Financial Services group in ASEAN and executive sponsor of the FinTech Innovation Lab Asia-Pacific said that Financial services institutions are embracing cloud technology, mobile wallets and blockchain to fundamentally redefine their business and operational models.
“We are seeing the convergence of two trends: venture capitalists are clearly signaling fintech is a growth opportunity and simultaneously financial services companies are waking up to the vast opportunities created by the current wave of fintech,” he added.
Value not volume
In an interesting revelation, the investment will quadruple not because the volume of deals has increased – it has, but only nominally from 117 in all of 2014 to 122 by October 1st, 2015 – but rather because the value of the deals has skyrocketed.
This includes huge deals such as Alibaba and Ant Financial’s strategic $680m investment in Paytm, India’s largest mobile payment and commerce platform. This was a second Alibaba investment in paytm after its earlier $575m backing in February.
FinTech also appears to be a source that financial institutions are using to streamline their operations. In the UK this has been demonstrated by Barclays’ collaboration with bitcoin exchange Safello, in an attempt to see if blockchain technology can improve the financial services sector.
Blockchain, the underlying distributed ledger technology that supports the exchange of crypto currency and cryptographically secured financial assets, will increasingly be a focus for startups, banks and investors, Accenture’s report says.
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