FinTech: Game changer for the economy?


19 May, 2017


AI, European fintech, european startup ecosystem, Fintech, fintech trends, Insurtech, RegTech, startups, unbanked, underbanked


FinTech. Short for ‘Financial Technology’, this term is all the rage at the moment. But one that nobody really understands, at least not in detail. The broad term applies to the technological innovations that are disrupting the financial sector. Fintech is the playground for traditional financial actors, such as banks and insurers, as well as for start-ups who are introducing alternative ways of banking, aiming at making the process simpler, more transparent and more accessible. Since 2015, the fintech sector is booming. And it seems to be set to grow, spread and innovate a lot more in the coming years.

Report of Q1 2017 FinTech activity in Europe

After impressively high figures for fintech investments in 2015 and 2016, the trend continues to rise in Q1 2017. According to CB Insights’ report, there was a strong increase in European Fintech investments compared to Q4’16.

The figures speak for themselves: 73 deals amounting to $0.7B in Q1’17 against 42 deals and a total of $0.2B in Q1’16.

Deals were made all over Europe, and it is interesting to note that London hasn’t yet suffered the consequences of Brexit, as the UK amounts to half of the ten biggest deals in Europe. Seems like for the moment, London is clinging on to its crown

But other hubs have seized the opportunity to show the FinTech world what they are made of. Top of the list: Germany, who welcomed 4 out of the top 10 European deals. Ireland is also proving its worth, multiplying its initiatives, seeing mature companies expand and welcoming foreign FinTechs on its territory.

As you know, our pledge at OneRagtime is to be front of stage, ready to spot the companies who are here to disrupt. Our latest investment shows we are true to our word: we took part in the funding of, a French Insurtech company who is disrupting the Insurance scene, offering easy solutions for small businesses and independent workers. And we have recently launched another fintech/insurtech company on our platform! Currently under fundraising, this start-up leverages the power of its technology to transform the financial market investment scene.

What to expect from FinTech in the coming months and years?

The FinTech sector has seen massive growth last year, and is well on track to do even better this year. Though it has been heating up all over the place in all sorts of verticals, we can see some key trends that will drive the sector up and up again.

InsurTech start-ups have experienced solid growth in 2016, mainly driven by AI and IoT. These start-ups have built disruptive technologies and usages for an industry that hasn’t been so keen on technology driven evolution. But now, established insurance players and banks have understood their interests in tying close links with those companies to take advantages of new opportunities. These collaborations are only likely to increase driving this vertical to new height in 2017.

There was a time when the word Blockchain was driving investors crazy and making them write huge cheques. This time is coming back. Blockchain finally means something and real, tangible applications leveraging the true power of Blockchain are coming up. Killer blockchain applications will emerge in the very near future; we will notice the implantation of a few dominant players setting the rules, and large institutions will up their game partnering with existing technologies.

Alternative lending has become a thing. Consumers love it, traditional players and regulators not so much… To keep growing, the sector will see a lot of consolidations. Pure players will have to become bigger and bigger to set network effects to play and have the weight necessary to establish themselves on the long term. Traditional players will partner and/or acquire technological disruptors to add new services in their offer.

RegTech or Regulation Tech has been an underrated vertical. Though it started seeing increased interests in 2016, and is likely to continue. FinTech players and regulators have understood their common interest in a stronger RegTech market allowing for faster rise of the FinTech industry as a whole.

In the Tech world, new players challenge incumbents to take their spot and it is not rare to see them succeed. In FinTech the play is different. Established institutional players hold tremendous power, and have infrastructure and legislations in their favour. Though they haven’t been able to answer to the evolving needs of their customers. Collaborations between disruptors and disrupted are inevitable to sustain the evolution of the industry. At OneRagtime, we are at the heart of this consolidation enabling better collaboration between start-ups and corporates. A good exemple is the acquisition of Fidor, the first German digital bank, by the BPCE which we advised.

Payments are being made more social and integrated within the consumers’ journey. This is allowing FinTech start-ups and social networks to tap into the e-commerce market. This is highlighting the convergence of media with every other consumer centric industry. Social media platforms like Facebook or WeChat can and will become important players of the FinTech landscape.

Security has always been a key interest for financial institutions and FinTech start-ups. New technologies are coming into the play to offer better security solutions. Growing concerns of hacking in the recent news are just emphasizing this issue. With security goes trust, hence the need for more collaboration and transparency between FinTech and incumbents to work in the best interest of the customers.

Promising European FinTech

These trends will shape the next few months for FinTech, though the future of FinTech is being decided by Artificial Intelligence. AI is everywhere and expands FinTech capabilities. The best kind of banking system is one that is transparent, 100% efficient, immune to all sorts of attacks, serves our needs rather than being a need, available to anyone, and error free. This is pretty much impossible within the current set up, but thanks to AI, we can tend towards this direction.

New technologies like biometric sensors and quantum computing will contribute to tend toward a “perfect” financial system. We will never have a completely secure financial system, fraud existed well before banks and technology did. But as technology aimed at protecting is progressing, so is technology aimed at attacking.

This leaves us with one key point that has nothing to do with technology to decide the future of FinTech: trust. Establishing trust with their customers is one the biggest challenges that FinTech start-ups have yet to overcome. Do we really want to leave our money in the “hands” of a machine? Money is just an object but it has been attributed to social status and wealth in the modern society. With AI becoming ever more intelligent, it seems possible for it to understand human behaviour to a point where we give it our trust, unless it screws us all over before… But who would you rather trust to be more ethical: an AI developed and told by the people robot or a real banker?

Impact FinTech – Finance making positive changes in the world

The significant rise and progress of the Fintech industry is setting into motion a radical change that is going to be felt far beyond the financial world. It is going to affect everyone. And for the best.

Here is how.

Fintech is undoubtedly changing the way we use financial services, and many of the ways in which it is affecting this industry are tangible. The banking process is becoming more transparent, quicker, less expensive and thus more widespread amongst the population. Fintech is going to reduce the cost of opening a bank account, not to mention the fact that we soon won’t need a bank account anymore. It will reduce fees and transfer costs significantly by improving the remittances fees. It will allow for a much larger amount of people to take out loans. The list of changes brought about by FinTech is considerable.

But how does it translate in terms of true social impact?

Today, there is a problem with the banking system. An estimated 2.5 billion adults are unbanked, meaning they don’t own a bank account and have no contact whatsoever with any form of banking.

This staggering figures reveals a bleak statement: people with little means find themselves with no financial guidance and resources and end up having to pay continual extra fees and charges. This current situation is making it ‘expensive to be poor’.

As things stand at the moment, rich people are getting richer and poor people are getting poorer. Increasing inequality is at the root of many issues our world is currently facing. However, Fintech with its inclusive solutions, is yet another proof that tech is a force for good.

And this fintech revolution is already underway. We are seeing the change on our doorstep, with new ways of payment used by underbanked millennials, who no longer seek traditional banking solutions. What people need and want today is quick, straightforward solutions. And fintech offers just that.

But financial technology’s impact goes beyond that. Far beyond.

The continent where fintech is stirring things up the most is Africa.

While failing infrastructures and lack of transparency are still plaguing a large part of the African continent, FinTech is breaking down new barriers and starting to reverse the trend.

Indeed, Africa is the continent that welcomes the largest majority of unbanked people in the world, cutting them off from so many goods and services accessible only to people with a bank account and credit card. But you know how the saying goes: each cloud has a silver lining. Because of these dramatic figures an urgent needs, FinTech is developing faster in Africa than anywhere else in the world. Leveraging the widespread use of mobile phones and social media, Fintech is opening up access to new markets, offering consumer countless new opportunities. This serves as an invaluable motor for economic growth as well as stronger inclusion.

Refugees are also benefitting greatly from the Fintech wave. Having to start a new life in a foreign land is hard enough for refugees who, in most cases were forced out of their home country and went  through hell to reach the safety of Europe. Little do we know that their struggles don’t end there. Settling in is a whole other effort, as refugees often face prejudice, rejection as well as lack of resources, accommodation and money. Fintech is helping make integration easier by giving refugees access to the financial facilities that are necessary for them to settle in: means of transferring money and making payments are two such examples.

Finally, FinTech, and in particular the blockchain technology, is helping fight corruption and terrorism fundings through stricter and more transparent means of moving money.

This, along with the tangible benefits of day to day use of FinTech for the unbanked and underbanked, truly demonstrates the positive change that Fintech is capable of unleashing.

FinTech for the Unbanked

And to see further, how will the regulators deal with this new wave?


Antoine Delanglade & Béatrice Malleret