FINTECH firms are increasingly being seen as a partner to mainstream financial services rather than a threat, according to a new study.
Research by accountancy firm PwC and entrepreneur support network Startupbootcamp found that fintech firms were once seen as a threat to the incumbents, disrupting an industry suffering from a loss of customer trust, but the emphasis has now shifted to collaboration.
56 per cent of applications to Startupbootcamp last year were from business-to-business propositions, often helping incumbents with their internal processes.
The report cited data from Innovate Finance that showed venture capital investment in UK fintech had fallen 33.7 per cent, but it said the outlook was still positive as the tough climate created by issues such as Brexit could increase the need for partnerships.
“Fintech businesses face a number of other headwinds as they seek growth, investment and customers,” the report said.
“One issue is the tough climate for incumbent financial services businesses, an obvious source of investment and collaboration in the fintech sector. As these firms face economic, regulatory and market challenges of their own, they are under mounting pressure to show attractive returns on investment in innovation.
“The reality for many financial services businesses is that investment into the fintech sector is necessary to keep pace with their peer group, but also to explore and discover new business models that will help them to compete with up and coming tech companies.”
Analysis of the firms using the services of Startupbootcamp showed that the proportion of crowdfunding businesses increased from six to seven per cent, while the biggest proportion was cloud solution and cashless firms, accounting for 22 per cent and 19 per cent respectively.
There has also been an increase in firms looking to help the under-served in financial services, with more than one in 10 applications to last year’s scheme coming from firms aiming to tackle issues of financial inclusion and wellbeing.
Francisco Lorca, managing director at Startupbootcamp fintech, said the sector was helped by people from traditional banking now setting up their own firms and more of a willingness to test new products.
“There has been much to talk about in 2016, but for fintech it was a coming of age year,” Lorca said.
“We have seen this once young sector maturing, with the lines between fintech companies and incumbents blurring. In the future, we will probably all smile when we hear the term fintech.
“As the whole financial services industry learns how to embrace partnership and collaboration, technology-driven innovation will simply become business as usual. Finance will be made of technology, incumbents and start-ups all intertwined in one place.”