Wednesday , 13 December 2017
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Alt finance takes the unicorn lead

Fintechs Valued at $1 BillionBI Intelligence

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Billion-dollar valuations are broadly considered to be an important marker of a young company’s viability, and a key indicator of potential future returns for investors. However, in many geographies, VC investment in fintech has been slowing recently, and such valuations have correspondingly stagnated.

That said, some segments of the industry still boast relatively healthy numbers of “unicorns,” companies valued at $1 billion or more, a new report by GP Bullhound found.

Here are the report’s key findings:

  • Alternative finance leads in number of unicorns. Globally, the alternative finance space boasts 16 companies valued at or over $1 billion. This lead is probably down to the fact that many fintechs in the space — like Zopa and Funding Circle — have been around for a while, affording investors time to develop an understanding of their business models. In addition, these companies have had more time to conduct investment rounds, raising their valuations. Also, nine of the 16 alt finance unicorns hail from China — a market conspicuous for its enormous valuations.
  • Digital payments and data/software companies follow close behind. There are 10 and eight unicorns in these segments, respectively. Payments fintechs have also been around for some time, likely contributing to the higher number of unicorns in this segment. However, the successful innovation efforts of incumbents like Visa and MasterCard seem to have kept the sector from reaching the same heights as alt finance. In the case of data and software, these firms’ solutions are based on elements that are integral and invaluable across multiple industries, increasing their value.
  • Neobanks, insurtechs, and asset management fintechs boast the fewest unicorns. Globally, the neobank and insurtech segments have just two unicorns each, while asset management has only one. These fintech segments are more nascent, meaning investors are still cautious and unsure of how they will develop. Also, the banking, insurance, and asset management industries are much harder to break into, largely due to the regulatory burdens associated with them.

The number of new billion-dollar fintech valuations will probably decline over the next few years. Until quite recently, the fintech industry as a whole was nascent, and its novelty likely drove many of the early unicorn valuations. Now that the space is largely mainstream, and some early major players have stumbled, investors seem less inclined to be swayed by hype and will probably be more hesitant to commit heavily. In fact, we are likely to see VC investors step back to watch existing fintech unicorns handle the next few years, particularly as they try to evaluate the likelihood of realizing the investments they’ve already made.

Open banking is the democratization of access to data previously exclusively owned by legacy financial institutions.

The open banking trend is being driven by a number of factors and will ultimately become the norm. That means retail banks need to rethink their business and operational models if they want to maintain the positions of dominance in the financial ecosystem.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on open banking that explores the drivers behind open banking in detail, outlines the options for banks as they look to update their business and operational models, and explains the likely potential winners and losers of open banking.

Here are some of the key takeaways from the report:

  • Open banking is most often facilitated by a technology known as Application Program Interfaces (APIs) which have enabled the business models and success of some of the most well known startups of recent times.
  • There are a number of drivers behind the open banking trend, the most obvious of which is regulation that forces banks to give customers access to their data, or enable permissioned third parties to access their data.
  • Banks adopting open banking are taking a number of different approaches, from just taking the necessary steps to comply with regulation, to actively embracing the concept in an effort to maintain their retail banking dominance.
  • Banks are using different models of open banking, including app stores and sandboxes. Which model, or combination of models, a bank adopts depends on its priorities and the drivers it finds most imperative.
  • Open banking will have a significant impact on fintechs. With access to banks’ systems and vast data stores, fintechs will be able to provide more personalized products, while operating with greater autonomy. However, open banking will also increase fintechs’ regulatory and cybersecurity burdens.

 In full, the report:

  • Explains the concept and mechanics of open banking.
  • Outlines the drivers behind its increasing adoption by global retail banks.
  • Highlights the different approaches banks are taking to open banking, and explores the advantages and disadvantages of each.
  • Explores the future of open banking, including its impact on fintechs.

Interested in getting the full report? Here are two ways to access it:

  1. Subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> START A MEMBERSHIP
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[“Source-businessinsider”]