In this edition:
FT Partners Publishes Q2 2020 FinTech Insights
How Digital Platforms Are Helping Banks Compete With Challenger Banks
Corporate Funding Gap And The Role Of Fintech
The Great Reset Requires FinTechs – And FinTechs Require A Common Approach To Cybersecurity
Digital Strategy In A Time Of Crisis
Artificial Intelligence As A Tool For Investing.
FT Partners Publishes Q2 2020 FinTech Insights.
FT Partners Research just published their Q2 2020 FinTech Insights. This 110-page report provides a comprehensive review of global FinTech deal activity with analysis across private company financings, IPOs, and M&A statistics. Highlights from the report include FinTech financing volumes in Q2 2020 totalling $9.3 billion, lower than recent quarters; however, the number of financings (479 transactions) was the second highest quarterly count ever, behind only Q3 2019 (521 transactions). The IPO market has been very active in spite of the global pandemic, with 12 FinTech IPOs globally in 2020 so far, including 8 in Q2 alone. Significant deals in Q2 included several strategic transactions: SIX Group's $2.9 billion acquisition of a majority stake in BME, SoFi's $1.2 billion acquisition of Galileo and Mastercard's ~$1.0 billion acquisition of Finicity.
How Digital Platforms Are Helping Banks Compete With Challenger Banks.
It’s no lie to say that challenger banks are very popular. In the UK alone, there are a number of major players in the industry, including the FinTech unicorns Revolut and Monzo. A lot of their success is down to the fact they are run more like a tech company than banks, meaning they are designed for scale, efficiency, agility and have a lower cost of operating.
In order to better compete with challenger banks, traditional banks will need to leverage technology to become leaner, more efficient and more integrated. The way to achieve this is through banking platforms, which will enable them to digitise and automate business processes, operations and workflows quicker and more cost effectively.
Corporate Funding Gap And The Role Of Fintech.
According to the SME Finance Forum, 41 percent of formal micro, small and medium enterprises in emerging markets have unmet financing needs. This gap currently amounts to US$5 trillion or 1.3 times the current level of financing. If we only consider Southeast Asia, one of the most dynamic regions globally, this funding gap amounts to almost US$300 billion.
Fintechs can play a crucial role in reducing the funding gap. The digitalisation of business, specifically peer-to-peer lending enables access to funding by allowing for the direct matching of units short of funds with units in surplus of them. Credible fintech, however, regulations are necessary to create trust, a fundamental requirement in attracting funding. Regulatory oversight should aim to protect investors in P2P platforms from mismanagement, and borrowers from usurious interest rates and unacceptable recovery practices.
The Great Reset Requires FinTechs – And FinTechs Require A Common Approach To Cybersecurity.
To help the economy bounce back from the COVID-19 crisis, citizens and small businesses need innovative ways to access financial services. And if new FinTech services are to be adopted at the speed necessary for economic recovery, citizens must be able to trust that the technologies are secure and that their assets are protected.
There are many approaches FinTechs can take to make themselves cybersecure. Yet it is not always clear which control frameworks best allow a FinTech to secure its assets, create trusted commercial partnerships with established firms and ensure compliance with relevant regulations in the jurisdictions in which it operates. Last week, the World Economic Forum’s FinTech Cybersecurity Consortium released recommendations for a common approach to cybersecurity controls providing a pathway for the private sector and public agencies to build on existing control and assessment frameworks.
Digital Strategy In A Time Of Crisis.
When the Covid-19 pandemic swept across the globe, it forced us to move our business communications, operations and strategies into the digital sphere. The pandemic challenged all of our comfortable norms and undermined our foundational assumptions about modern business. Now, the race towards digital disruption isn’t a vague imperative—it’s an immediate necessity.
One recent survey found that roughly 70 percent of executives from Austria, Germany, and Switzerland feel that Covid-19 will likely speed their digital transformations. As McKinsey authors noted in a recent report, “The COVID-19 crisis seemingly provides a sudden glimpse into a future world, one in which digital has become central to every interaction, forcing both organizations and individuals further up the adoption curve almost overnight. A world in which digital channels become the primary (and, in some cases, sole) customer-engagement model, and automated processes become a primary driver of productivity—and the basis of flexible, transparent, and stable supply chains.”
Artificial Intelligence As A Tool For Investing.
Industry-wide changes are happening right now in global finance, and artificial intelligence (AI) is at the forefront of those changes. By utilizing AI capable of machine learning, the way we invest is drastically changing. Algorithms are becoming the core decision makers for companies processing multibillion-dollar transactions. And it’s working.
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