Fintech has established itself as one of the fastest growing industries over the course of the last decade. Between 2013 and 2016 worldwide investment in fintech grew from $4.05 billion to $23.2 billion, according to Accenture. From banking, through investment and financing, to blockchain, fintech offers a broad space for innovations.
Accelerators and incubators have been credited as one of the main actors behind the growth of the fintech industry. Facilitating corporate investment in startups, they enabled them to become important players in this industry. Along with the rise of fintech services, there is also a growing demand for a safer online environment. This makes innovations in cybersecurity an important addition to the fintech industry. Keeping this in mind, Startupbootcamp FinTech & CyberSecurity in Amsterdam embarked again on a worldwide tour with the aim of supporting fintech startup culture and discovering new talent.
What are the trends?
After analyzing more than 7000 startups and talking to over 2000 of them, we have witnessed several clear trends that are emerging in the industry.
Trend 1: From B2C to B2B(2C)
First of all, startups are transforming themselves from industry disruptors to enablers by shifting their business models from B2C to B2B. Rather than competing with the financial institutions, they choose to cooperate, providing corporates with the technology and the speed they need. Jack Ma, CEO of Alibaba Group, recently coined a term ‘’techfin’’ to describe this shift from disrupting to improving the existing financial service models.
Trend 2: Blockchain
Blockchain innovations are particularly recognized as game-changers that will drastically reduce operational costs for businesses. Originally developed as a distributed ledger that records and verifies transactions in bitcoin, blockchain technology today enables secure transactions without the necessity for authorization by a third party. It also allows startups working with cryptocurrencies to raise funds through the Initial Coin Offering (ICO). Regarding banks, blockchain enables them to cut down the number of participants involved in transactions, hence reducing the time and expenses needed for banking operations.
Trend 3: Machine Learning
A significant number of startups, especially in the cybersecurity and regulatory technology domain, are dedicated to developing machine learning software. Startups working on regulatory technology solutions (RegTech) are emerging. For instance, Anti-Money Laundering (AML) and Know Your Customer (KYC) technologies are becoming a necessity in financial services business. Machine learning solutions are also becoming an important factor in cybersecurity, with the potential of detecting advanced persistent threats. Besides regtech and cybersecurity, robo-advisers – another fintech innovation that has been gaining popularity – utilize machine learning to provide advice on financial investments.
Trend 4: Open banking offers new opportunities for startups
In 2018 the EU will introduce the Payment Service Directive 2 (PSD2) – obliging lenders, including banks, to share their customer’s data with unaffiliated parties through APIs. This will open up new possibilities for startups offering payment services and digital-only banking solutions, at least in the EU market. Digital only challenger banks are characterized by systems that can quickly adapt to user requirements, hence improving customer experience. Put differently, they move beyond core banking services and provide value added services. So far, banking was considered as the most difficult area for startups to make a breakthrough, while payment services and peer-to-peer lending is traditionally regarded as the most innovative area in fintech.
Trend 5: Cybersecurity is a growing market for startups
It is expected that cyber threats and crimes will continue to increase due to the expansion of the internet access and cloud computing. Consequently, the predictions are that cybersecurity market will substantially grow. We also saw an increasing number of startups shifting their work in cybersecurity from detection to prevention strategies. In other words, they mostly focus on providing solutions for preventing cyber hacking and data breaches before they happen, instead of subsequently detecting them and reacting. Accordingly, startups often work on developing authentication software, with biometrics as an emerging area of innovation.
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FastTracking Across the World
During a six-month application period, the Scouting team of the Startupbootcamp FinTech & CyberSecurity accelerator program was fully focused on finding the best FinTech, InsurTech and CyberSecurity startups in the world. From New York, across Moscow and Tel Aviv, to London, we visited 23 cities introducing local startups to our corporate partners and mentors. In the end, we were happy to receive 541 unique applications, double compared to the previous application period. The applications came in from 73 countries, with the applications from the US having the greatest increase.
…And Coming Up Next
Today our FinTech & CyberSecurity program is kicking off in Amsterdam! The 11 startups and 1 Scale-up in Residence from our 2018 accelerator cohort are great representatives of the trends we have witnessed during the application period. In the upcoming 3 months,each of the 11 selected startups will gain access to our global network of mentors, corporate partners, investors, and potential customers. The teams will attend workshops, one-on-one sessions, as well as pitching and networking events that will help them take their business to the next level. At the end of the program, in February, they will present their progress at Demo Day.