2015 was the year of the FinTech Start Up. From London to Hong Kong, San Francisco to Singapore, FinTech innovation reigned supreme, and the revenues around this were massive. There is still a buzz around this heading into 2016 with global lists putting the existing number of start ups in this area numbering anywhere between 5 and 6000. They are battling out for marketshare in different sectors – whether this be
- Virtual Banking
- Mobile Payments
- Data Analytics
- Online Lending
- Bitcoin Applications
- Crowd Funding
The last five years have seen VCs, banks and angel investors literally put billions behind FinTech start ups.
So why should we be concerned about this?
In fintech, the consumer side of the market is especially active. Retail customers are especially enjoying lower fees and lower interest rates by using mobile wallets, mobile payment apps and online lending platforms. The fintech startups providing these services have seen a rising adoption curve, especially among millennials. But for founders and investors, even in the sizzling fintech scene, success is not guaranteed
According to a Morgan Stanley whitepaper published last May, globally, marketplace lending platforms, which include players such as OnDeck and Lending Club, are forecasted to see loan issuance grow at a 51% CAGR between 2015 and 2020. Both Lending Club and OnDeck were first movers in the marketplace lending space and have become recognized brands in fintech. The companies were touted as unicorns for their high valuation. Both also went public almost a year ago, and as of December 31, 2015 both have seen their share prices drop more than 50% compared to their IPO open price. Despite the growth in marketplace lending, the public markets see risk in the underlying loans.
Venmo, the mobile payment app startup, was acquired by Braintree in 2012. In 2013 PayPal acquired Braintree and with it, Venmo. Inside PayPal’s vast empire, Venmo’s total payment volume increased to $2.1 billion in Q3 2015, a 201% jump compared to the prior year. The once small startup is now part of corporate giant with access to a global ecosystem of merchants and customers.
Most recently, payment processing company Square, a fintech unicorn, went public in November of last year, at a price which wiped away more than 30% of the company’s valuation compared to its last private funding round. While its revenues have been climbing, the company is not profitable and continues to compete in an overcrowded payment processing market.
So lets see what 2016 can do to the FinTech landscape – will the drive for emerging payments and continued innovation drive its continued growth? Or Will external financial factors lead to its collapse?
This blog was written by Laurence Colicott, head of production at Apps World.