#fintechresearch

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These markets also have highly concentrated banking systems, making them ripe for disruption by newcomers such as Kenya’s mobile financial services firm M-Pesa, which has revolutionised payment systems in the country. (Reporting by Marc Jones and Helen Reid, Editing by Gareth Jones) https://www.reuters.com/article/us-china-stocks/u-s-listed-chinese-financial-firms-dive-on-regulatory-action-idUSKBN1DL1MR

FinTech 3.5 is supported by (1) high penetration of mobile devices (especially with broadband internet access) among the young and technologically literate, (2) the growth of the middle class, (3) untapped market opportunities, (4) a lack of physical banking infrastructure, (5) consumers increasingly valuing convenience over trust, (6) low levels of competition, and (7) weaker data protection requirements. The spike in the number of graduates with engineering and technology degrees in such economies as China and India has also played a role in planting FinTech firmly in the soil of those economies. http://www.cfapubs.org/doi/full/10.2470/rfbr.v3.n4.1

If that bit of prognostication didn’t get the attention of the average midlevel bank exec, this one surely did: The Citi researchers predict that the fintech revolution will wipe out nearly a third of all the employees at traditional banks in the next 10 years. Such a stark outlook helps explain the seriousness with which Citi and its big-bank peers are suddenly treating the latest threat to their hegemony. “Fintech is different,” says Bird. “It will change your life and my life. And will change this institution and every other bank.” Veering back to another paleontology metaphor, Bird puts the financial industry’s situation in perspective. “I describe it as the extinction phase,” he says. “What happens in an extinction phase is that you either rapidly adapt and new means of competition are created, or you go extinct.” Citi, then, is in a Darwinian fight for its life. http://fortune.com/citigroup-fintech/

Given how quickly new competitors are arising, Citi can’t move too fast. Last year investors poured $19 billion into finance startups, up from less than $2 billion five years before. In March, research firm Venture Scanner said it was tracking 1,379 fintech companies, with combined funding of $33 billion. The opportunity for the startups is huge. Revenue in the North American consumer-banking business alone was $850 billion in 2015. It’s projected to grow nearly 50% over the next seven years, to more than $1.2 trillion. The most wrenching period for the big banks is almost certainly yet to come. In March, Citigroup’s own research department put out one of the direst assessments yet. The 112-page report, titled “Digital Disruption,” was produced for the bank’s investment clients and reads like a Jerry Maguire manifesto. The gist: Radical change is coming. Citi says that fintechs have nabbed $9 billion in business so far, a small percentage of what banks bring in each year. But in just four years, the Citi analysts predict, fintech revenues will leap more than 10 times, exceeding $100 billion. By 2023 fintech will account for 17% of consumer-banking services in North America, or $203 billion. http://fortune.com/citigroup-fintech/

In a recent study, Fintech in Australia – Trends, Forecasts and Analysis 2015–2020, research firm Frost & Sullivan says the Australian fintech sector is poised to take $10 billion in aggregated revenues away from the big Australian banks, while contributing $3 billion of new revenue to the Australian financial services sector, by 2020. The firm contends that the big four banks in particular must react, or “face a large dent in future profit growth.” But as Saranga Sudarshan, Frost & Sullivan research analyst points out, the banks are not just incumbents waiting to be picked off – they have agency, they have scale and they have the financial muscle to buy the fintechs they see as threats or whose product they like. “We see the banks as having two strategies. There is the Westpac model, a kind of engagement model, they have invested heavily in fintechs – in a $100 million investment fund they have already invested half of that. http://www.theaustralian.com.au/business/financial-services/fintech-is-going-to-be-much-bigger-than-you-think/news-story/f7a42de31e8faae702d8ae25afc1c87c