According to a Accenture Study growth in Fintech Investment Fastest in the European Market.
Global investment in financial-technology (fintech) ventures tripled from $4.05 billion in 2013 to $12.2 billion in 2014, with Europe being the fastest growing region in the world, according to a new report by Accenture.
Last year, fintech investment increased at more than three times the rate of overall venture capital investment.
While the United States still captures the lion’s share of fintech investment, Europe experienced the highest growth rate, with an increase of 215 percent to $1.48 billion in 2014. The United Kingdom and Ireland (UKI) accounted for more than two-fifths (42 percent) of the European total, as investment in the region rose from $264 million in 2013 to $623 million in 2014.
In the rest of Europe, the regions that experienced the most significant levels of investment in 2014 were the Nordic countries ($345 million), the Netherlands ($306 million) and Germany ($82 million).
“The massive investment in fintech shows that the digital revolution is well advanced in financial services, and it is both a threat and an opportunity for banks,” said Julian Skan, Accenture managing director.
“Fintech is empowering new competitors and start-ups to move into parts of the banking business but, paradoxically, it is also helping banks to create better, more convenient products and services for their clients. It is also leading to increased cooperation between traditional banks and innovative start-ups and technology businesses in a way that can result in totally new business models and revenue streams.” he added.
The report, The Future of Fintech and Banking, released at the third annual “Investor Day” of the FinTech Innovation Lab London, suggests that many established banks are not well equipped to deal with the digital revolution. According to a survey of 25 senior banking executives involved in technology innovation, 72 percent of the respondents feel their banks have a fragmented or opportunistic approach to dealing with digital innovation, and 40 percent think the time it takes their organisation to deploy new technology is too slow, either negatively impacting their ability to realise value or providing no net benefit at all.
The vast majority also believe that they lack the skills and culture needed to succeed in the digital age. Among respondents, four out of five say that when it comes to skills and culture, their banks are only “somewhat” or “minimally” equipped for the digital age. In addition, although 80 percent see working with start-ups as a valuable way to bring new ideas to their business, 56 percent claim that their organisational cultures need to change in order to work effectively with start-ups.
Forty-four percent of the executives surveyed claim that their banks do not invest enough in innovative technologies, and while all of the respondents believe that legacy technology presents an issue to their organisations, only half say their bank has a strategic approach to replacing its old technology.
Despite these challenges, the report also suggests that many banks feel confident about the future. Three-fifths of survey respondents believe that banks and new competitors will coexist by providing differentiated offerings, or the established banks will acquire the new players.
A majority of respondents (72 percent) expect their banks to increase investment in technology innovation over the next two years. Fifty-six percent say their banks will explore open innovation, such as opening up their intellectual property, assets and expertise to outside innovators to help generate new ideas and discover new areas for growth. Thirty-two percent say their banks will create a corporate venture arm within the next two years.
The report shows that banks are also open to collaboration with their peers and with organisations outside of their industry, to more effectively adopt innovative technologies, with all survey respondents saying they are willing to do so. Furthermore, 60 percent of respondents say they are open to sacrificing current revenue in order to move to new business models.