Key trends disrupting FinTech startups
The outbreak of COVID-19 virus is often a grey rhino event, i.e.an event that is highly probable (unlike a black swan event that is highly improbable), with a high impact, and yet neglected. The World Health Organisation have warned the society for some time now about a potential global pandemic. Irrespective of the probability of the outbreak occurring, it still caught a lot of companies and start-ups off-guard. Still, the latter based on their flat structures and flexibility tend to react much faster to the new challenges related to the COVID-19 pandemic. Let’s have a deep dive into key predictions for the FinTech startups in 2020!
KPMG has prepared their expectations of the most probable development scenarios of the FinTech startups ecosystem:
1. Digital trends to gain pace
2. Adjacent categories to be explored by FinTechs
3. Boost in corporate venture capital (CVC) activity
4. Teaming up
5. Platforms moving into FinTech
Digital trends to gain pace
It is no news to anyone that new technology adoption curve is much steeper among the younger people. However, the COVID-19 outbreak required the older generation to start using technology to a much greater extent. They often did not have a chance to do things the way they did it traditionally as going to a bank or to a broker required physical contact with the employees of a financial institutions. When we saw traditional brick-and-mortar financial institutions struggle, e-commerce and FinTech startups were booming as they locked customers that they couldn’t dream of before.
Adjacent categories to be explored by FinTechs
Growing number of FinTechs could be now considered as mature. Initial phase of gaining aggressively new customers in a niche market is coming to an end for some of them due to saturation of their initial business model. Therefore, the startups will try to capitalize on their initial success and explore additional avenues of growth in the adjacent markets that would be easy for them to enter.
Boost in corporate venture capital (CVC) activity
Corporates are usually very hierarchical and rigid organisations. It is very difficult for them to be flexible enough in order to timely adapt to a rapidly changing environment. Current situation is particularly challenging for them as the world is changing at an unprecedented scale. Investing in innovative and fast-moving startups at a higher pace is a logical strategy going forward.
Current situation results in some polarization in the fundraising for startups. New startups and the ones with mixed past performance might find it much more difficult to attract new investors. At the same time, the ones that are collecting the next funding round based on a stellar performance boosted by the recent shifts in the consumer behavior will be at the winning position.Such a situation might result in an increased M&A activity among the well-funded startups who will gain market share via acquiring their less successful competitors.
Platforms moving into FinTech
FinTech is a very attractive space. It is largely driven by large datasets of customer information. Platforms have advantage in entering this area as they possess enormous pools of data of their clients. One good example is the introduction by Allegro (leading CEE e-commerce platform) of Allegro Pay, which allows its customer to defer payments or pay in installments for the goods ordered online.