The number of digitally-based financial services companies worldwide has grown substantially in the last two years, but their stage of development varies widely from country to country. Among the emerging countries, the Africans stand out.
You will not often hear the name ‘Africa’ on the lips of banking innovation experts, but for all that the continent is not really lagging behind. In fact the number of new financial sector companies there is steadily increasing. L’Atelier has already reported on Nigerian startup Cube, which provides a mobile payments service, and Wizzit, one of the first companies to offer mobile banking services. However, speakers at the round-table debate during the Fintech Day event hosted by French IT consulting, design and implementation company Octo Technology in Paris on 25 March, left the audience in no doubt that the world of financial services startups varies enormously from region to region. While the number of startups in this field has been growing substantially, a number of speakers underlined just how widely the approaches – in terms of legislation, sectors targeted, even basic mindset – differ from one region to another. ‟Some places are more favourable than others for financial technology companies to develop,” underlined Sylvain Fagnent, senior consultant at Octo Technology. Africa and emerging countries in general still have good cards to play, he told the audience.
Apparent shortage of fintech firms in Asia and Africa
Sylvain Fagnent, co-author of a paper entitled Les fintechs cannibalisent la banque (‘Fintech Firms are Cannibalising the Banks’) points out that while there are currently many African financial services startups, each of them was set up with a view to meeting a very specific need. On the African continent, ‟financial technology companies are developing along very narrow lines. So it will be hard for them to export their services,” he argued. Most of the solutions either meet the need to transfer money to and from a network of friends and family members abroad, or are geared to the increasing use of the smartphone on a continent where bank branch networks are today generally failing to meet the needs of ordinary people.
Like Africa, Asia was hardly spoken of at the Fintech Day discussions, Chinese giant Alibaba being the only Asia-based company the speakers mentioned. Sylvain Fagnent argues that this absence is due to cultural differences: ‟People do things differently there. People in Asia are hyper-connected, so their approach is different. I used to think that a lot of progress was being made in this area but, paradoxically, there are currently very few fintech firms in Asia. A year ago a Finovate Asia conference had to be cancelled for lack of attendance.” A glance at the figures provided by finance expert, Chris Skinner, which were quoted several times by speakers at the Fintech Day, corroborates this conclusion: in terms of global fintech financing activity – i.e. the number of deals done and sums invested, the United States comes first, followed by Europe. Asia lags far behind, for the moment at least, and no-one is predicting the arrival of financial technology startups en masse there in the next few years.
Global Fintech financing activity by continent. Source: Accenture
Europe and the United States : two visions of fintech
Both Europe and the United States are way ahead of Africa when it comes to financial technology companies, but these two advanced regions are also very different from each other, as a number of speakers at the Fintech Day stressed. Speaking to L’Atelier, Grégory Gillet, Business Development Manager at software solutions company Strands, pointed to a “difference in mindset”. This young financial services firm has premises in both Silicon Valley and Europe, and experience of working on these two continents. Gillet underlined that ‟in Europe people talk a lot about security because that’s what customers want to hear. That’s not so much the case in the US‟. He also stressed that US legislation favours the emergence of fintech companies, although, as his colleague Marc Torrens pointed out, consumers are basically less well protected. Torrens also highlighted the fact that US Americans are more comfortable using cloud-based services, which in turn opens up more options.
Another observation made by the various financial industry players at the Fintech Day is that even within Europe approaches differ, with the UK way ahead as the preferred destination for financial technology startups. In 2014, 60% of all fintech companies in Europe were based in the UK, Sylvain Fagnent pointed out. Nevertheless, the Octo Technology analyst and others all acknowledged that this has started to change. Benoît Bazzocchi, founder and CEO of SmartAngels, a French crowdfunding platform, predicts that in the ever-changing world of finance, “not all fintech companies will survive, but then again not all the banks will survive either”.