Grow Advisors (a Grow VC Group company) and the wider Grow VC group have been at the forefront of Fintech innovation since 2009. Since then the landscape has seen new businesses enter the consumer and small business lending market, angel round equity investing, trade finance, payment and FX services and challenger banks. These have been created to take on the established institutions and banks. What has also emerged are technology applications that underpin these new entrants which could allow the established players to innovate and change, to protect themselves from the threats of the new entrants.
The Financial Times have reported on recent Boston ConsuIting Group research that has identified that investment banks are making only small investments into new technology companies which are focusing on innovative capital markets technology.
“Start-ups concentrating on capital markets activities — such as finding cheaper ways to trade shares — attracted just 4 per cent of the $96bn invested in financial technology, or fintech, since 2000, according to research from Boston Consulting Group”.
The Boston Consulting Group report reports bank backing is particularly important for innovative capital markets start ups and technology providers, since banks are best placed to “pick the winners” in a complex industry. BCG said fintech solutions could lower costs in some areas by more than 50 per cent.
The findings on the lack of investment in capital markets fintech are striking given the need for “Enormous opportunity exists from the collaboration of established capital markets players such as investment banks with young fintech companies, but the potential is far from being realised,” BCG said. “Banks and the entire capital markets ecosystem must take action now in order to gain the considerable benefits achievable.”
Banks and the entire capital markets ecosystem must take action now in order to gain the considerable benefits achievable suggests Boston Consulting Group, Philippe Morel, one of the report’s authors. He has said that the BCG could not estimate the total amount that banks could save by using fintech since it was hard to judge whether start-ups could live up to promises of reducing costs in some areas by 80 to 90 per cent.
Grow Advisors regularly meet new technology providers who are developing services that are giving consumers and businesses opportunities to source debt in cost effective ways that bypass traditional lenders. These lenders boast innovative ways to carry out credit checks and to underwrite loans that speeds decision making. If these processes were replicated and implemented by traditional banks, the likelihood is that consumers and businesses would stick with the big banks. Do the banks have the vision to support this innovation or will they fall into the trap of the old adage adapt or die?
Read the whole article on Grow Advisors blog.
Est. 2009 Grow VC Group is the global leader of fintech innovations, digital and distributed finance services. Our mission is to make the finance services more effective, transparent and democratic. The Group includes leading fintech companies in their own areas.
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