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Tech market intelligence company, CB Insights, has published a new report on the fintech market, 2019 Fintech Trends To Watch, which provides fascinating insight into how fintech companies are evolving around the world.
The report found that VC-backed fintech companies raised $39.57 billion across 1,707 deals globally in 2018.
The report found that VC-backed fintech companies raised $39.57 billion across 1,707 deals globally in 2018. Both the amount raised and number of deals are annual records, with the US remaining the top market for deals, with 659 investments worth $11.89 billion funding, also new annual highs. Global funding grew for mid-stage companies, while four more VC-funded fintechs in the US – Plaid, Brex, DevotedHealth and Confluent – have become unicorns (privately held startups valued at over $1 billion) since the third quarter of 2018.
The report also investigates the most important trends for banking and payments fintechs here in the US, just the kind of companies that use Open Platform’s APIs, so we thought we’d round up the top trends that are most relevant to our customers in 2019.
1. Banking-as-a-Service is helping fintechs in the battle for deposits
More US fintech companies, such as personal finance platform MoneyLion are expanding their services to offer bank accounts to their customers, and CB Insights thinks this trend will continue in 2019. That’s partly because Banking-as-a-Service platforms like Open Platform, which allows you to offer white label bank accounts and debit cards to your customers, make that process so much easier.
This trend is also driven by the fact that taking deposits opens fintechs up to other lines of business.The report finds that fintechs’ first crossover products are often debit cards (linked to bank accounts) because they add another service and revenue stream. It also mentions that once fintechs take deposits of their customers’ money, the introduction of new products like savings and investment accounts can be a seamless process.
2. Fintechs are helping consumers tackle and prevent debt
Household debt in the US rose to over $13 trillion at the end of 2018, according to the Federal Reserve Bank of New York. While the first generation of fintechs offered consumers products such as credit cards and student loans, the latest trend is to help consumers alleviate and prevent debt in first place. US fintechs have launched services to help consumers pay off student loans, secure safer payday advances, automate pre-tax spending and, in the case of Digit, a company that works with Open Platform, meet financial goals, pay off credit card debt and save for a rainy day.
3. Fintechs are moving into ESC and impact investing
The importance of environment, sustainability and corporate governance (ESG) and impact investing is on the rise, particularly for the next generation of consumers that want businesses to align with their values. For this reason, fintech companies are moving into the ESG and impact investing space, which have seen an uptick in inflows recently. CB Insights cites the examples of Newday and Aspiration, two fintechs in the US that incorporate impact investments into their product offerings.
4. Fintechs are upping focus on regulatory compliance
Regulators are trying to lower the barriers to entry for start ups around the world. As we discussed in a recent blog, the Office of the Comptroller of the Currency (OCC) announced last July that it would start accepting applications from US fintech companies for special purpose national bank charters. However, the CB Insights report also finds that regulators are increasing their scrutiny of high-profile fintech companies that offer banking services to consumers. It points out that tech startups that take advantage of open banking will need some in-house regulatory expertise.
As companies continue to introduce exciting new services and fintech funding and deals increase globally, Open Platform is proud to enable innovators across all industries with our banking and payments APIs. Get in touch to learn about how we can help turn your ideas into reality.
–The Open Platform Team
The PSD2 regulation opened up banking infrastructure to third parties and revolutionized banking as we know it. Particularly as regards contracts for products whose rules seemed set in stone, such as mortgage applications. Thanks to APIs, this can be done entirely online, without going to a branch and minimizing friction in the process.
Carlos López-Moctezuma analyzes the present and future of open banking in a roundtable dedicated to this matter, where essential questions such as user growth curve, the role played by fintech and the profound evolution that banks such as BBVA and others have experienced in the past few years.
Startups and existing companies in the process of digitization need a new set of digital tools to help them transform their businesses and get more in tune with their customers' needs. If possible, they should develop frictionless systems that do not create barriers to entry for the business, as occurs with some banking solutions.