2019 fintech trends

September 19, 2018 | Publications

Article originally published in Fintech Mag, by Laura Pironnet

Like all flourishing sectors, FinTech is one of those that are closely scrutinized: we still closely monitor investments, newcomers and market leaders, real uses and reactions of the ecosystem. Not to mention French and European regulations which can greatly influence certain businesses.

Difficult to take stock and state the truths at the start of the 2018 school year: studies carried out by firms and associations, however, agree that the sector has imposed itself in recent years. The association France FinTech is in the front row to observe Fintech trends: we met Alain Clot, President of France Fintech who gave us his precious perspective.

CAN YOU SHARE US THE LATEST NEWS FROM FRANCE FINTECH ?

The season ended at a very sustained pace and the return to school is of the same ilk. Our activities are mainly organized around our three main missions:

First of all do the promotion of French fintech in France and abroad  with a large number of speeches, interviews, conferences, interventions in universities and grandes écoles.

Then bring the voice of entrepreneurs and represent the sector to stakeholders in the fintech ecosystem : regulators, government, parliamentarians, European Commission, etc. Our "hot" subjects are in particular the second European directive on payments, PSD2, RGPD, the Pacte Law, the monitoring of the draft European crowdfunding regulation, the Fintech Plan and of course the consequences of Brexit and the strengthening of the marketplace. Paris (on the right track for that matter).

 animate the ecosystem by creating opportunities for meetings, exchanges and collaborations between member start-ups, large partner groups but also with research, etc. In this regard, we should mention the organization of numerous public or informal events (breakfasts, meet-ups, etc.) and the design of various publications and content (panorama of French fintechs published annually, white papers and studies on the state of the ecosystem - to note soon the release of Boom of fintech as part of the third action of the #fintech thematic network of FrenchTech).

But also the preparation of FinTech R: Evolution, our big annual event. The 3rd edition last April was on the theme "Data Liberation" and we are already working on the next one. The event will take place on April 9, 2019 at Station F, make a date!

Finally, a program of meetings on the occasion of the FinTech Tour in the region, which we are also organizing with the Finance Innovation Pole as members of the FrenchTech Fintech thematic network. Note, the next stages will take place in Nantes on September 18, Marseille on October 4 and Bordeaux on October 10.

Fintech R: Evolution, 2018 edition

WHAT WERE THE MAJOR ADVANCES IN THE FINTECH SECTOR IN 2018?

Our companies now have the resources they need for their development (financing, regulatory framework, efficient ecosystem, world-class human resources in particular). Now is the time to accelerate, to obtain a critical size and to make the models viable. A very large part of our members have crossed the border, taking advantage of the European regulatory passport, which is a decisive advantage.

It should be noted that fundraising very often aims to finance acceleration and internationalization. Thus, 52% of French FinTechs develop activities abroad (EU & International). 70% of our members are aiming for a foreign establishment by 2019.

In addition, the regulatory and legislative files mentioned above, in particular DSP2, strongly mobilized us, with good progress as a result. We have encountered genuine listening and the expression of a very encouraging market ambition on the part of the State services and parliamentarians.

 

WHAT DO YOU THINK THE BIG FINTECH TRENDS IN 2019?

First of all, the market is consolidating on some of the major verticals. We are witnessing the emergence of champions (Lendix, Younited Credit, Ledger, Lydia, etc).

But beyond the size effect, profound changes of nature appear.

Our Fintechs are becoming more “horizontal”. They now offer more complete service platform models, with a more marked technological component (Artificial Intelligence, BlockChain, Internet of Objects), efficient use of data sciences: the fuel of the digital economy. And this is only the beginning, because the potential of these technologies is immense, the regulation returns to the customer the property of his data and this one demands more efficient and appropriate services.

Finally, Fintechs help internationalize financial services. Until now, the banks were international but the purely local services, because of parameters such as taxation, customs. A “multi-local” approach therefore, without real economies of scale. All this is changing, with a new standardization of uses (payment, through crowdfunding, etc). FinTechs are essentially international.

 

WHAT ARE THE RELATIONSHIPS BETWEEN BANKS AND FINTECH STARTUPS IN FRANCE? DON'T THEY HAVE THE GAFA AS COMMON COMPETITORS?

Relations between banks and Fintechs, at the end of an observation phase, are now at a stage of calm maturity.

Our members are, for some, competitors of large establishments, for other partners, customers or suppliers. They are also often all of these at the same time, and that is fine. Some often need the other. Banks to access the start-up culture, to innovate better and faster, to develop new paths and uses. Start-ups for distribution agreements, access to certain resources (incubation, platforms, etc.). Some even take the plunge and get married: Nickel acquired by BNP Paribas, pumpkin et Leetchi by Arkéa, KissKissBankBank by La Banque Postale, on Common potDaleynis et PayPlug by Groupe BPCE, Lumo by Société Générale to quote the latest.

Investments and POCs are increasing: 82% of traditional financial institutions plan to strengthen their partnerships with Fintechs within 5 years. - Source: KPMG study, April 2017

Ex: investment of € 20 million by Crédit Agricole and Crédit Mutuel Arkéa (and MAIF) in Linxo (aggregator), BNP and Paytweak (payment) partnership to support the digitization of merchants in France.

Let us not conclude, however, as we sometimes hear that the fate and ambition of FinTechs would be to be acquired by banks (or insurers). The period we have just passed through was characterized by a desire on the part of traditional players to catch up with a certain delay in digital innovation, which echoed a difficult funding phase for start-ups, a situation which, as we have seen said, has evolved a lot. We will still see acquisitions take place, but probably at a slower pace, especially as banks are now well "equipped" in the main families of use (payment, robo, aggregation, etc.). I also know of the founders who have refused very tempting offers ... Finally, I would add that bankers and insurers are no longer alone in the game, in which the telecom operators, large distributors and technology groups are rushing. and finally the GAFAM and other BATX, all entities already giving "soft eyes" to our nuggets ...

There is no doubt for me that GAFA and other large digital players will accelerate their involvement in financial services, which is already very significant (eg Alibaba, the 10th largest bank in the world or the agreements signed by Apple with four large French banks).

I see two main reasons for this: defensive first of all because letting the client - user pay, or obtaining financing from a competitor runs the risk of losing it. Secondly, offensive because the GAFAs hold one of the key strategic advantages of this industry, a very low customer acquisition cost thanks to their data and traffic (at the same time the banks see their acquisition cost increasing). In addition, financial services are an extraordinary vector for acquiring quality data over time.

We will therefore have to prepare for this formidable competition.

This competition has, however, also its constraints and challenges: the inevitable and desirable increase in the cost of data, now acquired free of charge, consumer fears about the control of the major players over their lives, the risk of 'anti-trust legislation and finally learning the financial profession, which is and will remain a complicated profession, based on experience.

The battle has only just begun and the challenge is exhilarating. Our Fintechs and more generally our country have significant assets to lead it.

 

FUNDING SEEMS TO BE SUCCESSFUL TO A LOT OF FINTECH, WHO HAVE RECENTLY MADE GREAT LEVIES (ALAN, LEDGER, LENDIX…) BUT NO REAL UNICORNS: FRANCE'S FAULT? WHAT IS MISSING TO “CREATE CHAMPIONS”?

Indeed, for the third consecutive year, fundraising has experienced strong growth:

  • 2017: € 318 million raised in France through 64 deals (i.e. an increase of + 84% in amounts and 60% in the average ticket compared to 2016) - Source: KPMG 2017
  • 2018: + € 200m raised in the first half of the year alone - Source: France FinTech 2018 - or 10% of the lifting of the French registered - Source: EY Barometer 2018 -, with an average ticket higher than the national average and many operations are underway! This year should be a great vintage!
France Fintech Focus 2018
French FinTech fundraising in 2018

A significant number of our members are now valued at several hundred million, with five or six fintech reaching levels very comparable to their major Anglo-Saxon competitors in particular.

It is highly likely that we will have our first unicorns in a few years. It should be remembered that, until recently for lack of a favorable environment (venture capital financing, a regulator keen on innovation, the emergence of a demand for alternative finance), we started our take-off later than London or the United States. United. Now the resources are present and our champions are very efficient. The last KPMG Fintech 100 ranking 2017 even gives us 1 FinTech in the “Leading 50” and 5 in the “Emerging 50” worldwide, ie twice more than in 2 and 2016% occupancy of the ranking. Optimism is therefore allowed!

 

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