McKinsey has analyzed the main trends of the fledgling fintech industry. The consultant has found a logical explanation for the ascent of China as a leading fintech incubator.
The fintech report of McKinsey describes the trends in the financial technology industry and focuses in particular on the investment potential. McKinsey concluded in the paper titled Synergy and disruption: Ten trends shaping fintech that investors have to look particularly carefully at the firms before taking a stake.
The survey shows just how different Western financial firms and their Chinese colleagues approach investments in fintech.
China’s ascent to a leading position among fintech incubators is down to local financial companies collaborating with big tech ecosystems instead of small fintech startups. This strategy has helped the country achieve rapid growth and an expansion of Chinese tech giants – examples are the cooperation between Bank of China and Tencent or China Construction Bank, Ant Financial and Alibaba.
This year, global risk capital investments in fintech startups reached $30.8 billion (see table below). A clear increase compared with the $1.8 billion of 2011.
And these are the ten trends of McKinsey, trends that will shape the industry:
- High level of regional variation in fintech disruption
- AI is a meaningful evolution, not a great leap forward for fintechs
- Good execution and solid business models can trump exotic technology
- Scrutiny of business fundamentals is increasing as funding grows more selective
- Great user experience is no longer enough
- Incumbents can, and do, strike back
- More attackers and incumbents are partnering
- Infrastructure fintechs: Potential is high, sales cycles are long
- There is a tentative return to public markets
- Chinese fintech ecosystems have scaled and innovated faster than their counterparts in the West.