Silicon Valley, move over, here comes FinTech River
Financial technology companies are clustering all over the globe. The spread isn’t surprising, because where there’s finance, there’s FinTech.
One thing that can’t be said about Visakhapatnam – a metropolis perched on the Bay of Bengal about halfway between Kolkata and Chennai – is that it thinks small. Although the city of 4 million is home to less than 10 start-ups in financial technology, local boosters already have dubbed it ‘FinTech Valley’, with the hopes of attracting many more. Their chances are probably good, not least thanks to a local, booming information-technology industry, but also due to a global explosion in FinTech.
Popping up like mushrooms
A 2016 study by accountants/consultants Deloitte identified 21 ‘FinTech hubs’ around the globe. A short year later in its 2017 study, Deloitte upped the figure to 44. A 2018 study led by China’s Zhejiang University came up with 30. Whatever – there are a lot of hubs out there. They’re found in areas already storied in finance and/or information-tech: Silicon Valley and Seattle, New York City and Boston, and the major cities of Western Europe, especially London. Then there are the Asian upstarts, anchored along the Chinese coast and Singapore. Indeed, the number one hub for FinTech, according to Zhejiang’s ‘Global FinTech Hub Index’, encompasses Nanjing, Hangzhou and Shanghai along China’s Yangtze (‘FinTech River’ – anyone?). Finally, there are regional centres such as Cape Town, Dubai, Mumbai, São Paulo and Sydney. (Sorry, Visakhapatnam, FinTech Valley has yet to make the list.)
The (simple) FinTech recipe
It seems logical that this industry would spread out. For one, banking, insurance and investing are usually organised nationally or even regionally. Beyond that, the four factors needed to seed FinTech (i.e. the automation of banking, insurance and investing) are, at least in principle, available anywhere. According to Deloitte’s FinTech Senior Partner Louise Brett, the keys to success are: brainiacs with computers and good internet connections; deep-pocketed investors; government that doesn’t get in your way; and somebody to buy what the brainiacs make. Ok, she uses more formal wording (talent, capital, policy & regulation, and demand), but the idea is to take these four elements, marinate, stir and serve.
Everybody’s a winner
There is no shortage of regions claiming excellence in all the above. A UK survey says that London is tops. A poll of experts in Singapore says the island nation is number two in the world. A study by Switzerland’s Lucerne University names nearby ‘Crypto Valley’ also as global number two, and the list goes on. To be fair, they could all be right. FinTech’s raw materials can be located anywhere, especially if there is an existing financial industry. Meanwhile, surveyors and rankers are more than happy to give out gold stars, especially to their sponsors. In short, there is no reason to think Visakhapatnam will not have its day in the sun – eventually.
Plenty to go around
Not least because FinTech is growing like Topsy. Global investment in the sector hit USD 60 billion in the first half of 2018, reckons accountants/consultants KPMG, four times as much as all of 2013, and half-again as much as full-year 2017. (More conventional measures of size such as revenues or profits are not yet available or relevant.) Driving the boom, says KPMG’s Global Co-Leader of FinTech, Anton Ruddenklau, are technology giants such as Amazon, Microsoft and Google, who are in an “arms race” to explore, collaborate and invest in the sector. And they are going anywhere to do it, adds Ruddenklau’s opposite number, Ian Pollari, including less traditional markets such as Brazil, Japan and South Korea.
So who’s the biggest?
The various hub rankings all have a measure of forecasting. They are not just assessments of today, but expectations of future potential. As for the here and now, according to consultant CB Insights, probably the biggest hub is in the USA, either New York City or Silicon Valley. Of the world’s 250 largest (by valuation) FinTechs, some 150 are North American (including 6 in Canada), and 20 of those are so-called unicorns: assessed at over USD 1 billion. London is home to far fewer, 24 of the largest 250, and China hosts only 11. Right behind the USA and London comes India, with 15 of the top 250. None is in Visakhapatnam – yet. Given FinTech’s growth, this might just be a matter of time.
Julius Baer and FinTech
Will robots ever take over the jobs of relationship managers in the private banking industry? Only time will tell. At least for a bank like Julius Baer, where the human factor is a key element of its service model, the prospect is rather unlikely. But this doesn’t mean that technology is insignificant. On the contrary: without cutting-edge IT, a bank like Julius Baer couldn’t cater to the very complex needs of its clients. In order to push the technical boundaries even more, the Bank joined the F10 FinTech Incubator and Accelerator Association in October 2016, supporting promising start-ups from across the globe on their way to innovate the financial industry. In our ‘Insights’ section, we will cover the progress of this initiative regularly and talk to movers and shakers of the FinTech scene.