Please find our first Fintech M&A Market Update of 2017, here.
What a year we just had. I won’t try to summarize it; way too much happened from the rise of populism and Donald Trump, to Brexit, Syria and what may be the beginning of the end of a united Europe. After the Brexit vote, VC investment in Europe dropped by half. And of course, 2016 saw the publication of my book, The Marine Corps Way To Win on Wall Street. It’s not only about a better way to run a Wall Street business; it’s about a better, smarter, more ethical way to run any business. Politicians should take note, too.
Too many good people died in 2016 to list. Too many zealots tried to impose their will on others. Too many scandals. But the year wasn’t all bad: a new vaccine may prevent Ebola; the gene responsible for ALS has been found; and scientists made progress finding treatments for cancer and prevention for Alzheimer’s. The ozone layer may be repairing itself; and Fintech may be entering a new phase.
Fintech is not a cure for cancer. But new technologies are lowering the cost of borrowing and making payments; bringing banking to the unbanked; credit to those without it; and offering small merchants the ability to transact easily and at lower cost across borders. Fintech is making it more affordable for people to buy cars, homes, or fund a college education – or a business. For 2017, we see five major trends in Fintech:
1. Fintech innovation will accelerate. Blockchain, crowd-funding, AI, cloud computing, mobile technology, digital signatures, tokenization, peer-to-peer lending, virtual currencies, digital wallets, and cybersecurity measures all saw great strides last year. In 2017 we’ll see these and more, combine with other tools to continue changing many aspects of the retail, healthcare, and financial services marketplaces.
2. Non Tech firms (e.g., Ford and Walmart) will adopt, emulate, acquire and invest in fintech capabilities – weaving new capabilities into more complete solutions. A few of the tech disrupters will survive alone. But for many small tech firms 2017 will be a year to be consolidated, before there are no more dance partners.
3. Anti-regulatory forces will prevail – or at least slow the bureaucracies. After years of Sarbanes-Oxley, Basel (I, II and III), Dodd Frank; CCAR, RegFD, and more, we detect a political climate ready to slow and perhaps reverse some of the rules.
4. Insuretech will rise. Oscar Health, Clover Health, and Bright Health are examples of new companies leveraging the latest tools to bring innovation to an insurance market that has been lagging. So far it’s mostly in the US. But in 2017, we expect to see more companies involved in more insurance innovation in more countries.
5. Fintech investments in Asia-Pacific will double again. They’ve already doubled since 2015. According to a report by Ernst & Young, China has outpaced London, New York and Silicon Valley to become the world’s Fintech leader. At least 5 of the top 10 Fintech fundings in 2016 were Asian businesses. The trend shows no sign of slowing. China is now home to 8 of the 27 Fintech unicorns.