Many young fintechs won’t survive the digital revolution they unleashed

#Fintech a bubble? #Handelsblatt thinks so. What do you think? #Insurtech #ai #disruption

  • In a survey of bankers conducted by BearingPoint, a consulting firm, two-thirds of respondents were convinced that less than 20 percent of today’s fintechs will still be on the market in three years’ time.
  • And fintechs are even muscling into activities once dominated by big investment banks.
  • On the other hand, there have been few market exits in insurtech, the insurance industry’s equivalent to fintechs, Mr. Barkow added.
  • Ralph Hamers, boss of Dutch bank ING, is among the powerful bankers who believe the digital upheaval will transform the face of finance in a few years’ time.
  • “Some [fintechs] will survive and push the established banks forward in terms of service and management, but more as partners than competitors,” said Ms. von Schmettow of HSBC.

Digital change is turning the banking world upside-down. But many young fintechs won’t survive the revolution they unleashed.

Digital change is turning the banking world upside-down. But many young fintechs won’t survive the revolution they unleashed.

David Harding is one of those rare hybrids: a scientist-turned-geek investor. The Brit studied physics before building one of the world’s most innovative hedge funds, Winton Capital, which invests exclusively on the basis of computer algorithms and statistical models. But as far as the future of technology-driven financial start-ups goes, Mr. Harding, whose fund has a whopping $30 billion under management, remains skeptical.

“As a financial man, I am always skeptical about such models, which initially devour millions and billions in investment before they really come to fruition – if at all,” he said.

Christopher Flowers, a billionaire investor and former partner of investment bank Goldman Sachs, went one step further. He told Handelsblatt that he expects nine out of 10 financial start-ups to fail, and that the current boom is actually a bubble – one that will burst sooner than later.

These fintech companies are lauded as one of the key drivers of the digital revolution in finance. Competition has heated up for the turf held by conventional banks, with a big helping hand from investors. In the first six months of this year, around $12 billion poured into emerging fintechs (see charts below). In Germany alone, some 250 fintechs have been launched since 2010, according to consultants E&Y.

Much of this investment has been driven by hopes – some say…

Many young fintechs won’t survive the digital revolution they unleashed