In 2014, KPMG released the “50 Best Fintech Innovators” report, one of the first papers examining the most promising Fintech players globally. 5 years later, CFTE decided to take a look at the evolution of these 50 companies.
CFTE’s Fintech 50: 5 Years in Fintech report analyzed how the 50 most innovative fintech startups have developed since 2014. We found that they have been enormously successful on average, as 12 achieved unicorn status (i.e. billion dollar valuations) and only 2 went bankrupt. These 12 companies now have a valuation in excess of $90bn.
The report examines why some were successful and others weren’t.
Payment firms fared the best while peer-to-peer lenders and robo advisors didn’t live up to the hype. Payment and payment infrastructure companies such as Square, Klarna, and Stripe found underserved market segments and capitalized on the integration of finance and technology in the growing field of e-commerce, while lenders faced stiff competition and difficulty retaining clients. Peer to-peer lenders faced the greatest challenge of all and found it difficult to match supply and demand for loans. While lending volume has recovered since the P2P lending bubble burst in 2016, Fintech investors’ still haven’t seen their investments recover.
Robo advisors such as Betterment and Wealthfront didn’t grow as much as they hoped and in the US faced dangerously low fees from competitors. Robo advising may be becoming more popular, but the biggest players are now incumbents such as Vanguard and Schwab who can advertise to their existing customers and compete more effectively on fees due to their scale and ability to subsidize their robo advising services. Most of the startups are still unprofitable despite rapid growth and many are trying to raise funds by adding premium services such as access to human advisors.
If one had to choose one single key factor of success, that would be timing. In addition, the most successful fintech startups tended to prioritise their efforts in the following order:
1. Client acquisition: The best performing fintechs focused on getting clients first. They grew extremely quickly, prioritizing constantly increasing users.
2. Client retention: The most valuable fintechs were able to affordably retain clients as well, either by creating products that favored continuous use or increasing clients’ cost to switch.
3. Client monetization: The most successful fintechs focused on getting and keeping clients first, and then found ways to monetize them. This often involved monetizing client data with third parties or using the data to offer bespoke services.
What else can be learned from the evolution of the Fintech 50? What does it mean about the future development of Fintech – and financial services? For more information, download the full report.
About CFTE: CFTE is a platform supported by senior leaders from the largest institutions, startups and universities. It addresses the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from the online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast growing startups such as Revolut or Shift Technology.