Which bubble of financing? Banks, VC companies pay more money in fintech


The forecasts of a finance bill of the fintech have been made repeatedly in recent years, but investments in the sector remain strong.

Venture capital investments in US companies of fintech reached a quarterly high of $ 3 billion in the second quarter, according to KPMG's latest Pulse of Fintech report. Traditional banks are pumping more money and forming partnerships with fintechs while banks try to launch digital-only services.

American Banker recently spoke with Safwan Zaheer, head of fintech and digital banking for KPMG in the United States, on the contribution of the banking industry to the flow of money for startups. Some sectors are particularly favored by banks, Zaheer said.

The following is the interview, which has been modified for length and clarity.

Despite concerns about a bubble, the investment in fintech does not seem to be slowing down.

SAFWAN ZAHEER: It shows no signs of slowing at all. The investment in fintech for the first half of 2018 has already doubled compared to the total annual starting from 2017, and we see that it continues between different types of fintech solutions. Areas in which there are many investments now include blockchain, artificial intelligence and regtech. We also see the launch of the Fintech OCC card as further acceleration of activities and investments in this space.

Venture capitalists who provide financing. Even traditional banks invest more in the fintech space?

Traditional banks are not just investing, but collaborate with fintech more than ever. We are seeing three main areas of investment banks that are doing in fintech. The first concerns the customer's experience; banks are continuing to improve and transform the experience they are currently offering to customers to make it more digital and transparent across channels. The second is that they are evaluating investments to enable them to automate and enhance middle-office and back-office platforms and technologies. This is to make manual tasks more efficient and automated and reduce paper-based processes. Thirdly, some banks have already started trying to create new digital solutions that work outside their main platform. So banks are studying agile and agile digital solutions that are typically provided by fintech companies.

  Risk capital financing in US Fintech

Why do you think we are seeing more partnerships and investments between banks and Fintech?

One of the reasons why banks are working harder with fintech startups is to work together to refine or improve a specific product. So they can integrate that product or service into their organization. They are also working with startups to essentially integrate and take any solution they are already offering and having on the market and label blank. In some cases, banks have a significant investment in a fintech startup where they are actively shaping new products and using [relationship] as a way to support new digital-centric products. The largest banks have been active in space for a number of years past.

Is there a gap in fintech investments between large and small banks?

First, you've seen some big banks launch their digital-only banks recently and now they're in the market to test those virtual and digital banks. At the same time they are also continuing to make investments to improve their current products and improve the customer experience. On the super regional and regional side is a mixed exchange, but we see some regions that are very, very active in the fintech space, having announced partnerships and investments. With community banks we are witnessing some activities, but not much compared to larger banks.

You said that there were some areas that saw particularly high investments. You could go further

Blockchain was a sector in which we saw interest and investment increase, almost double that of 2017. When we talk about blockchain, banks are starting to move away from the qualifications of the case of use and brainstorming for active experimentation and proof-of-concept development.

There is also a lot to do in AI. This is a generic term, but we see that much of the investment is going on in AI technology that helps us understand large amounts of data, as well as reducing the repetitive manual activities that a human being would currently do.

When we talk about regtech, we are also seeing investments in solutions that exploit artificial intelligence for process automation. Banks are studying technology not only to help them comply with regulations, but also to improve efficiency and reduce costs when it comes to regulatory processes.

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