Payment.

Payment is the elder brother of the family. All kind of payment: PSP, mPos, settlement, mobile payments, cards… Most of players have been at Fintech last year. We saw big success, sad failures, and drastic business model changes due to new interchange regulation in Europe. We had many discussions on mobile payments at emerging markets (Africa, India). Due to the leapfrog in emerging markets from cash to mobile money, classic and well working payment infrastructure in other markets making it harder for new incumbents.

As during the Gold Rush, companies selling the tools, also Fintech, will definitely make money. It may be BtoB or BtoC and using those tools, being profitable is generally not yet neither the case nor the short term objective. But some of those actors do have good assets in hands and disruptive ideas.

Transfer and Foreign Exchange.

Still in the very large “payment sphere’ if we look at it with an extended definition, we may add the transfer and forex platforms. Here cost differentiation is king due to overpriced playing field. Old incumbents price very heavily those services and most of the time with no transparency. Travelling or doing business in different currencies do know and suffer that.

Some fintechs did find their way in that space, some with innovative use experience, others with key distribution partnerships in some migration corridors, many with clear low cost approach. The high adoption rate of mobile money wallets in Africa and India is a key success factor for many of those new players.

In that field more than in any other one in fintech, the batterfield is global.

In all cases, there is definitely good traction and we met many players who seem to be on their way to profitability. But not all with the same scalability capacities.

Neo Banks.

Over the past year, we moved from buzz around some new actors playing with e-money and PI licenses to do lite banking with clever UX, to a huge list of ‘want to be bank’ actors. Many of them already got a license, much more are in the line to get one in the coming months.

Cumulated investments in that category are calculated in hundreds of millions, even if to our point of view, the viability of the business model in many situations is yet to be proven. Indeed, for banks as for new incumbents, one of the issues is the reductance of BtoC customers to pay for the service. And the interest rate situation, added to interchange policy, does not give a lot of space to find a profitable path. Not to mention the acquisition costs, which are, even for new players, very high in BtoC when you want to grow wider than the first early adopters.

All banks are trying to find their answer to this new kind of competition. Some Neo Banks players are already pivoting to propose their services in white label to those banks. And even some actors are directly launching services only in BtoBtoC field to become the key enablers of such new banking models. In 2016, we saw also the first important acquisitions of Neo Banks by large classical banks.

Last but not least, a real trend since 2016 has been the rising number of neo bank projects in the SMB market. Indeed, that field is less well addressed by classical actors and customers are used to pay. Two (very) good reasons for a fintech to go in that market. Will they succeed where most of classical incumbents failed in that very hard to address market?

Alternative lending and funding.

Alternative lending and funding is the second largest segment after payment, judging by the number of startups and already grown up players we've seen in that field. Countless actors can be found all over the world. Most of those actors rely on local regulations, some of them on regional ones. Moreover under ‘Alternative Finance’ term, we find very different businesses, from crowdlending & crowdfunding to credit facilities for SMB Market, not to forget the numerous credit market places for businesses and consumers. So many realities.

Personal and business finance management.

Yodlee Personal Finance management was launched in 1999 in the US, first in BtoC and quickly became a fintech star by providing tech services in BtoBtoC for PFM. Then came Mint in 2006, one of the biggest Fintech success based on Yodlee possibilities and sold to Intuit software with 1.5 M users in 2009 for 170M$. Enough to have many enterpreneurs dreaming!

For the first Paris Fintech Forum edition,we put in front a few European new players trying to do 'copycats' in a European grey zone based on online bank customer account screen scraping. One year later European landscape is radically different, PSD2 being almost there. Everything will change, everybody knows it, and banks as fintech are developing their strategies.

Not a week in 2016 without an announcement of a big funding round or new bank/fintech cooperation in the personal finance field.

Here as in all fintech categories, two main strategies. BtoBtoC and BtoC. Some key players in both fields are already emerging. And if the business model is clear for the first category, we must admit that beside trying to be the number one gate to customer personal finance, as did many internet portal in the 90's, the viability of business models fo the BtoC market is not totally clear at this stage.

Insurance and insuretech

For the first edition of Paris Fintech Forum, we hardly found some startups with a real story and live products in the insuretech field. Many projects, but not so much traction. Situation is very different this year, and it was not so easy to select the Fintech in that field among the numerous applications we received.

Of course, in mature markets, real new insurers are an exception, the fintech field being more focused on distribution, especially on mobile.

Nevertheless, we see more and more initiative, and all key insurers are now looking at the subject to accelerate their digital transformation through key partnerships.

Doubtless, we'll see in 2017 many new big projects rising in that domain, and with the arrival of PSD2, the line between banking and insurance project will be more blurry as it would be a key opportunity for Insurance to be back in the banking playing field.

Wealth management and investments.

Wealth management is a category with many sub domains: short term savings, funds selection and investments, market analysis, etc...

Many projects in that field have been existing for a few years already and they are often in a second development phase, looking for profitability. In real key words in 2016 were the I.A.& Robo Advisory buzz. Reading at the new flow, we should be already in a world where human are not any more needed in trading rooms, and BtoC investment market is soon to be, if not already, totally taken off by robo advisor offers. The reality we have seen is a bit different. Many ideas, a lot of projects,but an execution still far away of what we could expect when using the words "Artificial intelligence".

Doubtless, technology will evolve and dreams will one day be closer to the reality, but it will take time. Behind the scene, in back offices, no need of IA or RA to see drastic transformation of the way the classical actors work and not less drastic job cutting in some fields. That is just the realization of the process digitalization, where 5 to 15 years old technologies are not mature enough to be fully deployed in banks and insurances with the expected impact on organization and productivity.

Last but not least, let's mention that we've seen during the last few months many actors of that category pivoting from a full BtoC position to a mix with BtoB where they propose to classical incumbents to support their offers with white label solutions or more basically 'technology selling'.

Bitcoin and blockchain.

Among all Fintech categories, there is little doubt this topic is special. First of all, it should not be a category, as depending of usages startups working in that space could be classified in any of the other sectors.

Blockchain is a mix of concepts & technologies that are clearly reshuffling the way we use to think in finance industry, and more globally in many trust related industries and that could be used differently in most of them. As in every new technology there are downsides and nobody can predict today the future of Blockchain technology.

2016 has been an interesting year for Bitcoin and Blockchain. Not a single week without an article announcing why Blockchain will disrupt a full new industry, whatever the industry. And in the same year, first mitigated news from big experiments between banks and institutions. Nice techno, but perhaps not the Graal of digital finance. At least, not for as many use cases that some want to believe, and not as fast as expected.

One of the main interests in Blockchain is the number of cooperation projects around the world between old institutions, regulators, new players, experts... Nobody knows where such projects will end, but this kind of cooperation cannot be bad for the finance industry.

Service to finance

More and more fintechs we met this year are not acting in BtoC market, nor in classical corporate one. Their customers are banks, insurances or other fintechs. They sell the tools, the platforms to enable better services to end users of these financial actors. They are much less visible in the newspapers or on Twitter, their offers are much more complex to describe in newspapers so they do not make headlines, unless some exceptions, but they do have clear advantage: their customers do have needs and, sometime, money.

Those fintechs could be acting in any of the previous categories, specificity being that they sell their services not to final users but to other financial services who use them for their own customers.Those ones clearly are not fighting with banks, they are trying every day to work with them. And to some extent with already some success.

They are mainly competing with classical technology suppliers, and we can bet that there will be soon more and more buy outs by the later ones of those new actors. And we should never forget that during the gold rush, the one who were sure to get rich were the tool sellers. That could explain some of the valuation we've seen recently on the market.

Regtech

Regtech is mainly a sub category of Service To Finance. But with the endless regulation flow of new rules, and reality of security risk in some countries leading to a real need for in depth KYC and AML, there are plenty of needs for innovation in that space.

In 2016, there were many fund rising in tens of millions in that space, in the USA as usual, but also in all other geographies. Mix of agility, customer oriented UX (User eXperience), clever use of (not always so) new technologies give a clear advantage to all those new companies compared to classical technology suppliers. Banks and other financial institutions are eager to understand and integrate such solutions, main difficulty being the capacity to scale and, as usual, to lead successful development project between huge corporations and very small teams.

Whatever happens, there is doubtless here a field of news flow for 2017.