Payment solutions are no longer the hottest ticket in town for fintech innovation, with that prize now going to investment management.
Disruption to the payments industry has typically been highlighted as the main area of focus for fintech start-ups, but now an increase in focus on the investment management industry has seen this area steal the limelight.
This is according to a report from PwC and Startupbootcamp called "Accelerating change: London FinTech 2015-2016." The report highlights key trends and patterns seen in the area over the past 12 months and predicts developments and challenges for 2016 and beyond.
The rise of investment management fintech start-ups to the top of the disruptive tree has been helped by the decline in the prominence of payments as the main focus of innovation.
The report says that innovation in the payments sector has already reached a certain level of maturity but one of the trends of 2015 was the decline, in relative terms, in payments innovation as a whole compared to other trends.
This decline is attributed to factors such as the challenge posed by scale as start-ups look to enter the market, because a viable payments business needs to have a large volume of transactions and both people and businesses are drawn to the solutions that already have global scale and reach.
Investment management in 2015 saw a large increase in start-ups working on B2C, B2B, robo-advisery, big data, machine learning, equity research, and automated portfolio selection. The report states that it expects the number of start-ups entering this market to continue to grow in 2016.
The report said: "FinTech will transform the way the investment industry operates and empower investors to make better decisions. The industry as a whole is facing cost pressures as fees continue to be pushed downwards and regulation is forcing a clear delineation between fund costs and corporate costs."
One area that has struggled though is that of partnerships, with relationships between corporates and start-ups tricky due to the difficulty incumbents have with keeping up with the pace of innovation from fintech companies.
Even the traditional route of acquiring start-ups has fallen out of fashion, this is because it has been found that once the start-up has been brought in to the corporate entity, the value of it is quickly drained.
Steve Davis, UK & EMEA fintech leader at PwC, said: "The heart of the FinTech problem often lies in the inherent culture of ‘slow and steady’ found in large financial corporations and success will come from incumbents and startups working together.
"Companies should focus on what they do best and then work with relevant FinTechs for innovation to support their strategy."
Blockchain is another area that has found it difficult in 2015 with the technology struggling to match the hype around it, apart from Bitcoin.
The problem is that many companies have struggled to get to grips with the basic practicalities of using the technology, the report says.
Despite this, it is expected that the technology is here to stay with 2016 being a year where more companies experiment with test scenarios. It is also expected that more institutions will work together to build a blockchain ecosystem.
