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October 3, 2016

Capital market fintechs fail to attract investors

Area has only seen 4% of the investment.

By James Nunns

Plenty of hype surrounds the fintech market but it would appear that not everyone is jumping on to the bandwagon. While some areas of fintech have seen large amounts of investment from banks there is very little concentration on the area of capital market technology.

According to research from Boston Consulting Group, start-ups focusing on capital markets activities only attracted 4% of the $96bn invested into financial technology since 2000, despite it being a clear opportunity for it to lower costs.

Instead the majority of the funding has been focused on payments and lending with companies like TransferWise and Funding Circle.

The report said that capital markets technology could help lower costs in some areas by more than 50%.

Boston Consulting Group said: “Banks and the entire capital markets ecosystem must take action now in order to gain the considerable benefits achievable.

“Enormous opportunity exists from the collaboration of established capital markets players such as investment banks with young fintech companies, but the potential is far from being realised.”

One of the reasons for the lack of investment in the area is a lack of trust. This is an issue because it raises questions about regulatory approval.

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While capital markets technology has seen a small amount of investment and is struggling to make an impact in the area, other technology driven start-ups have had more success but they too are facing challenges.

Global Fintech Financing Activity (2010-2015). Accenture analysis on CB Insights data.

Global Fintech Financing Activity (2010-2015). Accenture analysis on CB Insights data.


According to research from Aspect Software, carried out by Vanson Bourne, challenger banks are limiting their growth by neglecting the mobile youth market.

Although many of the challenger banks are technology focused and take a mobile first approach they are failing to focus their efforts on under 18s.

The survey of 100 senior IT decision-makers from challenger banks and building societies found the challenger banking industry to be in “rude health”.

Although many had seen their customer bases increase by around 15% in 2015 only 28% said that they were consciously targeting customers in the under-18 bracket, while 87% are focusing on the 31-40 year old age group.

Peter Littlewood, Finance Solutions Consultant at Aspect said: “Given the propensity of customers to stay with their current account providers for years, if not decades (though the market may become more fluid with the recently-announced changes to the industry by the Competition & Markets Authority designed to make switching more straightforward), it would be a fair assumption that challenger banks would look to catch customers young as they are entering the system.

“But in the majority of cases that doesn’t seem to be happening, and they may be missing out on valuable opportunities as a result.”

Littlewood said that challenger banks are well positioned to capture the under-18 market due to not being burdened by legacy technology and already having a mobile first approach. However, the report suggests that there is a lot of work to be done to re-focus their mobile strategies.

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