What’s FinTech and how does it change the financial world?

| 22-2-2017 | Arnoud Doornbos |

FinTech is a term that is becoming popular in the financial world. Only one third of the financial experts know what this means  and understands  what consequences it has for their business. How this innovation is currently changing the ecosystem of money, is still relatively unknown.

FinTech is a contraction of the words financial and technology. In other words: it covers all innovative financial products and services that simplify and accelerates the way we handle money. For traditional banks FinTech is still an uncomfortable concept. Why? Because a large portion of the revolutionary financial concepts are derived from technology driven start-ups. These start-ups change the traditional ecosystem. This is enormously important in a country like the Netherlands where the majority of firms is financed by banks and personal finances of the people are predominantly held by financial institutions  which find it often difficult to modernize.

The emergence of ICT in the financial sector may also have different consequences. Those FinTech companies that focus on a single product or service can erode the business model of banks. At the same time the same technology also offers opportunities for traditional players to improve their service and reduce costs. Also, traditional players have a competitive advantage over new entrants based on their knowledge of regulations and access to information from relationship banking (also called soft information).

FinTech companies have greatly changed the rules of the sector. Today we can pay via our mobile phone, quickly apply for online credit and invest online with one click. The list of innovative ideas is endless and an enrichment for everyone.

FinTech VC investments

The explosive growth of the financial technology industry continued in 2016.

  • 2016 has seen 839 deals globally attracting $15.2bn of investment
  • Global investment is up 27% to Q3 2016 vs the same period in  2015 and has surpassed the 2015 total of $14.9bn
  • Global deal size is slightly ahead of 2015 Q3 levels, with the average increasing from $14.3m to $18.1m, partially attributable to large Chinese investments such as Alipay

 


Source: Pitchbook Innovate/Finance

Most money was invested in start-ups. Projections show that the amount of investment will continue to rise.

The power of this technology-driven financial services lies in the fact that it is fast, efficient, transparent and mobile. You can use these services as long as you have Internet access. Of course, this strongly contrasts with the discontent which experienced customers from traditional banks.

Looking ahead — the FinTech industry could experience even greater growth moving into the coming year. The future remains positive from an investment perspective. We may expect an uptick after relative slow growth in the second half of 2016 due to political risks such as the Brexit and the US elections which fueled great uncertainty across all emerging sectors. Along with increased attention, the industry could see a large number of fresh launches and FinTech could make its way into an even stronger growth pattern in 2017 as investors have become more certain about industry prospects.

The possibilities for FinTech in Netherlands

In the Netherlands, there is also a strong rise of FinTech companies. Companies like Paypal are rapidly gaining market share. The biggest and best-known Dutch company FinTech Adyen. This company was recently valued at more than € 2.3 billion.

The FinTech Top 100 announced in 2016 that there are eight Dutch FinTech startups are part of the leading European companies in the financial technology. The financial infrastructure and the international focus play an important role. In addition, capital and expertise is also necessary for innovation, two factors Netherlands as a European Member State meets. The Netherlands also rise in 2016 from the 5th to the 4th place in the ranking of most competitive economies in the world.

The infographic shows that, perhaps inspired by Adyen, payment providers constitute a large share of the pie. Also data startups and alternative financing (crowdfunding example) are well represented in the Netherlands.

Dutch FinTech awards 2017

FinTech startups are disrupting the financial sector. Innovative companies are eager to please millions of frustrated banking customers. Investors are fascinated by the phenomenal profits made by banks struggling with outdated technology. Today, more and more money is being invested in FinTech. The Uber of the banking sector has not yet emerged, but this is only a matter of time. On April 21 the Dutch FinTech Awards 2017 will be held in Utrecht at the Rabobank Headquarter. The panel of judges of this years event consists of seasoned investors, academics, marketeers, entrepreneurs with an extensive track record in finance and/ or technology.  (http://www.fintech.nl).  The author of this article is one of the judges

Future

What we see in practice is that components of banking products and services are being redeveloped by the FinTech Industry.
These FinTech solutions are smarter, faster and better.
As a result we now see that different FinTech companies will work together. The individual Fintech products often turn out to be complementary to each other.
FinTech companies now recognize that collaboration with other FinTech companies leads to high growth and a better product range.

The Uber of the banking sector

 

The Uber of the banking sector has not yet emerged, but this is only a matter of time.

 

 

Arnoud Doornbos

Associate Partner

 

 

 

 

Innovation in Treasury Management: Vallstein’s walletsizing

31-05-2016 | Huub Wevers from Vallstein

On april 13th of this year the Fintech innovation awards took place. Vallstein won the innovation award in treasury management with their Walletsizing® system. We asked Huub Wevers from Vallstein to give us an update on this new system. What’s new about it and who will benefit from using Walletsizing®?

Congratulations on winning the award, can you tell us more about WalletSizing?

WalletSizing® is a system in the cloud focused on giving full transparency to corporates on their spending and profitability for banks. All their banks globally, regardless of the number of banks and the type of products, varying from Fx, Cash Management, bonds, lending or asset management. We take in all data a corporate has available on the products and invoices from the bank in an innovative easy way for the corporate where they do not need to do much with the data. We translate, map and upload it into the system after which the corporate has all insight in their banking landscape and can do easy analysis with all the features the system offers.

What distinguishes WalletSizing® from its competitors?

Firstly, WalletSizing® looks at the entire bank relationship, across all product areas, not just transaction services or credit, but everything that is being used from all banks that maintain a relationship with the client concerned. Secondly, we take an explicit view through the eyes of the bank on the relationship, taking all relevant Basel III /IV regulation into account. This kind of transparency is absolutely essential to identify the real room to negotiate and ensure terms and conditions that are truly fair for both sides of the table. Thirdly: technology. We provide analysis for clients maintaining multiple bank relationships across a multitude of countries with many different banking products, which is impossible to build and let alone maintain in spreadsheets.

ROS Calculation 2

 

Who will benefit from using this system?

CFO’s and Treasurers will benefit by having full transparency in the bank relationships and as a result they will have more meaningful bank reviews, RFP’s and Negotiations. Depending on the objectives a corporate has, it will allow them to be fair in their distribution of business towards banks, limit the number of banks used globally or keep banks costs in line with market practice as will be indicated by the system’s benchmarking capabilities. Where cost saving was an objective, corporates saved 26% on their bank costs on average, across the entire relationship, all products.

Vallstein won the Fintech innovation Award 2016, what is innovative about your system?

We take away the need for extensive data gathering, translating and analysis by taking this responsibility upon us and we create full transparency using all data and the latest Basel III rules in a matter of days. Comparing banks like for like. Next to this we have extended the functionalities last year by having a edition focused on Bank Fee Analysis as well. The system verifies automatically after upload of new invoices if the prices paid are as agreed earlier with the banks. A simple and somewhat more operational step.

Can you give some examples of companies and employees that are using Walletsizing®?

Examples of Companies that are currently using WalletSizing® are SaudiAramco, Salzgitter, Vimpelcom and many more. Typically, the Treasury Control department works with the system on a day to day basis and depending who is having the bank reviews the Treasurer or CFO will be using the reporting.

 

Picture_HWHuub Wevers is responsible for Corporate Solutions at Vallstein, the leading Bank Relationship Management specialist. Before joining Vallstein he has had eighteen years of experience in Banking at ABN AMRO and RBS, notably Transaction Banking. His responsibilities included Product Management, Account Management, Implementation and Operations, whereby his last role was the leadership of all Service & Operations in EMEA for RBS. At Vallstein Huub is responsible for building out the software solutions that Vallstein offers for corporates. Solutions that automate bank relationship management in order to assess the profitability that a corporate has for their banks, using all banking products and Basel III.