In 2014 KPMG picked 50 start-ups from various countries as "best fintech innovators" using 4 criteria: total capital raised, rate of capital raising, degree of sub-industry disruption and degree of innovation. The division by sectors among the selected companies were: payment/transfer (20%), balance sheet lending (12%), crypto (6%), crowdfunding (22%), wealth management (20%) and others (20%).
5 years later, these 50 companies boast an impressive survival rate of 96%, much higher than standard rate for start-ups. Interestingly, their management turnover rate is lower than S&P 500. Regarding valuation, 20% of them have reached the unicorn status.
The success stories reveal consistency in business strategy of focusing on obtaining a mass client base first, then looking at how to keep the clients. Monetising only comes after the clients acquisition and retention stages.
In the next 5 years we would expect to see this sector becomes even more diversified and prospered. The world of finance will continue to change dramatically with the disruption introduced by Fintech forcing traditional bank business models to change and adapt.
On our watchlist are:
- fintech introduced or adopted by traditional financial institutions;
- the increasing popularity of challenger banks; and
- the use of blockchain, big data, machine learning and predictive analysis to personalise products.
The 5 most successful startups from the report, collectively valued at $71 billion, all focused first on obtaining customers as cheaply as possible and are now using those relationships and customer data to enter higher margin operations.