10 Major Trends of the 2014 Year
Vladislav Solodkiy, Managing Partner of Life.SREDA VC, highlights ten most interesting trends of 2014 year in FinTech industry.
1. FINTECH INVESTMENTS TRIPLED
Two years ago we predicted that fintech would become the fastest growing venture capital industry and the volume of investments in the industry would double every year! Well, a year ago they really doubled and amounted to $2.2B, but in 2014 they tripled and amounted to $6,8 B of new funds in the industry. Our first forecast was that the industry investments would double each year for the next 5 years. We hope that our forecast wouldn’t come true for the better.
2. THE FIRST (AND SECOND) IPO IN FINTECH
Industry isn’t considered as a fully established one until the first IPO takes place. Everyone expected Square to be the first fintech company to undertake IPO. However, it postponed its listing, while p2p-lending platform Lending Club hold a successful IPO. It was followed by Ondeck, online lending ser-
vice for SMEs, which undertook a successful but not such a high-pro-
file IPO. Forecast for 2015: at least another three successful IPOs.
3. 10 COMPANIES JOINED «FINTECH BILLIONAIRES CLUB»
A year ago the «billionaires club» (online startups valued over $1B) consisted of only three companies – Square, Lending Club and Stripe. Seven more com- panies joined the club in 2014: Transferwise, Kreditech, CreditKarma, Wonga, Powa, SoFi and Raise. Ten more companies are also approaching this limit.
4. APPLE (AND SAMSUNG) PLACE A STAKE ON FINTECH
Apple has finally launched its mobile wallet Apple Pay — the decision itself is not technologically innovative, but Apple wins hearts with its brand and customer base. Two years ago we predicted that the future of financial ser- vices belongs to online companies, mobile operators and major retailers, but not to banks. Giants such as Apple can bring financial innovations from advanced users to general public and this is their major merit! Samsung is not lagging behind and actively cooperates with PayPal, getting ready to ac- quisition of Loop – in my opinion, a far more advanced solution than Apple Pay. The major question in 2015: what will do XIAOMI in its turn? (And Apple also confirmed that it had offered Jack Dorsey to acquire Square – but the parties did not agree on the price. However, negotiations are ongoing).
5. THE FUTURE OF PAYMENTS AND TRANSFERS BELONGS TO MESSENGERS
Mark Zuckerberg surprised everyone with his fast and expensive acquisition
of WhatsApp, and then astonished again at the f8 conference stating that monetization of messengers lies in the sphere of payments and transfers via messengers. And p2p transfers will become as simple as messaging in WhatsApp. He was the first to announce it, but the first to implement were messengers Line, WeChat and Kakao. This year we expect a release from David Marcus (ех-СЕО PayPal, currently heading Messengers&Payments at Facebook).
6. ROCKETINTERNET’S IPO AND FINTECH — IS THERE ANY RELATIONSHIP?
RocketInternet’s IPO deserves attention on a number of parameters: first- ly, it is a startup incubator, but not a startup that hеld IPO, secondly, it is German, not American, thirdly, it promotes two principles: «An idea is noth- ing. Execution is everything» and «There are many interesting markets outside the United States». Samwer Brothers are prominent in fintech as far as they have raised their last round before the IPO ($ 0,4B) «only for fin- tech startups» and they have confirmed1 that «fintech is next big thing!».
7. PAYPAL AND EBAY SEPARATION
Investor Carl Icahn has been a long-term advocate of eBay and PayPal separation justifying it by the fact that the companies cost more separately and e-commerce era is ending (eBay), while fintech (PayPal) is moving forward. He succeeded in this and the companies cost more af- ter their separation and PayPal growth rate is higher than eBay’s.
8. CHINA IS MOVING FORWARD!
E-commerce giant Alibaba undertook the most expensive IPO ever, while fin- tech industry, with a sinking heart, is following its daughter company – the payment system AliPay overtops Apple Pay at every point 100 times. The only question left on the agenda is when its IPO will take place. Promi-
nent investors like Yuri Milner and DST fund are actively funding both Chi- nese online startups in general and fintech in particular. This year China is launching $6,5 B venture capital firm2 for fintech and biotech startups.
9. MOBILE BANKS FOUND THEIR BUYERS
The most famous mobile bank in the world – American Simple – was acquired
by the Spanish BBVA group for $117M (Life.SREDA VC was one of its investors). This had a positive effect on two issues. First – everyone understood that they are quickly gaining a customer base, but getting low revenues. The answer was simple: mobile banks are interesting to those who have a customer base (banks, mobile operators, retailers) and high margins, but are lacking new products, and that are able to quickly and cheaply attract customers. Second – Simple acquisi- tion spurred interest to its global competitors: Moven, Instabank, Rocketbank etc.
10. MPOS IS THE FASTEST-GROWING FINTECH SECTOR
Last year we stated that 7 out of 23 fintech sectors are developing faster than others. But this year we see an undisputed leader in all countries, and it is mPOS-acquiring (Square, SumUp, ibox, LifePay, etc.). The major growth drivers: this service is the easiest to explain to the potential consumer and to use it; it attracts both SME customers and private individuals; it easily connects new online opportunities with conventional offline infrastructure; it has a very low CoCA and is growing very fast. Future developments: to increase the margin on mPOS-cus- tomers by selling additional fintech services and active scaling in Asia and Africa.