The research report stated that investments in fintech continued at a remarkable pace last year, nearly tripling in the United States in 2014. The value of fintech investments in the United States soared to $9.89 billion in 2014, up from $3.39 billion in 2013. This 191% increase dwarfs the increase in 2013, when fintech deal values in the United States climbed 68 percent. In New York, fintech deal values grew by 32% in 2014, to a new high of $768 million.
The report notes that hot areas for fintech investment in 2014 included payments, lending, trading technologies and wealth management. Payments accounted for the largest number of fintech deals in the United States in 2014, 29%. In New York, however, the total number of fintech deals in payment companies has trended downward, from 33% of all fintech deals in 2012 to 21% in 2014. Lending was the second-biggest investment area for U.S. fintech investments in 2014, accounting for 16% of such investments.
The report also highlights that New York is attracting more venture investments into wealth management and markets (which includes trading platforms) segments on a percentage basis than the rest of the United States. More than four of every 10 (42%) fintech deals in New York in 2014 were in one of the segments highlighted above. These same fintech segments, however, represented just 21% of deal volume in the United States.
Next Big Trends
The report indicates that a key driver of the increase in investment in fintech is coming from the needs within financial services for innovation. Financial services firms are looking for new technology that can help them cut costs, comply with changing regulations, and, importantly, allow them to compete more effectively with new competitors.
Emerging technologies are providing companies with the tools to meet these challenges, for instance with cloud technology. Banks will likely consider increasing their investment in this area; particularly as they continue to work with regulators to identify which data can be hosted in the public cloud and as they look to transform their data centres with private clouds.
The report also notes that strong growth is expected over the next 18 months in blockchain, the underlying distributed-ledger technology that currently supports bitcoin. As a stand-alone technology, blockchain has the potential to help banks, credit card companies and clearinghouses collaborate to create safer, faster accounting and optimize use of capital by reducing counterparty risk and transaction latency. Investment in cyber security is also likely to increase significantly in the coming year, especially in light of broad media attention surrounding recent large-scale data breaches.
Facing digital disruption, the report highlights examples of innovative startup companies working with insurers to help transform their operations. According to the report, U.S. insurers lose $5.8 billion annually as a result of consumers switching carriers. To address a challenging customer base, insurers have started to tap the innovations within the fintech community. The report notes that more than four in 10 insurers (43 percent) are either planning to buy, or already have bought, a fintech startup.
View Accenture’s press release here
Download the Accenture research report here
