Fintech

Global investments in Fintech increased to more than USD 112 billion in 2018, an increase of over 114% compared to 2017. Fintech companies are rapidly gaining market share from traditional banks, and they are also growing strongly in cooperation with these banks. They provide services that are highly focused on a single segment or solution, supported by modern technologies and are therefore able to respond quickly and easily to the changing demands of the customer.

Research shows that banks increasingly see Fintech companies more as partners than as competitors. Many banks therefore start new digital-only banks outside the existing organization, based on cooperation with one or more Fintech companies. In addition, banks have significantly expanded their Fintech investment funds in recent years. As a result, we will see accelerated growth of Fintech companies in the coming years, and further cooperation between banks and Fintechs.

From Payments to SME and Lending

One of the first areas in which Fintechs have developed is payment transactions. For example, Adyen has developed in a short period of time into a ‘Fintech Unicorn’ with successful global services. In this Fintech market, we see consolidation emerging. At the same time, we see the SME banking segment emerging rapidly, with various Fintech parties offering solutions that are specifically focused on what the SME customer needs in order to successfully conduct their business, rather than on the financial product alone.

Full value chain with open banking & platforms

In order to comply with PSD2, most banks have launched a developer portal; with this, they provide access to an average of three to seven APIs. As a next step, based on the lessons learned from the digital-only banks and the developer portals, and based on developments in the platform economy, we see open banking platform solutions emerging, for example to offer a full value chain for SME customers.

Efficient onboarding

Challenger banks have set the ‘five-minute onboarding’ trend, in which customers can open a bank account fully online (mobile) and perform the first transaction in a limited number of clicks. In this domain, a broad range of Fintech services is emerging, from a specific focus on sanctions list checks to broader solutions ranging from facial recognition through KYC and risk profile checks to customer acceptance.

The growth of the challenger bank

There is one area in which banks compete with Fintechs, and that is challenger banks. In recent years, we have seen growth of these banks, such as bunq in the Netherlands, but also in Europe such as OakNorth, N26 and Revolut. While investments in start-ups slowed in 2019 compared to 2018, investments in challenger banks continue to grow, enabling these parties to continue their international growth.

These developments mean that many banks must determine a new course and make choices in order to get the utmost out of these trends.

KPMG helps banks and Fintech companies in this dynamic playing field to make the right choices: from finding the right Fintech solution and implementing it properly, to orchestrating an ecosystem of Fintech solutions, and guiding acquisitions or finding funding.

With our experience in assurance, advisory and technology services, KPMG has all the knowledge in-house to guide both banks and Fintechs. For example, KPMG has set up a database with curated Fintechs to help banks find the best-fitting Fintech solution. KPMG is also one of the key partners of several Fintechs in guiding the licensing application process with the Dutch Central Bank (DNB).