Payments The payments market in fintech had witnessed $12 billion in investments in 2014, and represents about 43% of the startups in the fintech space. The opportunity fintech represents is redefining what value is and how it is transferred, leading to an uptick in the number of fintech firms which are active, (roughly 4000 now), and with a few dozen players being worth upwards of $1 billion. Based off CBInsights, the majority of the deals are sourced in the US, followed by the UK, and Germany and India being tied for the 3rd place.
The significance of fintech is seen in the unbundling of “opaque” financial transfers, making it more accessible and certainly more user-friendly than traditional payment services. A great example of this is Ripple – a firm which positions itself as a network of debtors and creditors utilizes flow algorithms (for the more technical minded, refer to the Max-Flow-Min-Cut problem) to reduce the number of inter-bank transfers and tries to settle accounts within the shortest possible reach, leading to a dramatic reduction in time as well as costs saved.
Further capabilities such as the abundant access to compute and storage services on-demand, the commoditization of machine learning services, the increased penetration of mobile phones and the need for appealing and intuitive user functionality, and increased transparency regulations in intra-day payment processing (leading to European standards such as SEPA) have been instrumental in uncovering pain-points in the customer journey and implementing scalable and cost-efficient technology solutions to address the need, leading to increased cooperation between fintech firms and banks.
The market itself stands highly dominated by retail consumer applications.
Major trends for the future:
1) Fintegration: Banks + fintechs leading to more agile development cycles and smoother customer experiences
2) Cryptocurrency standardization: Even though there was a recent failure, we should expect to see an integration of these alternative modes of payment
3) Corporate payments: A big source for problems to unbundle