#fintechresearch

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BRATS: Countries With Rapid FinTech Growth

Blossoming fintech growth in Brazil, Russia, across Africa and in Turkey looks so promising in the view of analysts at U.S. bank Citi that they have given them their very own acronym - the “BRATs”.

It is the latest twist on the BRICs label coined in the early 2000s, but with Brazilians and South Africans among the world’s most voracious internet users and smartphone sales booming across ‘BRAT’ countries, they may deserve their own tag.

BRATs also have lower-than-average dependence on cash, which helps the adoption of digital payment options, while there’s the simple fact that Brazil and Russia alone have populations of more than 200 million and 144 million respectively, making the potential growth huge.

Venture capital FinTech investments across Latin America rose more than 30 percent last year to around $200 million, with Brazil having the largest number of startups across payments, financial management, lending and investment.

Though smaller, Turkey’s young population and proximity to Europe and Asia give it an edge in terms of new tech adoption. Turkey’s total population is around 80 million.

South Africa’s speciality, Citi says, is micropayments - platforms for very small transactions.

Around 60 to 70 percent of the population in the BRATs already has some form of banking relationship, according to World Bank figures, in sharp contrast to other heavily populated emerging markets such as the Philippines and Indonesia, where the share remains tiny.

“This provides fintechs with a fertile ground as customers often just need to be converted to a more competitive product as opposed to being taught the broad array of financial products,” Citi analysts wrote.

These markets also have highly concentrated banking systems, making them ripe for disruption by newcomers such as Kenya’s mobile financial services firm M-Pesa, which has revolutionised payment systems in the country. (Reporting by Marc Jones and Helen Reid, Editing by Gareth Jones) https://www.reuters.com/article/us-china-stocks/u-s-listed-chinese-financial-firms-dive-on-regulatory-action-idUSKBN1DL1MR

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JP Morgan Acquires FinTech Startup.

Unpredictable global banking giant JPMorgan has bought up payment network WePay in a “rare” fintech acquisition.

The move is aimed at JPMorgan’s four million business customers which it wants to be able to accept payments “faster,” Bloomberg reports.

The bank has made headlines several times over the past month after its CEO Jamie Dimon called Bitcoin a “fraud,” only to U-turn on his comments and “not talk about Bitcoin anymore.” At the same time, senior executive said the company was “open-minded” on cryptocurrency and Blockchain.

WePay has hinted at a markedly different stance, CEO Bill Clerico saying he was “bullish on Bitcoin” as far back as 2014.

“As a protocol it will survive & as the tools in payments evolve it will grow,” he tweeted.

“This is the first acquisition we’ve brought of this kind,” Bloomberg meanwhile quotes JPMorgan merchant services CEO Matt Kane as saying.https://cointelegraph.com/news/jpmorgan-buys-bitcoin-bullish-wepay-in-rare-fintech-move

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FinTech in the Developing World.

FinTech 3.5 is supported by (1) high penetration of mobile devices (especially with broadband internet access) among the young and technologically literate, (2) the growth of the middle class, (3) untapped market opportunities, (4) a lack of physical banking infrastructure, (5) consumers increasingly valuing convenience over trust, (6) low levels of competition, and (7) weaker data protection requirements. The spike in the number of graduates with engineering and technology degrees in such economies as China and India has also played a role in planting FinTech firmly in the soil of those economies. http://www.cfapubs.org/doi/full/10.2470/rfbr.v3.n4.1

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Extinction Phase for Traditional Banks.

If that bit of prognostication didn’t get the attention of the average midlevel bank exec, this one surely did: The Citi researchers predict that the fintech revolution will wipe out nearly a third of all the employees at traditional banks in the next 10 years. Such a stark outlook helps explain the seriousness with which Citi and its big-bank peers are suddenly treating the latest threat to their hegemony. “Fintech is different,” says Bird. “It will change your life and my life. And will change this institution and every other bank.” Veering back to another paleontology metaphor, Bird puts the financial industry’s situation in perspective. “I describe it as the extinction phase,” he says. “What happens in an extinction phase is that you either rapidly adapt and new means of competition are created, or you go extinct.” Citi, then, is in a Darwinian fight for its life. http://fortune.com/citigroup-fintech/

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By 2023 FinTech may account for $203 billion in business.

Given how quickly new competitors are arising, Citi can’t move too fast. Last year investors poured $19 billion into finance startups, up from less than $2 billion five years before. In March, research firm Venture Scanner said it was tracking 1,379 fintech companies, with combined funding of $33 billion. The opportunity for the startups is huge. Revenue in the North American consumer-banking business alone was $850 billion in 2015. It’s projected to grow nearly 50% over the next seven years, to more than $1.2 trillion. The most wrenching period for the big banks is almost certainly yet to come. In March, Citigroup’s own research department put out one of the direst assessments yet. The 112-page report, titled “Digital Disruption,” was produced for the bank’s investment clients and reads like a Jerry Maguire manifesto. The gist: Radical change is coming. Citi says that fintechs have nabbed $9 billion in business so far, a small percentage of what banks bring in each year. But in just four years, the Citi analysts predict, fintech revenues will leap more than 10 times, exceeding $100 billion. By 2023 fintech will account for 17% of consumer-banking services in North America, or $203 billion. http://fortune.com/citigroup-fintech/

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Fintech poised to take $10 Billion from Australian Banks

In a recent study, Fintech in Australia – Trends, Forecasts and Analysis 2015–2020, research firm Frost & Sullivan says the Australian fintech sector is poised to take $10 billion in aggregated revenues away from the big Australian banks, while contributing $3 billion of new revenue to the Australian financial services sector, by 2020. The firm contends that the big four banks in particular must react, or “face a large dent in future profit growth.” But as Saranga Sudarshan, Frost & Sullivan research analyst points out, the banks are not just incumbents waiting to be picked off – they have agency, they have scale and they have the financial muscle to buy the fintechs they see as threats or whose product they like. “We see the banks as having two strategies. There is the Westpac model, a kind of engagement model, they have invested heavily in fintechs – in a $100 million investment fund they have already invested half of that. http://www.theaustralian.com.au/business/financial-services/fintech-is-going-to-be-much-bigger-than-you-think/news-story/f7a42de31e8faae702d8ae25afc1c87c