Fintech Trending

Europe takes on China on mobile payments

Whether or not you think that the future lies in financial technologies, it is hard not to be impressed by the sector’s astronomic growth. Rarely have we seen an industry expanding at the rate ‘FinTech’ did in 2016 when it attracted over $17.4 billion in investment. For the first time ever, China outpaced the U.S. in both the amount of deals completed and the total capital raised by start-ups.

During the year, Chinese investments into FinTech companies grew by an astonishing 84%, making the country the market leader in one of the most modern and prominent technology sectors in the world. Meanwhile, the money flowing into western companies dropped dramatically. The U.S. and U.K. saw 12% and 34% decreases in investment respectively while, in Europe, the amount of investment fell from $12.4 billion in 2015 to only $2.2 billion last year.

This transformation was, therefore, one of the main discussions at the eFinTech show is Barcelona this year. The event attracted companies from all around Europe. All came to discuss current trends and ways European start-ups could compete on a global scene. “We’ve seen a fall of investment because of the political instability” says Fabrizio Villani, founder of Fintastico, a global FinTech portal that features start-ups from all over the world.

“At the moment, most FinTech start-ups are targeting the whole [of] Europe. This includes the UK, which, of course, is the biggest market. So, at the moment, FinTech start-ups can expand into other European countries without having to apply for a completely new license each time”, says Villani.

But while political instability may be factor that played a big part in this change, it’s clearly not the only reason for the shift. Looking at the Chinese and European markets development, it is evident that the journey to the current standpoint looks very different in the two continents. While the western economies are characterised by stable growth with a financial system that gradually adapted to customer needs, China has built their digital market from a very different base. Their enormous economic growth over the past 20 years meant that many consumers went from a cash-only daily life straight to paying for goods and services on their mobile phones, bypassing the plastic bank cards Europeans have been using during the past decades. As China became the country with the greatest amount of Internet users in the world (over 700m), with the whole population moving onto smartphones almost over night, cash-free payment options were suddenly possible but massively under served.

This resulted in a clear competitive advantage for Chinese FinTech companies over their western counter parts, which used the opportunity to make China into the mobile-payment country it is today. Anyone who’s ever been to China would have seen the enormous amounts of QR code scanning happening and the heard the bleeping sound made by smartphones processing successful transactions. The leading Chinese mobile payment solution, AliPay is, literally, everywhere. Everyone, including beggars in the street, take and makes payments through their phone. As a result, the parent company behind it, Ant Financials, is expanding at the fastest rate in the market and is engaged in acquiring dominant players in the leading economies around the world.

Apart from AliPay’s recent acquisitions and investments of major Asian mobile payment companies such as Paytm in India, Ascent Money in Thailand and Kakao Pay in Korea, it now appears that the company might have won the bidding war for MoneyGram, the leading money transfer company in the U.S. This bidding war against the U.S-based company Euronet, seems to have ended after an increase to the bid from the initial offer of $880 million to $1.2 billion. While the bid still needs to be approved by the U.S. committee of Foreign order levitra no prescription investment, where Euronet might seem to have an advantageous position, Jack Ma AliPay’s founder has already discussed the deal in a meeting with President Trump, who will have the final say. As a result, European FinTech companies are now looking for competitive advantages over their fastgrowing Asian counterparts in the global market. “We really need to think about this. If we don’t support and grow the FinTech scene here, how are we going to compete with non-European players if they decide to set up in Europe?” says Fintastico’s founder Villani.

Unlike China, Europe does not have a leading mobile payment provider and, while there are many different arguments about the causes for this; the large amount of regulations attached to the operations for running a financial services company, is clearly a factor, that makes it harder to set up and run a financial technology company in the west. The regulations also make it difficult for new companies to penetrate already mature and advanced markets. However, this is about to change, according to IBM FinTech “Thought Leader” and author of “FinTech Innovation” Paolo Sironi. He points out that there are many new regulations that could make Western economies more competitive in the near future. One of these, he says, is PSD2 which, amongst other things, allows for real-time online transactions and better customer protection with FinTech start-ups sevices, that will make the European market more competitive when it comes to mobile payment. “PSD2 is due to facilitate open banking in European markets by requiring that banks offer data access to third party solutions through API’s, conditional to regulatory approval of a trusted license. Easier data sharing will clearly foster frictionless innovation outside the banking club, granting to FinTech a more competitive playing field”, says Sironi. T

he plan with this regulation is to make it easier for FinTech companies to operate and make it more competitive internationally. It could also make it easier to transfer regular bank customers to digital payments, allowing for expansion of services. These features would, hopefully, make it possible for European FinTech companies to, not only dominate the domestic market, but also expand internationally into markets with a familiar language and culture. “There’s a lot of room for innovation in Latin America. If you go to Columbia, you can end up queuing at a cashpoint for hours, so mobile payment solutions make a lot of sense”, says the founder of the Spanish FinTech incubator Innsomnia Francisco Estevan. The incubator works with established banks and links them to start-ups in order to create an effective infrastructure for FinTech innovation. Estevan sees this as a great opportunity for both Spanish and Latin American entrepreneurs to get access to capital and customers, making it possible to implement and test new ideas on the scale of a mass-market.

With major players, banks and financial institutions all competing for the people to use THEIR service, the situation can be described as confusing at best. While the politics and the capital involved in the FinTech startup scene is so large that it’s equivalent to many countries’ GDP, the word still doesn’t make sense to most people outside of the tech industry. FinTech might even seem like a buzzword, one that’s likely to drop out of fashion within a few years. One thing, however, is certain – we’re witnessing a battle for the next generation customer. Even if the word disappears, the world is changing at a very fast pace and when the storm settles, there is certain to be a new order we are all a part of and that new order will be built on financial technologies.

By Yelena KENSBORN and James MAYER


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