No man is an island when it comes to fintech, and in the pursuit of a better world driven by better financial services, it’s clear that standing together means progressing together. This September at The Fintech Times, we’ll be delving into every corner of what it means to be a fintech ecosystem. We’ve dedicated the entire month to investigating what makes a successful fintech ecosystem, how fintechs can work together more effectively, as well as providing a regional view of some of the industry’s best examples of community collaboration.
This week, in line with our September coverage of fintech ecosystems, we’ve been delving into all aspects of wealthtech, including how the use of automation is driving the technology forward.
Rounding off our second week of coverage here, today we’ve welcomed a diverse range of wealthtech experts to discuss and identify the ecosystems that are leading the way for the sector, considering both geographic, economic and social factors.
CEE is one to watch
Piotr Kicinski has got his eye on the start-ups and fintechs emerging from Central and Eastern Europe (CEE).
Kicinski is vice-president of Conotoxia, a Poland-headquartered fintech which provides currency exchange, money transfers and online payments services, alongside multi-currency cards, multi-currency lending services and investment services.
“We think that the founders’ hard work at the grassroots, from ideas to implementation, particularly characterises the CEE representatives,” he says.
The region’s attention to detail at every stage of the process has set it apart from the industry’s masses, as Kicinski explains: “The assumption behind this is that first, there is time to work organically on your own, bring the company to an appropriate, high level, and then start thinking about potential investors or an IPO.”
Taking the company’s native Poland as an example, only 67 per cent of its 37.9 million citizens had access to an online bank account in 2020, even though 85 per cent had access to the internet.
The figures sink lower when looking at neighbouring Lithuania, where online banking reaches a maximum of 58 per cent, or Belarus, where only 47 per cent of its population had access to the services.
However, more recent data shows how CEE’s fintech sector is enjoying a rise in interest, especially from investors.
The region’s tech startups enjoyed a fructuous second quarter this year, doubling funding from the year previous to €2billion, while investors favoured fintech in 20 per cent of the region’s 50 largest rounds.
“In our opinion, CEE companies will grow increasingly fast and catch up with Western European ones in terms of technology,” continues Kicinski. “We already see more and more such entities, but such a transition must take some time due to historical reasons.”
Emerging fintechs from CEE include the Hungarian anti-money laundering (AML) fintech Seon, which recently closed a €90million Series B, the Lithuanian blockchain company Zenith Chain, which closed funding in April with $35million, and LHV, the Estonian banking and financial services company which has pursued its UK banking licence this year alongside the global expansion of its services.
The future is digital assets
“The fastest growing sector of the fintech ecosystem is digital assets, which has received the largest amount of VC funding and even with recently adjusted valuations, still garners the highest valuations amongst private tech companies,” predicts Susan Miller, chief growth officer at the private investing platform Linqto.
“From payments to the blockchain, digital lending, and wealth management, the fintech sector is growing exponentially.”
“For context,” she elaborates, “we have an interesting vantage point on the sector given Linqto vets unicorn finech private companies for investment by the accredited investors who likely otherwise would not have access to private equity investments which are traditionally only available for large institutional investors.
“We invest in fintech and digital asset companies and then make part of our shares available to investors, to democratise private investing. In addition, Linqto’s partner, Farther, is a wealthtech company marrying digital tech with wealth advisors.”
Wealthtech warriors
In regard to the fintech ecosystems leading the industry forward, Ahon Sarkar, general manager of Helix by Q2, the cloud-native core for embedded finance, sees the ball to be very much in wealthtech’s court, and he even hones in on specific companies that are making a name for themselves.
“Companies like Betterment and Acorns are leading the development of wealthtech for consumers,” comments Sarkar.
“Acorns is helping millions of consumers nationwide take their first steps into investing with ’round up’ micro-investing, 401k, banking, and more whereas Betterment is helping individuals holistically manage their wealth through their digital advisor.”
In terms of wealthtech infrastructure, Sarkar names companies Addepar and Envestnet as “working closely with advisors and wealth managers nationwide to improve the ‘backend’ of wealth management and enable better, contextual experiences for all users.”
Wealthtech in banking
Kevin Anthony, associate director of thought leadership sales for global data and insight-driven thought leadership agency, iResearch Services, points to the availability of wealthtech ecosystems as a benefit to innovation within the industry.
“There are many wealthtech ecosystems available, which allow companies to use digital solutions to improve wealth management and investing,” explains Anthony.
“Paolo Sironi says that many banks are developing platform models, which enable differentiation. Banks need to change their business models and fintech needs to adjust their perspective and their ambition; and when they all understand how to do that together on the platform economy, building ecosystem platforms and user rental platforms, I believe that we will still see faster transformation compared to what we see today.
“It does take time, but I believe it is happening. Partnerships play a key part in this, too, he explains: “There is work to be done to set the foundations right from monthly to flexible architectures and that enables you to start moving and shifting towards the customer interface or the customer ecosystem, bringing the partners in, to basically make a better job.”
Personalisation is leading the way
Concluding our discussion, Jody Bhagat, president of Americas for Personetics, a provider of data-driven personalisation and customer engagement tools for banks and financial services companies, sees the rise of personalised wealthtech services as a defining feature of the ecosystem.
“The CEO of Charles Schwab recently put the wealth management industry on notice that ‘personalization is coming at us like a freight train’,” he says.
Despite its onset, Bhagat describes the two big challenges for wealth management firms to deliver on the promise of personalisation.
He recommends that firms “understand their clients’ full financial needs,” and “deliver personalised advice at scale.”
“Fintechs can enable the industry with both of these capabilities, and expand the population of customers that can be served by wealth management firms and their financial advisors,” he concludes.
