For fintech innovators, the sky’s the limit

Financial technology, or fintech, continues to see massive growth, as everyone from banks to points card companies are rethinking how we use money through digital technology. Over the next few years, cumulative investment in fintech around the world could top $150 billion, according to PwC’s Global FinTech Survey 2016. Amid this whirlwind of change, fintech entrepreneurs gathered at the Rakuten Fintech Conference 2017 to discuss innovation.

In fiscal 2016, fintech deals numbered over 1,500 and were valued at some $28 billion in terms of financing, explained Oskar Miel, Managing Partner at Rakuten Capital, while moderating the Conference’s “Innovation in Fintech” panel.

“Seventy-one percent of millennials would rather visit a dentist than a bank, and there are 2 billion people in the world who are unbanked,” Miel said, pointing to the growth opportunities in the sector.

Measuring and sustaining innovation

Panelist Alan Falys, co-founder and CEO of London-based Yoyo Wallet, an app that can replace both physical wallets and loyalty cards, pointed to the need to quantify innovation for fintech startups.

“The improvement has to be at least 10 times the equivalent of the incumbent technology system,” said Falys, whose company has over 250,000 monthly active users and more than 1.5 million transactions per month. “If you just provide the convenience of paying with a mobile phone compared to a contactless card, I don’t call that a 10x improvement. If you deliver an experience that goes well beyond the payment, with rewards and so on, then you’ve actually innovated.”

Innovation in fintech is essential to a company’s viability, said fellow panelist Bundeep Singh Rangar, head of U.K.-based insurtech startup PremFina, which provides insurance brokers with software that allows them to issue financing instead of going to a third party.

“Even as an innovator you have to assume someone else is innovating on the innovation,” said Rangar, who pointed out how Kodak was a dominant force in the photography industry for over a century until digital cameras came along and it went bankrupt. “Are you creating a new category? If you are, you won’t be judged by existing business models. You want to be doing something completely different.”

Charting new territory

Some fintech innovators are trying to carve out a unique niche for themselves in ecosystems dominated by earlier innovators. Revolut is an app that allows travelers to get interbank rates (the interest rates on short-term loans between banks) when buying, selling or remitting in 125 currencies. In just over two years since its launch, Revolut has seen heady growth: it has over 820,000 users with more than $4 million in payments processed.

“The beautiful thing is we’ve spent zero money on marketing,” said panelist Rishi Stocker, Revolut’s head of partnerships. “We’re trying to redefine existing financial services and readapt them for a new way of living for people with international lifestyles.”

Michael Dunworth is the CEO of Wyre, a startup he launched in San Francisco with Yanni Giannaros, his bunkmate from a hacker house. Dunworth told the panel about the novel way Wyre makes use of blockchain technology: it takes a sender’s currency, converts it to digital assets such as bitcoin or ethereum, sells those assets in the recipient’s country and then buys the appropriate currency for the payment. While bank transfers can take anywhere from two to four business days, Wyre, capitalizing on the speed of cryptocurrency dealings, can make them in as little as two hours.

“We think that the best use of technology is where you don’t really know that you’re using it,” Dunforth said in an interview on the sidelines of the conference. “Most of our customers are using blockchain every single day, but they have no idea what a blockchain is or how it works. We just put it under the hood and they get the benefits.”

In 2017, Wyre acquired Beijing-based payments startup Remitsy, giving it a foothold in China as well as a partnership with Alipay. But Dunforth nevertheless had a very optimistic message for the predominantly Tokyo-based audience at the Conference.

“For us, Japan’s a winner,” he said. “Japan has huge liquidity and great companies. I think there will be something cool coming out in the next six to 12 months.”

Read more posts from the Rakuten FinTech Conference 2017 here.