London’s fintech bubble hasn’t burst yet as established financial institutions remain desperate to be involved with startups
Suggestions that London’s fintech investment bubble is about to burst have been largely rebuffed and it would appear banks and other traditional financial institutions are still keen to fund new entrants to the industry.
However many are in danger of buying into so-called innovation theatre, collecting a trophy cabinet of proof-of-concept fintech startups that bank customers neither need nor want, experts said at a round table event today.
“I was approached by a client recently that said 'I want to do a deal with a startup, any startup,'” said Jonathan Vaux director of innovation at Visa Europe.
Read more: Beware fintech’s pivot to China
He warned that banks are not looking at the cost of integrating the kind of platforms they’re developing, suggesting banks are merely looking to keep up appearances of innovation.
Many of the UK’s traditional banks are lumbering under legacy IT systems that struggle to integrate newly developed software.
Fintech investment has exploded in recent years, with global investment hitting $20bn in 2015, up from $12bn in 2014. This is expected to grow to $30bn in 2016, according to a recent KPMG report.
Meanwhile, a seperate report has suggested collaborative fintech ventures, which target financial institutions as customers, are gaining ground on disrupters, which aim to compete with them.
In Europe investment in these collaborative startups rose from 62 per cent in 2010 to 86 per cent last year.
Despite the desire to appear focused on innovation banks are seemingly becoming more wary of the kind of startups they invest in.
Read more: Britain's financial regulator is the first to launch a fintech accelerator
Jason O’Shaugnessy, vice president at US data firm Yodlee, warned banks are increasingly questioning the long term potential of many of London’s fintech hopefuls.
There is still scope for startup success though – Barclays have signed contracts with six of ten recent graduates from their London startup incubator, according to O’Shaugnessy.
The comments were made during a round table event organised by struggling mobile money company Monitise that is battling to turn itself around after a string of management changes and profit warnings.
Visa Europe announced last year it would reduce its then 5.3 per cent stake in Monitise, though commercial ties between the two companies will continue.
Monitise last month hired Vertex Group chief executive Gavin James as chief operating officer, taking on the responsibilities left by former chief financial officer Brad Petzer who left in December.