When fintech first emerged as a sector only five or six years ago, it was all about new business to consumers (B2C) services. Peer-to-peer lenders like rebuildingsociety.com, international currency movers like TransferWise and hundreds of B2C apps flooded the market. Some lasted and grew to established brands, others raised, spent and died like digital flies.
Looking through the 2014 cohort of Barclays Techstars, seven out of 11 fintech startups were B2C ones. Some have done very well, like Squirrel.me, others don’t seem to even have a web presence anymore.
Fast-forward to the 2018 cohort, nine out of ten were business to business (B2B) startups. There’s one business to investor app – trygatsby.com – that provides options trading. Otherwise it’s all B2B, even Sitata.com, the travel information app on the cohort, has a route to market that involves embedding it in travel insurers and card issuers. They are essentially wholesaling the B2C product.
B2B fintech is where it’s at, with a few notable exceptions amongst the challenger banks, who are in a category all of their own.
So, what’s happening in the B2B space? There’s a strong interest in fintechs that in some way facilitate SME activity. Recent funding of Previse to the tune of $7m in a series A will enable it to scale it’s offering which claims to use artificial intelligence (AI) to enable corporate buyers to pay all their suppliers instantly. Sounds a lot like non-recourse factoring but with an algorithm making the credit worthiness call. Speaking of invoice discounting, MarketInvoice, an early starter in the B2B fintech space, recently announced a partnership with Barclays to provide the MI services to the banks business customers.
Looking for other trends, you often come across the term AI when you’re talking about fintech, especially when you look at their pitch decks. Although, the term is a slight misnomer as we’re not really talking about an actual artificial intelligence. No startup has a true AI, it simply doesn’t exist yet, at least in the commercial sectors. The fintech scene allows itself a certain poetic licence with these phrases – a fact not unrelated to valuations –which drive investment, which power the entire sector, which for the most part is loss making.
Instead, machine learning is a far more accurate definition of software systems that automatically improve themselves and this is another ongoing trend. Machine learning software systems are pretty much a prerequisite in any software as a service (SaaS) company these days. Such is the rate of development that unless the software betters itself, it’s going to be bettered by someone else very quickly. Static software programmes that don’t self-improve are guaranteed to be nearing obsolescence within 12 months. Hence, when you hear fintech startups talking about AI, it really translate as “we have a future proof design, at least for the moment.”
You can’t really talk about fintech trends without mentioning blockchain technology. Blockchain has been through the hype cycle and is now plateauing. If you want to upset any blockchain based fintech startup, simply say the four letters GDPR (General Data Protection Regulations) and watch them wriggle. Blockchains are inherently problematic in terms of GDPR compliance and if investors have yet to realise this they soon will.
Closely related to blockchain you have cryptocurrencies. The crypto bubble seems to have contracted, if not burst. The technologies of cryptocurrencies may have applications in the real world but the token values are based entirely on the ‘greater Fool’ theory. Will greater fools come along? Possibly. But the sector is so niche and cliquey it massively over-values its own importance and significance and therefore value. The huge wave of initial coin offerings of the last 18 months surely must now be as good as over. A recent study suggested 81% were outright frauds. Of the remainders 6% ‘failed’ and 5% had ‘gone dead’. If this had happened in the conventional finance sectors there would be uproar and huge jail terms. In crypto it’s expected. The whole sector is highly questionable, operating in a parallel reality, it’s why people who like it like it. Everyone else should steer well clear. Understand the market, forget the scams and trends. 
