In a now famous essay five years ago, Marc Andreessen, Netscape co-founder and partner at venture capitalist firm Andreessen Horowitz, explained “why software is eating the world” – and where he was putting his money.
In the intervening years, what has clearly emerged is that one of the industries that software is eating is financial services, including all aspects of payments, credit, investment and banking.
Over the past several years, I’ve had the opportunity to travel throughout the world and meet the people and companies that are driving this FinTech revolution in financial services. Through those interactions, I’ve observed the evolution of FinTech ecosystems through various stages of development in a number of countries and regions.
As I see it, there are four main categories of FinTech ecosystems: Disconnected, Disorganized, Organized and Recognized. Here’s how they might be characterized:
- Disconnected – In many countries there is some form of startup gathering and related capital, and even a significant banking presence. FinTech is more a “wave” they see being talked about, but there is no dedicated place to even have a meaningful discussion. Capital and start-ups are definitely not focusing on FinTech, and at best there is a Meetup around a beer (no disrespect intended; it’s actually a great excuse to have a beer with like-minded people).
- Disorganized – Until about a year ago, this category (in developed countries) was by far the largest. In this type of ecosystem, you can easily identify the FinTech initiatives, either from financial institutions or private (sponsored) incubators and accelerators and few local gatherings on the topic. VCs have these countries on their radar, and often there is little local FinTech capital available, mostly because the effort of local scouting is left to the goodwill of the global investors themselves. Disorganized eco-systems tend to hold local events, for the purpose of getting together the different pieces of the system. The emerging MaRS FinTech Cluster in Toronto is an example of this stage of ecosystem evolution. To exchange ideas with other global experts, members of disorganized FinTech ecosystems have to go abroad.
- Organized – In an organized FinTech ecosystem, a local catalyst emerges and this usually works best when this role is taken up by some sort of non-commercial government and/or community-backed body. Examples include Luxembourg for Finance, Holland FinTech, FinTech CH, Innovate Finance, France FinTech, HK and others. A strong nuance between disorganized and organized FinTech ecosystems is the sense of sharing and collaboration that exists in the latter. While some countries are still struggling with large banks that don’t play well together, organized FinTech ecosystems understand how engagement with local start-ups, investors, and other innovators from around the world builds value.
- Recognized – London and New York are key examples of recognized FinTech ecosystems. For Singapore and Honk Kong, we have to differentiate between the financial services centers (of which they are clearly examples) and recognized FinTech ecosystems of global importance – into which they may be transforming.
The US FinTech ecosystem is by far the largest in the world. Although New York is arguably the center of the US FinTech ecosystem, Silicon Valley is rapidly emerging as a role model in nurturing the best start-up ecosystem, in large part due to the increase in the past 18 months of large VC (Andreessen and Horowitz, Sequoia, 500 Startups, etc.) involvement, many with dedicated teams and resources in this sector.
In partnering with BAI Beacon, FinTechStage seeks to fulfil our mission to help create, structure, and bridge FinTechecosystems globally. Together with BAI, we will provide a deep learning FinTech experience, together with exposing the community to what we believe are some of the best startups and strategies fueling the disruptive thinking being applied to financial services.
We hope you will join us in growing this dynamic new global FinTech ecosystem by coming to Chicago October 5-6, 2016 for BAI Beacon and FinTechStage.