When fintech first emerged as a sector, only five or six years ago, it was all about new B2C services. Peer to Peer lending platforms like rebuildingsociety, international currency movers like TransferWise, and hundreds of b2c apps like the now liquidated Dividabill flooded the market. Some lasted and grew to established brands, others raised, spent, and died like digital flies.
Looking at the recent 2018 cohort, nine out of ten are B2B. There’s one B2i (business to investor) app, trygatsby.com, that provides options trading. Otherwise it’s all B2B, even the travel information app on the cohort, Sitata.com, has a route to market that involves embedding it in travel insurers and card issuers. They are essentially wholesaling the B2C product.
Business to Business 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, in the B2B space, what’s happening? 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 Ai to enable corporate buyers to pay all their suppliers instantly. Sounds a lot like non-recourse factoring, but with an algorithm making the creditworthiness 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.
Artificial intelligence is a term often found in fintech, especially in pitchdecks. It’s a slight misnomer, 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 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 the Ai claims of every other fintech really translate as ‘we have a future proof design, at least for the moment’. None of them have true Ai though, 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.
Blockchain has been through the hype cycle and is now plateauing. If you want to upset any blockchain based fintech, simply say the four letters GDPR and watch them wriggle. Blockchains are inherently problematic in terms of GDPR compliance and if investors have yet to realise this they soon will.
The crypto bubble seems to have contracted, if not burst. The technologies of crypto currencies 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 ICO (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.