A swirl of activity in the fintech space has been witnessed over the past few years, with Apple, Google, Amazon and traditional banks racing to stay ahead of rivals in the fast-growing sector.
Not only are new opportunities emerging at payment market leaders like MasterCard and American Express, but emerging fintech start-ups such as Transferwise, Prosper, and Lending Club, as a flood of capital washes into global fintech.
“A growth area over the past year has been the fintech sector, effectively straddling both finance and technology,” says Sarah Juillet, director of postgraduate careers at Cass Business School.
The battle between banks and tech companies for dominance in global payments has seen a war for talent break out.
“Companies like MasterCard are competing for talent with other companies in the traditional tech space such as Facebook, Google, LinkedIn, Amazon, and Microsoft,” says Roxanne Hori, associate dean of corporate relations at NYU Stern School of Business.
One of the triggers has been the launch of Apple Pay, which allows iPhone 6 users to purchase items with a whirl of their smartphone.
Google and PayPal have been racing to catch up. Google for example this year acquired Softcard, a joint venture between mobile networks AT&T, Verizon and T-Mobile.
The launch of Apple Pay is viewed as a catalyst for the broader adoption of mobile payments, which have the potential to expand the financial services market.
“There are a lot of new ways to pay that are coming out, such as contactless and Apple Pay, which are eroding the market share of cash and increasing the convenience of card and non-cash payment methods,” says James Allgrove, head of UK growth at Stripe, an online payments company recently valued at $5 billion, at a conference organized by Fintech Week 2015.
Other smaller companies — some of which are being targeted by banks for acquisition — include Dwolla, a network for cheaply transferring money, and WorldRemit, an online money transfer business founded by a London Business School MBA.
WorldRemit, which employs 150 at its London headquarters, has expanded to serve 50 markets, says Alix Murphy, senior mobile analyst. “Our company has grown very fast,” she says. Customers can transfer cash to 120 countries, many to mobile money wallets in the developing world.
Fintech start-ups have grown in popularity by offering faster and cheaper services than traditional lenders, which have come under pressure on the fees they charge consumers.
“Our customers typically use us to get to the market very fast or to get to parts of the world they can’t otherwise reach,” says Todd Latham, vice president of marketing at Currency Cloud, which delivers cross-border payments as a service.
Since launching in 2012, Currency Cloud has grown to have 80 employees and processes $10 billion in payments a year. “We are growing very quickly,” Todd says.
Another start-up, Azimo, a mobile and internet based money transfer business, has grown to have between 50-200 employees, and this summer raised $20 million from investors.
Marta Krupinska, co-founder and general manager, says that speed of pay-outs has been incredibly important for the company to gain a toehold in the $600 billion global remittances market.
The tech behind mobile payments is revolutionising access to finance in emerging markets in particular.
Africa — where less than a quarter of people have a bank account, but more than 80% have access to mobiles — continues to lead the way.
Users of M-Pesa, the leading African mobile money service, send an average of $44 million each day via 6.8 million transactions.
Jean-Stephane Gourevitch, founder and CEO of Mobile Convergence Ecosystems, a consultancy, estimates that mobile money represents 60% of Kenya’s GDP.
“Africa has seen some really tremendous successes,” he says. In emerging countries mobile banking is an important element of both financial and social inclusion, he adds.
In China too there has been significant disruption to the financial services sector, with tech companies Alibaba and Tencent pushing further into mobile payments.
Yu’E Bao, an online money-market fund run by Alibaba, reached $96 billion in assets under management at the end of last year. Alibaba will also partner with Fosun International, one of China’s largest conglomerates, to form Zhejiang Internet Commerce Bank this year.
Mobile Convergence’s Jean-Stephane sees further growth in the west too. In the US for example, 20% of the population remains unbanked, while in the UK growth has been seen in the adoption of contactless across London’s transport system, TFL.
“Mobile payments is growing in developed countries,” he says. Global investment in fintech is growing fastest in the European market, according to Accenture, with the UK and Ireland accounting for 42% of the $12.2 billion invested globally last year.
Meanwhile, the growth of fintech has seen nimble start-ups attract talent from top business schools, even poaching staff from investment banks. Astbury Marsden, the London recruitment firm, says banks are “acutely aware that they are fighting a war for talent with the fintech companies”.
Mark Davies, employer relations manager at Imperial College Business School, says: “There has been a very recent increase in interest amongst MBA students in fintech.”
Avinash Agrawal joined Bankable, a fintech start-up that offers banking as a service, in 2013, the same year he graduated from HEC Paris, a leading French business school.
The venture’s head of product strategy and commercialisation says Bankable works with clients from banks to other fintech start-ups: “Our vision is to displace payments inefficiencies for enterprises as well as consumers.”
Mobile banking usage is expected to double over the next four years, from 800 million people to 1.8 billion, according research from UBS and KPMG. But many in the sector do not see digital replacing cash altogether.
Dave Wascha, global digital product director for Travelex, a foreign exchange company, says: “People take refuge with the fact that they can pay with cash. People fundamentally also have a distrust of financial institutions.”
Anyone hoping to work in mobile payments will also keep a close eye on regulation in the UK from the new Payment Systems Regulator, while the EU has similarly looked at tighter regulation of the payments sector.
“Huge change is coming,” says John Salmon, partner and head of the financial services sector at law firm Pinsent Masons.
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