Part I: Should You Consider Investing In Fintech Companies?

Investing

Part I: Should You Consider Investing In Fintech Companies?

Since 2010, more than a whopping $50 billion has been invested into Fintech firms. We find out why the transformational trend – that is changing the way people get loans, gather research, manage money and even invest – remains disruptive to the financial services industry in 2017.

Written by WEALTH Team on 8 February 2017

Welcome to the global ‘Fourth Industrial Revolution’ where innovation is brought from non-traditional competitors to the financial services industry.

Buoyed by a transformational trend that is changing the way people get loans, gather research, manage money and even invest, global Fintech investment in the first quarter of 2016 amounted to US$5.3 billion, up 67% year-on-year, according to a report by global consultancy, Accenture.

Fintech refers to financial technology or an industry composed of companies that utilise technology to make financial services, enable provision of financial services or drive technological innovation in provision of financial services.

Asia-Pacific financial technology ventures, primarily in China, have reached US$9.62 billion as of July 31, 2016 – more than twice the US$4.26 billion invested in the region in all of 2015, according to Accenture’s analysis of CB Insights data.

Previously, in 2015, China also led the region with US$2 billion in Fintech investment, followed by India with US$1.6 billion.

bar chart of investment in fintech in asia-pacific

Investors in Fintech companies such as Singapore-based multi-family office and private equity firm, Golden Equator Capital, says they are always on the lookout for investment opportunities that centre on technological progress and companies that deliver high impact.

“Initially, these Fintech companies start off as competition for the banks as they fill gap areas that banks can’t perform efficiently and effectively. They provide solutions that are progressive and purposeful but at the same time, are also disruptive for the banks,” says Golden Equator Capital’s Managing Partner, Daren Tan.

More than $50 billion has been invested into 2,500 Fintech firms since 2010.

To capitalise on this growth wave, Golden Equator Capital has also launched a second Technology and Innovation Fund of SGD$100 million, which has a strong focus on Asean Fintech companies.

Fintech climate in Asia for 2017

On the current Fintech climate evolving in Asia for 2017, Daren explains that interest in Fintech has spiked over the past 2 years, with many financial institutions looking for Fintech solutions to service unbanked consumer demand for digital banking products and solutions.

“We see increasing cooperation between financial institutions and startups, in core areas such as payments, banking and insurance. Fintech startups have the advantage of being agile, but many consumers still place confidence in traditional financial institutions. There is a massive opportunity for Fintech startups and banks to collaborate and leverage each other’s strengths to bring financial solutions to the market at scale.”

As Fintech matures, it will be more apparent that technology is a necessary tool that helps extend into higher efficiencies and reach, maximising the same business fundamentals in areas of transactions, P2P/SME loans, insurance, wealth management and investments.

Despite still in its infancy, robo-advisory is also going to further upend the financial industry in 2017. Customers will benefit with lower fees and lower minimum commitment for top-notch investment portfolios.

Although wealth management is traditionally a relationship-driven business, the second or third generations of ultra-high net worth families, typically millennials, are increasingly adopting technology and artificial intelligence (AI) to advise on wealth and investment matters. The investment products for robo-advisors are also increasing in diversity and sophistication.

Disruptive impact of Fintech

Indeed, Wall Street and financial hubs of the world are being disrupted. Cloud-based software technologies, such as blockchain and proprietary black-box algorithmic trading systems are replacing and dictating the rationale behind execution of trades, all of which are key domain expertise of professional investment trade managers.

The impact of AI as key drivers of change, higher efficiencies and effectiveness will hasten the pace of life. There are 2 sides of the same coin – with the velocity in change and progress, it also gives rise to a generation less tolerant of lags and procrastination.

However, in the broader scheme of things, change is the only constant and historically, technology has shown how its impact can be sustainable even in times of rapid progress. In this current scenario, technology and its evolving intelligence will motivate new types of work and create new jobs too.

Daren adds: “The revolution in technology is meant to liberate us from inefficiencies, allowing us to achieve that ideal economic balance in deciding how we apply AI to Fintech, the workforce and build smarter economies.”

Daren Tan

Managing Partner, Golden Equator Capital

To assist the portfolio companies from our Technology and Innovation Fund, we have a comprehensive business structure which consists of a wealth management team, as well as a consulting group with tech development units and digital/creative service providers.

We have our own tech and innovation hub with a full support environment, where we curate and invite portfolio companies and other related business partners in establishing a collaborative ecosystem. This holistic structure enables us to guide companies – in connecting, collaborating and scaling their businesses.

WHO ARE GOLDEN EQUATOR CAPITAL?

GEC are a boutique wealth and investment specialist. With wealth management advisors as well as fund and investment professionals under the same roof, they offer a flexible and comprehensive alternative to a private bank.

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