23 November 2022
There is no doubt that the FinTech market has been one of the major success stories since the turn of the century. These nimble and innovative start-ups have disrupted traditional markets and forced many banking institutions onto the back foot. While the future still looks promising for FinTechs, recent developments have seen valuations come under pressure. Will traditional banks raid the APAC FinTech sector and take advantage of reduced valuations?
As global economies come under pressure, there is no doubt that the appetite for FinTech start-ups in the Far East and globally has reduced. Investors are typically derisking their portfolios in the short-term with start-ups often one of the first casualties. We then saw the collapse of the FTX crypto exchange which, not necessarily market led, has shaken confidence in the sector.
While it has been a challenging time for the technology sector as a whole, some of the more speculative FinTech companies have seen their valuations slashed by up to 90%. Consequently, these companies may struggle to raise much-needed finance in the short to medium-term, leaving the door ajar for long-term suitors to emerge. It would be unfair to suggest that the Far East FinTech market is in crisis but at best the sector is going through a consolidation phase
It is no secret that many global financial institutions have seen their traditional bread-and-butter markets disrupted by innovative FinTech start-ups. The double whammy of lost market share and reduced margins has had a serious impact on the bottom line. Many traditional banks have struggled to keep pace with the fast moving FinTech market, unable to match the technology while unwilling to invest on previous heady valuations. However, could there be a short-term window of opportunity?
The Far East is a historic hotbed of innovation with the FinTech market leading the way in recent times. Use of machine learning and artificial intelligence has already revolutionised the industry but we are only just scratching the surface.
Many of the innovative FinTech services available today were thought impossible just a few years ago. Huge leaps in technology have led to the creation of new and growing financial services. There is intense speculation that global banking giant will use the current downturn in FinTechvaluations to add to their range of financial services.
In many ways, this makes perfect sense. Many of these banking giants have cash available for investment while numerous FinTechs face short-term liquidity issues. Whether these innovative forward-looking operations will fit within a more traditional banking structure remains to be seen. However, it is unlikely that traditional banks will acquire FinTech start-ups and starve them of funding. But do they are really appreciate the concept of FinTech?
Historically, traditional banks were caught offguard by the fast-moving innovative nature of the FinTech market, unwilling to pay rich valuations to get involved. However, times are changing!
Short-term confidence in the FinTech sector has been hit by a mix of economic challenges and specific company related issues. Hopes that some of the listed SPACs would emerge with additional investment funding has yet to materialise. Therefore, is this a perfect time for old style traditional banking institutions to move into the modern era and embrace the innovative forwardthinking FinTech sector?Back to News