A Perfect Swarm

Idea in Brief

Much has been said about FinTech players competing with Banks. Now, it is almost universally agreed that FinTech players are partnering and collaborating with traditional Banks.

What nobody seems to write about is competition within the global FinTech universe.

There is a remarkable number of startups globally that are working in similar or identical areas within the broader areas: payments, wealth management, digital currencies, digital identities etc.

For instance, Chinese players such as Tencent are expanding globally to follow Chinese tourists across the globe. TenCent opened offices in Europe to expand WeChat in Europe. Facebook owned WatsApp is expanding into the payments space. Alibaba is expanding Alipay in different countries signaling a global battle of Titans. Each titan has unique and sometimes overlapping network of users.

Swedish banks have a their own p2p payment app called Swish. American banks are collaborating on an app called Zelle to do the same thing. India has PayTM and Kenya M-Pesa.

While each of these players have a different user base, they serve the same needs. This implies a wave of competition and possibly consolodation within the fintech world.

Similar enabling Technologies like the Blockchain and Open API’s are creating stiff competition within the FinTech space.

Therefore, scale is critical for every entrepreneur within the FinTech space especially if they are going to go head on with Goliaths such as bank consortiums and Chinese and American FinTech behemoths.

What are Stacks?

In computer science, a stack is an abstract data type that serves as a collection of elements, with two principal operations: push, which adds an element to the collection, and pop, which removes the most recently added element that was not yet removed. The order in which elements come off a stack gives rise to its alternative name, LIFO (for last in, first out). Additionally, a peek operation may give access to the top without modifying the stack.

The name “stack” for this type of structure comes from the analogy to a set of physical items stacked on top of each other, which makes it easy to take an item off the top of the stack, while getting to an item deeper in the stack may require taking off multiple other items first.

For instance, an IT stack looks like this:

Source: mazikglobal blog

The Fintech Stack

A FinTech stack is illustrated below:

Source: reinventure group

Within each element of the FinTech stack, there are multiple players with their own network effects. For instance, within the security stack, there have been 421 deals with a funding value of $3.5 bn.

Tenable, Tanium, Lookout, Crowdstrike, Openpeak are some of the top funded companies within this space.

Likewise, as discussed above, there are multiple players in the transactions (payments) stack.

Alternate Types of Stacks

In a speech (delivered at the Northwestern Kellogg Public-Private Interface Conference on New Developments in Consumer Finance), Governor Lael Brainard, member of the US Federal Reserve board of governors, had this to say:

Because of the high stakes, fintech firms, banks, data aggregators, consumer groups, and regulators are all still figuring out how best to do the connecting. There are a few alternative approaches in operation today, with various advantages and drawbacks.

The OCC in the US is exploring the issuance of special purpose bank charters to FinTech players. On the other side of the Atlantic beginning in 2018, EU member states will be required to start implementing the European Parliament’s revised Payment Services Directive (PSD2). Among other elements, PSD2 created licensing regimes for third parties that access bank accounts for purposes of initiating payment orders or consolidating information with consumers’ consent.

How the Perfect Swarm Could Play Out

A list of Global FinTech 100 compiled by KPMG and H2 Ventures indicates a concentration of startups in the lending, payments , insurtech and regtech space

There were 35 companies from the US, 29 companies from EMEA and 14 companies from Asia.

To get another glimpse at the perfect swarm, look at the infographic on unbundling of a bank in the US:

Similar unbundling is also happening in Europe and Asia. Here is the swarm of FinTech companies unbundling the European banks:

Globalization adds to the density and extension of this swarm across the globe spawning competition and internal disruption. There could be multiple outcomes to this game for FinTech players:

  • Vendors to Banks
  • Outsourced R&D hubs
  • Merger with Banks
  • Merger with other Fintech Startups
  • Horizontal and Vertical Integration
  • Independently Scaling Up

Lessons for Entrepreneurs

Entrepreneurs should bear in mind the following:

  • Think Global
  • Think End to End
  • Think Long Term
  • Think Talent Wars

User Interface: Enter Augmented Reality (AR)

Snapchat has filed a patent for Augmented Reality (AR) spectacles. The illustration below is an excerpt:

Source: theverge

Apple’s next Iphone is rumored to be compatible with Apple AR glasses.

Microsoft Hololens has already shown what an AR future can look like.

In addition to software Stacks, the user interface layer will be radically different in the future with smartphones increasingly deploying AR technologies.

Why India Could be the Next Battleground

The hottest startup markets in Asia today are China, India and Singapore.

According to CBInsights, Asia is the earth’s largest and most populous continent. Nearly one-third of the world’s private “unicorn” companies that are valued at $1B+, are headquartered there, 52 unicorn companies total. China holds the most, with over two-thirds (71%) of the continent’s billion-dollar startups.After China’s 37 unicorns, India has the second most with eight. Other countries with startups valued at $1B+ include: South Korea (Coupang, CJ Games, Yello Mobile), Singapore (Grab, Garena Online), Japan (Mercari), and Indonesia (Go-JEK).

The most well-funded tech startup in Asia is China’s Didi Chuxing, which has raised $8.6B and is valued at $33.8B.

This is how the startup landscape in Asia looks like:


Compared to China where each payment app Alipay, WeChat had a closed API, India has taken a different tack characterized by Open API's, digital identity — UiD Aadhar and financial inclusion.

What this means is that the Indian market offers an almost level playing field for all global players such as Facebook, TenCent, Google. Look at Flipkart battling Amazon. It is likely that history will repeat itself in the FinTech space.

Concluding Remarks

While the future is being shaped, what is clear is that scale and control of or access to the client data stack will be critical for every player within the FinTech space.

FinTech players would be remiss not to think of their ilk as competition. While financial services is being disrupted, the FinTech space is disrupting internally.

It would not be unfair to conclude that disruption is a double edged sword.

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Abhishek Kothari

Abhishek Kothari

Futurist@The Intersection of Finance, Tech & Humanity. Stories of a Global Language: “Money”. Contributor @ Startup Grind, HackerNoon, HBR. Twitter@akothari_mba