While fintech and banks have long been at odds, with the latter fearing the arrival of startups likely to tread on their toes, a new form of collaboration is developing with the rise of "tech for fin", which represents a great opportunity for both sectors.
The development of "tech for fin
Tech for fin enables bankers and other financial players, such as insurers and asset managers, to boost their productivity through the provision of cybersecurity, big data and artificial intelligence technologies by startups.
Of the 630 million euros raised in 2019 for fintech as a whole, 41 went to startups specializing in tech for fin. While fundraising is still modest, the number of financing operations has increased by 80%, confirming the sector's rapid expansion.
Dreamquark, founded in 2014 by Nicolas Meric, specializes in the development ofartificial intelligence solutions. While it initially targeted the healthcare sector, it has now focused on finance and insurance, two sectors in which artificial intelligence can notably help automate and therefore accelerate the selection process for credit underwriting. It also helps advisors to better target their customers, enabling them to offer the right products at the right time.
Dreamquark has raised €14 million in 2019 and convinced major players in the financial sector, such as BNP Paribas and AG2R La Mondiale.
Banks no longer see fintechs as competitors, but as innovative companies that can provide them with solutions to better meet their customers' needs. The Arkea group, which includes Crédit Mutuel Bretagne and Crédit Mutuel du Sud-Ouest, is no exception, and has invested in a number of startups, including Fluo, Grizbee, Linxo, Yomoni and Leetchi. The opportunities for traditional players in the financial sector to invest in innovative technologies are indeed numerous.
Fintech: from consumer to B2B
A growing number of startups are turning away from mass-market offerings, due to too much competition, and focusing on B2B.
This means they need less volume to cover costs, and are generally more profitable. Average shopping baskets are higher, and customers are more loyal. Their success is often based on reliable, innovative technologies, not on marketing with uncertain returns.
Many startups have also opted to keep their offerings aimed directly at the general public, while at the same time developing B2B offerings. This is the case, for example, with Younited Credit, which offers credit to individuals, while developing its Younited Business Solutions offering for banks, insurers, payment service providers, cell phone operators and e-commerce sites.
More than a third of the funds raised in 2019 were by startups specializing in the payment sector, which is currently number one in the French fintech landscape.