FinTech

Crossing the FinTech Horizon: What Lies Beyond?

MEDICI

Over the years, there has been an evolution in terms of how banks have perceived FinTech startups. While FinTechs were initially viewed as a threat to the larger banking sector, over time, an understanding came about that being in partnership with the other is the only way to grow. In recent years, banks and FinTechs have increasingly collaborated to bring innovations to the market, impacting millions of lives. Such services significantly impact the socioeconomic development of a country. Learning from this, investors and financial institutions have been eyeing startups that are ‘Beyond FinTech’ and those which focus on areas that are making an impact in the movement of goods/services across key economic sectors (agriculture/health/real estate/energy among others).

The scope of what is referred to as ‘Beyond FinTech’ extends to a variety of areas including but is not limited to AgriTech, PropTech, HealthTech, CleanTech, EdTech, and others. The spectrum of these startups are able to not only provide tremendous value to the operational aspects and address innovation needs in respective areas but are also especially impressive considering the amount & quality of digital data they are generating, which are fast becoming alternative data sources for lending & insurance underwriting.

Here is a brief look at four areas where startups have been taking significant strides:

AgriTech aims to use technology that can help agriculture-linked businesses operate more efficiently. These startups provide a platform to use the data generated by technologies such as sensors, IoT-based monitoring, and satellite imaging for financial services. Notable startups: Indigo (USD 609 million) and Inari (USD 40 million).

PropTech is powered by new-age technologies and data sources that can eliminate the prevailing challenges of data asymmetry through real-time inputs, advanced analytics, and simpler user interfaces for financial operations. The intersection of PropTech and FinTech can facilitate receivables, financing, insurance, and transfer of real estate asset ownership. Notable startups: Uoko.com (USD 184 million) and Ribbon (USD 225 million).

HealthTech is solving problems around unstructured, fragmented, and inaccessible data in the healthcare industry. HealthTech leverages developments in digital technology to improve delivery, payments, and effective consumption of healthcare. Creation of real-time health data by HealthTech startups can be vital to industry players such as insurers and healthcare providers. Notable startups: Tempus (USD 320 million) and Butterfly Network (USD 350 million).

CleanTech is an investment philosophy followed by investors to invest in environmentally friendly businesses. CleanTech generally refers to technologies such as solar, biofuels, water redemption, fuel cells, and other renewable energy sources. Notable startups: 8minutenergy Renewables (USD 230 million) and Genomatica (USD 227.1 million).

Startup Distribution in ‘Beyond FinTech’: Across Geographies

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  • There are about 10000 startups in these four segments cumulatively; HealthTech startups are the most predominant with over 5,000 in number globally, followed by PropTech (over 2500). CleanTech and AgriTech startups are emerging segments.

  • The Americas and Europe have a well-entrenched startup ecosystem across the segments while Asia, APAC, and Africa are witnessing the emergence of startups in this space.

  • A total of USD 7.58 billion was raised across 905 deals in 2018 across AgriTech, CleanTech, HealthTech, and PropTech areas, compared to USD 58 billion in FinTech.

  • PropTech leads the chart with total funding of USD 4.29 billion across 421 deals followed by HealthTech & AgriTech.

Beyond FinTech: Towards a Sustainable Future

While it’s still in its early days, it is evident that financial services by virtue of solving for ‘Movement of Money’ finds significant downstream data sources from areas such as AgriTech, CleanTech, HealthTech, and PropTech, which are thereby providing great opportunities for entrepreneurs to monetize data. Furthermore, FinTechs and banks can partner with startups in these areas to expand their services by offering payments, digital KYC, lending, and more, to a captive audience on these platforms – consequently rendering banking/financial services contextual and under the hood.

Having said this, partnerships between banks/FIs and ‘Beyond FinTech’ startups are still in a relatively nascent stage but have great potential to add significant complementary values to one another. These partnerships can lead to the development of financial products and solutions that are personalized and contextual, which can aid in providing a seamless user experience across the layers of commerce and finance in a scalable and sustainable manner.

Shubhanga Prasad & Nagendra R

MEDICI

Shubhanga comes with over eight years of professional experience predominantly in business management and strategy; and has a keen interest in new-age, technology-led business models. With substantial experience in corporate banking and product strategy, Shubhanga is currently heading MEDICI’s client engagements across banks/FIs, investors, and startup ecosystems. He brings his passion for technology and creating enabling environments for startups to his role at MEDICI.

A FinTech researcher and management graduate, Nagendra works on various syndicated and custom research assignments spanning multiple FinTech segments. He likes to analyze startup companies in the online retail and FinTech sectors. His interests also lie in corporate social responsibility, environmental impact assessment, and financial modelling.

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