And we’re kicking off the week with new analysis and opinions on fintech with new finance space for 2023, payments, crypto, fintech stocks and more. Dive into the latest fintech insights and have a great start of the week!
The future of banks: A $20 trillion breakup opportunity (McKinsey)
The banking sector is at a turning point. Key measures for banks are at a historical low point. The sector’s price-to-book value has fallen to less than one-third the value of other industries. That gap is less the result of current profitability and more about uncertain profit growth in the future. While banks have pushed for great improvements recently, margins are shrinking—down more than 25 percent in the past 15 years and expected to fall to 30 percent, another 20 percent decrease, in the next decade. Of course, the future is uncertain. Regulation, technology, geopolitical shifts, and unforeseen innovations could radically alter the way that the industry develops. But we do believe that the banks that successfully manage the coming transition will use tech and data to embed themselves deeper into customers’ lives with real-time services that were unimaginable just a few short years ago. The opportunity is great for those who move fast into this new future. This article aims to draw a picture of what the future of banking could look like. The article examines the forces currently squeezing bank revenue, value, profits, and usefulness to customers and identifies five distinct areas where banks may well have to transform to thrive. Read more
How fintechs can survive the economic downturn (altfi)
Fintechs have shown they can drive innovation in times of difficulty, but they’ll have to adapt to keep their heads above water, writes Aleks Stefanovski. In 2021, the UK saw a record year for fintech investment, reaching $37.3bn, up sevenfold from 2020 and accounting for $210bn in investment globally. The explosive growth of the fintech sector in recent years has mainly been a result of its hard work, enterprise and commitment to innovation. It’s fair to say the sector was also helped by a favourable macroeconomic environment that, combined with the market resonance of fintech products, contributed to the overall growth of investment in the sector. However, in the first quarter of 2022, funding to fintech companies fell by 18 per cent, representing the largest percentage drop since 2018. This was mostly caused by rising interest rates, which reduced the valuation of fast-growth technology companies. This in turn led to less funding arriving in the fintech ecosystem, while the threat of a recession and the ongoing cost of living crisis have exacerbated this issue further. These economic challenges represent an additional financial burden for fintechs and have led to new operational challenges, such as growth uncertainty as a result of the recession and additional cost pressures due to inflation. Read more
Japan Embraces Web3 As Global Regulators Grow Wary of Crypto (Coindesk)
With tight regulations already in place that helped insulate FTX Japan and its investors from heavy losses, Japan is working on policy and guidelines for stablecoins, NFTs and DAOs as it welcomes a crypto future. “While many other countries are standing still and shrugging their shoulders in the face of the cold wind, Japan is positioned to play a unique role in the crypto industry.” So reads a proposal by Japan’s ruling Liberal Democratic Party Web3 project team. In other words: Where other nations fear crisis, Japan sees opportunity. After a recent trip to Tokyo, it’s hard to overstate how out of sync Japan is with much of the world. No one I spoke with seemed particularly fazed by the FTX meltdown or the string of crypto implosions that preceded it. The FTX crash has had “no impact on policy making,” said Masaaki Taira, a member of the House of Representatives and the ruling Liberal Democratic Party’s Web3 Project Team. Read more
Are regulatory inefficiencies holding back the UK? (Fintech Global)
A new report from TheCityUK has found that financial regulatory authorizations at the FCA and the PRA can be slow and inefficient. The report – titled ‘Improving regulatory efficiency on authorisations’ – details that whilst regulators continue to be a UK strength, where firms perceive their authorisations processes as too complex, opaque, or slow, it can discourage further growth and investment. While recognising and welcoming that both the FCA and PRA are already taking forward measures to improve their authorisations processes and reduce backlogs, the report sets out a series of recommendations for further action that, if delivered in conjunction with those measures already in train, would improve their speed, efficiency and effectiveness.TheCityUK’s research involved interviews with over 20 industry leaders and a survey of 40 firms about their experience of four specific areas of the UK regulation authorisation – processes, variation of permission, change in control and approval of senior managers. Read more
What is a crypto winter and are we still experiencing one? (Fintech Magazine)
“Crypto winter” refers to a prolonged bear market in the cryptocurrency industry, characterised by a significant decrease in the prices of cryptocurrencies and a reduction in market capitalization. It is a period during which investor sentiment towards the cryptocurrency market is negative, and few people are interested in buying digital currencies. The causes of a crypto winter can be many and varied. It can be due to a lack of regulatory clarity, a decrease in interest from institutional investors, or simply a result of market saturation. In some cases, the crypto winter can also be caused by a major security breach or hack, which can damage investor confidence in the entire market. In addition to declining prices, crypto winter is also characterised by a decrease in trading volume and a slowdown in the development of new blockchain-based projects. During this time, many companies in the cryptocurrency space may experience financial difficulties, leading to layoffs or even bankruptcy. Read more
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