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Innovators around the world have heralded fintech as a force that will remake the storied financial sector. Investors agree. In the first three quarters of 2018 alone, venture capitalists invested $32.6 billion in 1,164 companies — almost double last year’s $17.9 billion invested globally. Already, fintech startups are impacting consumers lives: in 2017, an EY survey across twenty markets found that 33% of people were regular users of at least one self-characterized fintech product, a figure that has more than doubled since 2015. Remarkably, 13% were regular users of five or more fintech services.
Globally there are 33 fintech unicorns. Of which, 24 (73%) are from the “West” (North America and Europe) and 6 (18%) are from China. There are only 3 elsewhere.
By analyzing the geography of successful models and exploring where they intersect, one can uncover valuable insights about the future of fintech. A comparison between the 24 Western fintech unicorns and the six Chinese unicorns reveals the emergence of two distinct fintech models. But in certain geographies, these systems are intersecting, and no model has yet to prevail. South East Asia represents this “ground zero,” and is an ecosystem ripe for analysis.
Fintech in the West
The last fifteen years of Western consumer fintech can be summarized in one phrase: the systematic unbundling of the traditional bank.
Fintech pioneers began innovating in an ecosystem with a highly banked population and reasonably accessible payment systems (e.g. ACH, Visa, Mastercard, Debit). Thus, to disrupt the industry, they targeted individual product lines of traditional financial services companies. First, startups like Paypal disrupted the way consumers pay for goods and services. Later, companies like Prosper and Lending Club took on lending with the advent of peer-to-peer loans. Next came startups like Betterment, Wealthfront and Robinhood that disrupted investment and wealth management. More recently, insuretech gave way to leaders like Trov, Lemonade and Metromile which have made it easier to purchase a range of insurance products. Finally, digital banks like our investee Chime has recently made considerable headway and is reinventing the overall banking experience.