Fintech financing revenues to exceed $10bn by 2020
Fintech platform revenues for lending and financing will exceed $10 billion globally by 2020, doubling the $5.2 billion expected this year.
This is according to a new study by Juniper titled Fintech Futures: Market Disruption, Leading Innovators & Emerging Opportunities 2016-2021, which found growth in fintech lending platforms would be driven by a combination of factors, including an acceleration in peer-to-peer (P2P) lending; crowdfunding becoming a viable alternative to traditional lending mechanisms and the deployment of next-generation analytics platforms.
The research further reveals in the absence of credit checking bureaus in emerging markets, applicants' social media activity will be a deciding factor for their loan applications, with suppliers developing equivalents to credit scores so that lenders can gauge their risk exposure.
Nevertheless, the research cautioned that the process might meet with greater consumer resistance in developed markets, with many would-be applicants likely to perceive the practice as an unwarranted invasion of privacy.
"Platform providers need to be transparent about how they assess firms and not just sell the tantalising potential of funding the next Facebook. We are yet to witness a blockbuster exit for investors, but a successful initial public offering would cement crowdfunding's foothold in the marketplace," says Michael Larner, research author.
According to SA law firm Webber Wentzel, crowdfunding is not a new concept. However, in SA the crowdfunding model of financing is still in its infancy stage as it is a concept which is not clearly understood or trusted by most, and a financing model which has proved to be difficult for the Regulator (the Financial Services Board) to regulate forthright.
"As it stands, the activity of crowdfunding is not regulated in SA, there is no specific mention of 'crowdfunding' in any piece of legislation, nor is there any proposal of legislation in the pipeline," says the firm.
Market and research firm Frost & Sullivan says growth of the fintech sector on the African continent will be driven by reduced taxes on investment in start-ups, steady increase in mobile use for mobile banking and payments, as well as an increase in the digital native demographic.
"While Africa's fintech sector is different to that of developed economies, it is similarly poised for exponential and rapid growth that will challenge existing financial service providers," notes Frost & Sullivan.
Meanwhile, the Juniper research points out that in North America and Europe, crowdfunding platforms would increasingly provide opportunities for affluent individuals to obtain a stake in promising start-ups.
According to a report by Accenture, fintech investments increased more than 10 times in the past five years globally.
"Investments have risen from $1.8 billion in 2010 to $19 billion in 2015 globally. The majority of these investments have also been concentrated in the payments area and this is where banks are seeing the most competition with new entrants," it says.