Editor's Note: In 2018, Kyriba was named among the Fintech 250, a list of the fastest growing and most influential financial technology companies in the world, for the second year in a row. The company website explains that they use a data-driven approach to identify the top 250 - a list that investors and analysts should be following. We decided to call on one of their founders to learn more about the company and what trends we should expect to see in 2019. The interview below is a summary of what we discovered from the CEO & Co-Founder of CB Insights Anand Sanwal.
What is CB Insights? CB Insights fuses machine learning, algorithms, data and visualizations together to help large enterprises ask, answer and articulate compelling answers to difficult questions - about growth, about competition and about the markets and technologies of the future.
Our machine learning technology mines a vast array of unstructured documents such as patents, earnings calls, news articles, company websites, regulatory filings, social media and more to derive these insights into the global economy.
Why did you start the Fintech 250? In any burgeoning area like fintech, it is important to separate the best from the rest. But in an area like fintech where there are thousands of companies, it becomes prohibitive to do this at scale.
The Fintech 250 aims to scale the evaluation of fintech companies so that our clients and the broader world can understand the companies, the trends, the technologies and the business models that are showing the most signs of promise. We create the list in a customarily CB Insights way which is to say, it is data-driven.
In its second year, the Fintech 250 was selected from a pool of nearly 4,000 companies based on data submitted by the companies, business model and momentum in the market, and the company’s Mosaic Score, CB Insights’ proprietary algorithm backed by the National Science Foundation that measures the overall health and growth potential of private companies.
What is the most important trend you saw in this year’s crop of vendors? There is an incredible amount of diversity within the Fintech 250 - in terms of the markets and use cases they are attacking to the technologies they are building. We often talk about the unbundling of the bank, but this year’s list highlights that it is not just the bank but the unbundling of insurance, payments, wealth management and more that is going on. Fintech startups raised record funding and deals in 2018 surpassing 2017’s annual record and so this unbundling will only continue.
How do you see fintech developing over the next three years, five years? Over the next five years, we see several trends developing. One global trend is fintech as a feature of high-frequency platforms that provide their core service outside of financial services. We are already starting to see early signs of this as e-commerce giants such as MercadoLibre, ride-hailing apps such as Didi and Grab, and messaging apps such as Line expand their focus into areas such as payments and lending. Even China's leading AI-based content aggregator, Toutiao, which counts more than 120M daily active users, has recently expanded into insurance after acquiring a brokerage firm.
Another trend we expect to see on both the B2B and B2C sides of fintech is increased consolidation and M&A. As leading enterprise and consumer fintech firms emerge, we expect them to subsume smaller fintechs to expand their market opportunities. A good example was Plaid's recent $200M acquisition of Quovo to expand into the brokerage and wealth management arena. An analysis of CB Insights data highlights that while fintech has seen funding grow consecutively for almost ten years, deal activity is starting to slow indicating that investors are starting to see winners emerge across different verticals.
A third trend is the battle to become the next-gen banking brand for millennials in the US. Over the past two years, a number of startups that have unbundled the bank by focusing on a single area such as point-of-sale lending, robo-advisory, commission-free brokerage, or micro-investing have all looked to add checking and savings accounts products. This trend is being enabled by new banking-as-a-service platforms such as Green Dot and Cambr, a joint venture between StoneCastle and Q2 as well as more seamless mobile onboarding interfaces. Time will tell whether or which efforts succeed as fintech companies look to more aggressively expand horizontally.
What do you say to corporates who are slow to adopt private fintech solutions? There’s a great Ernest Hemingway quote that we reference a lot when speaking to our enterprise clients. It comes from The Sun Also Rises where he asks:
“How did you go bankrupt?”
And the response is:
“Two ways...gradually, then suddenly.”
Change is happening at an unprecedented pace as markets and competition move faster than ever. Corporations are especially vulnerable to this acceleration with 52% of S&P 500 companies having disappeared in the last 15 years.
And so, it is important that corporations look at all the growth levers they have at their
disposal if they want to avoid this gradual then sudden dislocation. In addition to building, thoughtfully buying and/or partnering become important strategies to consider in their growth portfolio.
What are your fintech predictions for 2019? This year, fintech will become much more vibrant in emerging and growth markets. While investment to fintechs in the US may slow, markets such as Latin America and Southeast Asia may see an influx of new fintech ventures and investment.
In the US, fintech will continue its expansion into ancillary industries such as restaurants, real estate, and healthcare. Restaurant point of sale startup Toast recently became a unicorn, and we've seen several new companies look to solve financial services-related problems during real estate transactions.
Lastly, while banks have become significantly active making fintech investments, especially in the capital markets, we expect banks to continue to remain tepid in acquiring fintech companies in 2019. A 2018 CB Insights analysis shows that, since 2013, 80% of the top 50 banks by total assets operating in the US have not acquired a fintech startup. The lack of acquisitions over the last few years could be the result of stringent compliance measures or banks not wanting to carry inflated goodwill (intangible assets) values on balance sheets. We don't expect that to change significantly heading into 2019.
About Anand Sanwal: Anand Sanwal is the CEO & Co-Founder of CB Insights, a technology market intelligence platform that provides predictive intelligence into emerging technology trends, startups and corporate strategy. Prior to founding CB Insights, Anand managed the $50 million Chairman's Innovation Fund at American Express and worked in VC and corporate M&A. Before AmEx, Anand worked at Kozmo.com, one of NYC's most infamous dot com flameouts, where he learned that if you buy something for $2 and sell it for $1, you will not make it up in volume. He has degrees in Chemical Engineering from the University of Pennsylvania and in finance and accounting from the Wharton School of Business.