The first thing you should know about fintech is that it's not a new phenomenon. It's been around for decades – the ATM is a prime example of fintech.
So saidRadboud Vlaar, Founding Partner at Orange Growth Capital, who has 20 years' experience in the industry, at Tuesday afternoon's Innovation Disruption & Tech Forecast summit at SuperReturn Berlin.
The industry continues to fascinate him: "It wakes up the banks. The whole concept of having disrupters, and incumbents having to respond, makes it a fascinating place to invest," he said.
There were also massive differences per region, interjected Rob Heyvaert, Managing Partner, Chairman & Chief Executive Officer at Motive Partners.
"Europe has a stronger history of fintech than the US, and Asia has the benefit of being able to skip legacy and therefore develop newer innovation than Europe and the US," he said.
A bubble?
Was there a bubble in fintech?
Yes, stated Radboud.
"Around 40% of every dollar in VC goes into fintech," he said. On the PE side only 2%.
And valuations were enormous.
"The question is, how do you as an LP looking for a good investment relate to the ever demanding entrepreneur who thinks he has a good idea and that it's worth millions?" asked Radboud.
There's a lot of hype, agreed Rob, but a lot of lessons learned as well, he said, citing Bitcoin as an example.
It was a question of whether there were sound economics behind the idea, he added.
Customer take up
A lot also depended on the customer, said Dr Daniel Schmidt, CEO of CEPRES and the only entrepreneur on the panel. The way in which people took up technology and adapted to it varied a lot.
"The US is the strongest market for innovations and startups because the user is accepting it the fastest," he said.
"But we have clients in Europe who, when we tell them about our groundbreaking technology ask us who else is using it? They don't want to be the first, and it's even worse in Asia.
"In the US they say who else is using it, and they hope that we say no one."
Where is the money being made?
Rob felt that some of the hype in the B2C area had died down, and it was the more hidden areas where money was being made, such as security and KYC (know your customer).
The opportunities lay in making the sector more efficient and improving the customer experience, he added.
Mark Schmitz, General Partner at Lakestar, agreed: In the beginning there was a lot of talk about disruption and the new wave of companies destroying existing incumbents, but nowadays it seems that a lot of companies have adapted from the B2C model to be more enablers in the existing market," he explained.
Daniel put it even more simply: "It's important to make revenue, and you make revenue if the product is demanded, if an industry needs it to fulfil their tasks.
"We work in a traditional industry with traditional processes. From my point of view fintech won't replace industries, it will support them," he added.
However, this wasn't the case with insurance, argued Rob. This was such a fragmented industry that you could easily disrupt the chain.
Marc P Bernegger, Serial Web Entrepreneur and Fintech Investor, said that new companies can start challenging the way things had been done in the past, but that they were cooperating and collaborating with banks rather than doing it on their own.
We are at a stage now, concluded Radboud, where the industry itself will find solutions for its own inefficiencies.