In an insightful presentation during The Future of Finance Summit 2017 in Singapore, Vladislav Solodkiy, managing partner of Life.SREDA, an international venture capital firm, shares the emerging trends in Asia's financial technology landscape, and the infrastructure requirements to build a stronger fintech industry.
Slava Solodkiy: I launched this fund a few years ago. Previously, we were based in Moscow. We invested mostly in U.S., U.K., Germany, Austria, little bit Russia and Ukraine. We invested from the first fund into 13 companies, already exited from seven. Most of our first first investments are quite iconic for fintech industry, like Simple Bank, Moven Bank, Fidor, SumUp, Anthemis Group. Two years ago, we relocated from Moscow to Singapore.
We are already here for two years, invested in eight companies in Singapore, Vietnam, India, and Philippines. Also, we are running two co-working space, Inspirasia in Singapore and InspiRussia in Innopolis. This first year when we will exclude the deal with Alipay. fintech little bit decrease.
But still, this industry is number one industry between whole VC-backed verticals, and for sure it will be the same story for the next two years. In the beginning of 2016, Asia became number one region in terms of money, which came to fintech industry across the world. At the end of the year, Asia increased their ratio. I want to provide this deals, not because of this company specifically, but because which trends are showing. The rise of Brazil, rise of insurtech, and rise of China.
Regarding exit strategies: most exit scenarios belong not to became listed company not to go to IPO, but to be acquired by some bigger players – traditional bank, Telcore internet giants, and most of new names between fintech unicorns as I mentioned before, they are coming from China. Numbers of unicorns is not rising so fast as we want to, but their total with Asia became twice bigger. In terms of diversity in fintech, still most of companies and money belong to payment companies and lending start-ups. Regarding current topic: banks became more active in fintech industries.
They invested 61% more in comparison with previous year, but if you will count whole money which came from banking side to fintech industry, total would be maximum 24%. It means that if whole banks will decide to leave this party, nothing will happen with fintech. Telcore is internet giants, e-commerce giants, messengers. They are more active players. Regarding participation, regarding support of this industry by regulators across the world: Asia became the loudest one. Regulators of Singapore, Malaysia, Japan, South Korea – they announced many activities, to be honest, not how hackathons awards, conferences converted to real deals.
We believe that it will happen later, but right now if you will count who is more active in terms of real results, for sure it is regulator from the U.K. They issued real new type of fintech licences for new players, not sandboxes. To my opinion, sandboxes are just polite ways to say “no” to fintech wares. So, to push them to work not with banks, but for banks. In terms of U.S. regulators, they became not so active as before, maybe because of Trump, maybe because of something else.
Regarding fintech in Asia, I mentioned before that Asia became number one region in terms of money, which came to fintech industry, but we have to be honest that most of this money belongs to China. China became number one market in fintech, not Southeast Asia. India is really very active in terms of numbers of deals. India is number one region for Southeast Asia. Belongs on the portion of this market and whole market of Southeast Asia dropped for 36%. By the way, Singapore is number one where here, but we see that there is some bottleneck problem with B and C rounds of investment.
There are many players on early stage and there are many potential buyers and strategic investors. But what will happen with small companies, hundreds of these small companies, tomorrow, during this year and next year because they are not prepared enough for appetite of big guys, and there is now many players who are supporting them together as regulators in mid-stage of their growth. In terms of diversification of fintech industries, by specifically in Singapore, the same situation like in other Asian countries, we see several strong players and several verticals. Still, most of other verticals are empty but any problem can be estimated as opportunity.
Singapore can invite foreign players to come to Singapore and to establish their businesses, to scale their businesses to Asian markets through Singaporean gateway. Regarding blockchain, everybody talking right now about blockchain requiring cryptocurrencies, but if you go count deals with real customers, real input to business processes, it’s not so big business. More hype rather than real results. Vice versa, for example, insurtech growing very fast, attracting millions of customers right now, and yes, Germany, Ireland, several companies started their businesses across Asia, for example in Singapore.
China also showing great results, not only new players but also such traditional players like Ping An Insurance Group. They disrupted themselves. They really transformed their businesses from traditional businesses to insurance businesses so they became very big, but oriental start-up styled company. If you will decide to launch your fintech company in U.S. or in the U.K., you will be launched in three months and you spend maximum 20% of your resources to be launched.
Why? Because you already know that such players like Bancorp will be happy to host you. CBW, a bank from Kansas, will be happy to host you. BBVA Compass will be happy to host you. You will spend maximum two weeks to talk with them. After that they will send you via email their open APIs, that’s done. You will be integrated, you will be launched.
Here in Asia, in any country, you have to spend three months to talk with different C-level guys. After that, three months to talk with the IT director. After that, six months to be integrated directly with the backend. Because still whole banks across Asia do not have their own APIs to host any kind of fintech start-ups. The biggest problem right now in Asia is lack of infrastructure. Who of you unite core banking systems of different banks across different countries with new players?
Because right now we see that none of these banks, even who promoted themselves as fintech promoters, they are not really advocates of fintech. They’re still trying to support their currently traditionally existing businesses. They want to save their role in the market. They do not want to disrupt themselves as I’ve mentioned. I think that this problem is not solved, important not only for fintech start-ups. I think that this infrastructure will help also governments to launch new services based on this infrastructure faster, cheaper, and easier than before.
I think that telcos, which had already attracted millions of customers across the world, to launch fintech services for their customer base based on currently existing banking infrastructure for their customers. I think that messengers who are moving right now toward payments, remittances, to launch their services too. I think finally that it’s a little bit stupid to talk about fintech in some specific country because fintech it is part of digital world, and in digital world you always have to scale. If you are not scaling, you are dying. You can create the biggest, the best one, fintech systems, for example in Singapore, but what next? How you are supporting Singaporean and fintech companies overseas?
Because once again, if you are not scaling, you are dying and I think this is the biggest problem right now, but the biggest opportunity for the next two years for all fintech players across the region right now.