Capital Markets Not Benefiting Enough from Fintech

A new report by the Boston Consulting Group showed that not enough investment or attention is going towards the role of fintech in capital markets. The report showed that banks and start-ups are not paying enough attention to the sector, despite the massive gains that can be realised from it. Only four percent of venture capital investment is going to fintech focused on capital markets. It estimated that only seven percent of fintech start-ups are involved in capital markets. Even more disturbing was that blockchain was receiving the least amount of funding, alongside other post-trade technologies. It has been projected that roughly two-thirds of all banks will be implementing blockchain by 2019.

“The vast majority of fintech disruption in the banking industry is happening on the retail and corporate sides, where technology provides a way to serve large and diverse client bases while still trying to reduce the cost of customer acquisition across a number of distribution channels…The prospect of mass adoption makes equity financing readily available with numerous VC firms on the lookout for the ‘Uber moment’ of finance,” said the report. The reduced interest in capital markets has been blamed on the high level of regulation in the industry and the general complexity of it. The fact that market regulation is a deterrent should be the very reason why more investments should go towards it. The report showed that banks working with fitnechs would attract more funding from investors, as they would be able to quickly carve out a niche for themselves. “Incumbents, by being active investors, can shape business models and help fintechs evolve into collaborative suppliers rather than disruptors,” it said.