?? WealthTech Booms, FCA Innovates, BNPL Giants Face Credit Check Dilemma: A Snapshot of Q1 2024 in FinTech
WealthTech sector valuations soaring, FCA looking to pave a new digital path, and potential credit checks pose a real threat to BNPL giants.
The WealthTech sector is resurgent, with newfound demand igniting a surge in valuations during the first quarter of 2024. While it's still catching up to other FinTech segments, the outlook is brimming with optimism.
What’s driving this new interest in WealthTech companies? Why are financial services companies suddenly courting cutting-edge WealthTech solutions again?
In reality, WealthTech solutions have been in demand behind the scenes, but several key factors have propelled them into the spotlight:
?? Interest in alternative investment classes (crypto and ESG)
?? Improved resilience and adaptability
?? Enhanced regulatory responsibilities for financial services
?? M&A activity
As funding for WealthTech startups improves, the market is shifting towards mature assets. The average size of WealthTech M&A deals surged from $98 million in the first 3 months of 2023 to an impressive $145 million in 2024.
Financial service pioneers are seizing the moment, embracing WealthTech solutions' expanding capabilities and encouraging hesitant clients to dive in. WealthTech serves as the critical bridge between traditional finance and the tech-driven future - the promised land for many. How can we best describe the evolution?
In its infancy, the WealthTech bridge was a quiet one-lane road; now, it's a bustling multi-lane highway with increasing traffic demanding even more lanes. It looks like 2024 is poised for growth and heightened M&A activity in this dynamic space!
Regulation and innovation don't often cozy up together, but is the FCA ready to challenge that notion??
When FCA chief executive Nikhil Rathi took the stage at the recent Digital Regulation Cooperation Forum (let's call it the DRCF), the excitement about embracing new technology was tangible.
So, is it time to grab your bucket and spade and dive into the FCA sandbox?
Testing and refining new ideas in a risk-free environment sounds like just the ticket for today's FinTech innovators. And with the vast potential of Open Banking and Open Finance still waiting to be fully explored, we're only scratching the surface of this new digital frontier.?
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Is the FCA gearing up to unleash a fresh wave of digital services? Well…
Amidst the tech appreciation and regulatory chatter, there might be hope for FinTech trailblazers struggling under the shadow of Big Tech. With a push to curb the power and influence of these giants (though some might argue that horse has already bolted), we could be looking at mandatory data sharing. Now, that would be revolutionary!
This then prompts the question, what incentive (more likely plural?) could the FCA give to Big Tech to share their invaluable data??
In the whirlwind world of instant credit and groundbreaking FinTech solutions, Buy Now Pay Later (BNPL) has been grabbing headlines for a while now. Operating under the regulatory radar (for now), it seems we've hit a pivotal moment - a broadside reality check for the broader FinTech arena.
So what’s happened?
Back in February, Apple decided to rock the boat, reporting Apple Pay Later loans to credit agency Experian. Previously, consumers were also able to fly under the radar, taking out short-term “loans” which didn’t appear on their credit records. Will Apple’s move prompt others to follow suit??
Not so far - they are resisting the Tech giant's lead.
Are these phantom debts a real problem or an overblown headline?
A staggering 48% of UK adults used BNPL in 2023, spending ￡16.8 billion. A 12.8% increase from 2022 is not too dramatic - until you realize that online spending in the UK dipped by 1.3% in the same period.
With 22% of BNPL users missing at least one repayment in the latter half of 2023, debts are piling up, late fees are mounting, and regulators are taking notice.
While Experian is not yet using BNPL data when calculating credit scores, surely it’s only a matter of time??
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