FinTechs are one of the hottest startup topics of the year. Experts expect steep growth in company valuations, investments, and acquisitions. A recent study identifies Munich as one of the global FinTech centers.
The international law firm White & Case, based in New York City surveyed 150 decision-makers from the international financial sector on the development of FinTechs. Respondents largely agree that FinTech valuations will rise over the next two years. Experts also predict that the funding raised by FinTechs will increase in the coming year. Surprisingly, however, more than half of the industry insiders surveyed already consider financial startups to be overvalued.
When asked which cities will be home to the most attractive financial startups in the next 12-24 months, it's no surprise that almost half of all respondents named Silicon Valley as the top location. London, Singapore, Hong Kong, and Munich follow.
Brexit could give Munich a further boost as a top location in continental Europe. After all, just over one in four respondents are deterred from making a deal in the UK by the current political situation. The top choice among alternative locations is Germany (38%), followed by the USA (36%).
“Financial industry driven by fintech developments”
Meanwhile, startups are already clearly making their mark on the financial industry: 95% of all respondents plan to enter into a deal with a FinTech company within the next two years. A good half want to do this in the form of a collaboration, and at least one in three respondents plans to expand or even replace their own services by acquiring a FinTech.
"The financial industry is already significantly driven by fintech developments and M&A deals. There will likely be even more collaborations in the future. Open models in which several fintechs and several banks work together are also possible,"
says Prof. Dr. Roger Kiem, Partner at White & Case. Kiem identifies, among other things, the company valuation of FinTech startups as critical points:
"But questions of valuation could become increasingly crucial. Traditional company valuation methods often don't work, and liability issues are at the top of the agenda for potential FinTech partners."
When working with startups, the study participants are particularly concerned about a lack of cultural fit and technical problems: A good two-thirds of respondents see the different work culture as one of the biggest hurdles. More than half are concerned about the technical integration of acquired startups and problems with legacy systems.
