• Roland Berger study: 86 percent of Europe's FinTechs put their money on collaboration with established financial service providers
• FinTechs perceive customer confidence as the key to success and as one of the strengths offered by incumbents
• Young companies see the best chances in asset management, payments and crowdfunding
• The UK, Ireland and France are the hottest markets for start-ups – Germany has some catching up to do

Munich, November 16, 2016

Around 19 billion dollars were invested in FinTechs the world over in 2015 – up nearly 60 percent on the previous year. As investors see it, technology-driven start-ups with innovative products and services are set to grab market share from banks and insurance companies. Yet it is clear that FinTechs do not see themselves as merely rivals to the established companies: 86 percent of start-ups want not confrontation but cooperation with industry leaders. And one third do not believe that they will be in a position to replace traditional financial institutes. The main benefit that start-ups anticipate achieving out of collaboration is access to a broader customer base (78%). These are some of the findings of the latest Roland Berger study, entitled "FinTechs in Europe – Challenger and Partner", in which the consultancy polled the opinions of 248 FinTechs across 18 European countries.

"FinTechs have a realistic view of their role in the market: while they are indeed changing the financial industry, they alone will not herald a revolution," said Martin Krause-Ablass from Roland Berger. "What banks and insurance companies themselves can get out of collaborating with FinTechs are opportunities to drive their own digital transformation. For them, this is about more than technical disruption, it is also about cultural transformation. That is exactly why people say that digitization begins in the head – it is all about having the right mentality. The process of change the incumbents face will certainly be painful but, given the entry of new competitors, it is unavoidable: the market will also be penetrated by tech giants who will ratchet up the pressure on financial service providers in the medium term – and players need to be prepared for this."

FinTechs aspire mainly to work in partnership with financial industry heavyweights. They are less interested in accelerator models (14%) and incubator models (9%). The majority of start-ups expect banks and insurance companies to respond to the new competition with a flurry of M&A activity.

Customer confidence: A success factor and one of the strengths of established financial service providers

FinTechs consider customer confidence (71%) to be the most significant factor in a company's success in the financial industry. And that is precisely where they see one of the strengths of established players. "The years of crisis left their mark on the industry but traditional players remain the first port of call for many companies and private individuals," commented Wolfgang Hach from Roland Berger. On other significant criteria such as product transparency and service convenience, FinTechs believe they are in the advantage.

Fully 91 percent of start-ups consider themselves very capable of serving the needs of their clientele well. Areas where banks and insurance companies are strong, such as in financial resources or brand awareness, are less relevant for FinTechs. Almost three quarters of the young firms do not consider a comprehensive knowledge of the regulatory framework to be a significant factor in their corporate success, many of them operating in the less regulated segments. "Start-up companies should not underestimate the regulatory aspects, however. This is an area where traditional providers have a distinct advantage," said Wolfgang Hach.

FinTechs are skeptical about whether established players in the market are actually geared up for the digital transformation. Only 15 percent of firms believe that banks are prepared – with 14 percent holding that opinion of insurance companies. A whopping 95 percent of the new market players believe they possess better digital competency than the incumbents.

Asset management, payments and crowdfunding hold the greatest potential for FinTechs

Study respondents expect the greatest potential for growth to lie in investing and asset management (55%), payments (54%) and crowdfunding (52%). Two thirds of companies anticipate strong market growth in their segment, with firms that offer crowdfunding and crypto/blockchain solutions being the most optimistic.

FinTechs mainly concentrate on B2B business. But increasing numbers of start-ups are interested in going beyond the wholesale market to offer their services to retail customers too. "European FinTechs tend to focus on new solutions at a single link in the value chain. The majority operate in just one market, but they have plans to expand into new countries in the coming years," explained Martin Krause-Ablass.

Germany is not the first choice

Asked about the main criteria in any decision on where to set up business, FinTechs stated that the chosen location must offer a good selection of skilled employees. The next criteria in line are regulatory openness, strong networks and the availability of investors in the local market. Survey respondents currently see the UK, Ireland and France as the markets that offer the best conditions for them to do business.

"Rigid regulation and a fairly small pool of investors are what is preventing Germany from performing better against European peers," concluded Wolfgang Hach. "FinTechs are finding plenty of promising talent here. Regulatory clarity is needed in order to foster these people and thereby support innovation. Germany should also guarantee the availability of information to answer any legal questions and ensure the provision of opportunities for personal exchange."

• Photos Baks / iStockphoto