3 Fintech Trends Driving Innovation in Finance

Investment in European financial technology reached an unprecedented $346 million in the first half of 2014, more than doubling the figures from the same period last year. For fintech professionals, this surge validates a fundamental shift toward disintermediated banking services as mobile technology and open data standards dismantle the historical dominance of traditional institutions.

What was announced

The first six months of 2014 saw a record $346 million flow into the European fintech sector, marking a significant acceleration in capital commitment compared to the same period in 2013. This growth is underpinned by structural shifts in how financial services are consumed, specifically the disintermediation of banking services. The ubiquity of smartphones and personal computers, combined with the influence of social networks, has empowered individuals to conduct their own information searches and validate alternative financial resources. This environment has fostered the growth of peer-to-peer (P2P) lending and online equity investment platforms, with AngelList serving as a primary network for business angels and equity crowdfunding payments.

The expansion of Application Programming Interfaces (APIs) and the adoption of open financial standards, such as XBRL, are identified as primary drivers for this innovation. These technologies allow startups to enter previously proprietary markets, challenging high commissions for international transfers through mobile applications that allow users to send payments directly from their phones. Additionally, the report notes a shift in payment methods, moving from standard bank accounts toward virtual currencies like Bitcoin and corporate credits such as Amazon coins. Big data is also being utilized in new ways, such as pooling social network data for fund management and using "social proof" to enhance credit scoring. This allows for more comprehensive company analysis and improved investment decisions by leveraging mass-compiled data from diverse online sources to disrupt an industry that has long benefited from a dominant position.

The companies involved

Equidam is a platform focused on the fintech sector, founded by Daniel Faloppa, which monitors the trends driving innovation and startup growth. The current market environment is characterized by the rise of platforms like AngelList, which has emerged as a primary network for business angels while also offering infrastructure for equity crowdfunding and the clearing of investment payments. In the realm of financial software, Bodetree is identified as a key player changing the accounting industry by outsourcing tedious financial management tasks through the strategic use of accounting data.

The broader fintech ecosystem also includes established technology giants and new currency protocols that are challenging traditional banking models. Amazon is noted for its foray into corporate credit via Amazon coins, while Bitcoin represents the shift toward virtual currencies that bypass standard bank accounts. These developments are empowering small and medium-sized companies to target an industry that is one of the largest in the world for deep innovation. The trends identified by Equidam suggest that the knowledge and resources required to disrupt finance are now in the hands of a broader range of entrepreneurs than ever before, utilizing open standards and mobile accessibility to encroach on sectors that were previously protected by high barriers to entry.

What this means

The doubling of investment into European fintech signals that the industry is reaching a tipping point where traditional banking moats are being systematically dismantled. The most significant pressure on incumbents comes from the shift toward open standards like XBRL and the proliferation of APIs, which strip away the advantage of proprietary data silos. As big data allows for the integration of social network activity into credit scoring and investment analysis, the reliance on traditional financial history is diminishing. This creates an environment where specialized startups can outperform universal banks on specific services, forcing a radical reassessment of how value is captured in the financial services value chain. As these trends mature, the question for the sector is whether traditional banks can pivot their legacy infrastructure fast enough to compete with the agility of these new, data-driven entrants.