EUROPE CLIMBS PAYMENTS INNOVATION RANKING

Geography, availability of funding and collaboration driving global payments innovation

The Global Payments Innovation Jury today releases its 2017 Report, revealing that payments innovation in Europe is being propelled by progressive regulation, innovation hotspots and changing consumer behaviour.

The Global Jury is a panel of 70 CEOs and senior industry executives from 37 countries across 6 continents, making it the most global body to look into payments innovation. Every two years, the Jury convenes to compile a global research report into payments and fintech innovation trends.

Regional differences

While Asia remains home of the most payments innovation, a position it has held consistently since the inaugural 2008 Jury, for the first time in nine years, Europe has leapfrogged Africa, North America and Latin America to take second place in the global rankings.

“While Europe has never been rated favourably for payments innovation in the past, the 2017 Jury sees grounds for optimism. There is now a much more progressive regulatory environment in Europe, world-leading innovation hotspots have developed in London and Berlin and we are starting to see that consumers are more willing to give new financial service providers a go. All of this has kicked the UK and Europe up the global league table but realistically they are still well behind China and the rest of Asia” said John Chaplin, Chairman of the Global Payments Innovation Jury.

Funding shortfall

While investment continues to flow into fintech companies, the 2017 Jury highlights that attracting investment at specific points in the lifecycle of a business can be difficult. The Jury reports that on a global level, the picture is of a marked shortage of growth stage capital for payments companies in all regions with a third of the Jury describing it as poor or very poor.

“There is constant noise around the availability of funding for startups but generally, with the notable exception of Africa, entrepreneurs with good payments ideas manage to raise the initial finance to get their companies going. Where it becomes difficult is that many payments businesses take much longer to become profitable than originally hoped, and funding in the growth stage can become hard to obtain. We certainly have this issue in UK and Europe,” commented Chaplin.

“We’re seeing the appearance of ‘teenage zombies’ – stagnating startups that have grown into mid-sized businesses without succeeding in becoming profitable.  These companies are often being drip-fed just enough funding to keep them going but not enough to make a real breakthrough. This leads to some businesses surviving longer than they should while others are simply not receiving the funding they need to scale and succeed,” concluded Chaplin.

Collaborate to innovate

The Jury identifies collaboration between startups and larger, established players as a win: win strategy. It can help startups to scale up and succeed whilst simultaneously solving the problem that larger organisations in financial services have in innovating.

Chairman of the Global Payments Innovation Jury, John Chaplin, continued, “Payments and fintech startups are great at using technology to develop new business models but getting large numbers of users signed up can be really tough and involves major marketing spend. And the established players such as banks, have large numbers of customers but often struggle to develop new services. So this collaboration model makes perfect sense.”

However, the Jury points out that there are some hurdles to overcome to put these partnerships together and make them successful.

“Given that the financial services industry is heavily regulated and scrutinised in almost all countries, established players have to carry out extensive due diligence on startups they plan to partner with. This can be a shock to the system for startups used to operating a lean business model and making decisions quickly,” explained Chaplin. “Notwithstanding the challenges in creating agreements, almost three quarters (74 percent) of the Jury report that collaboration is higher than three years ago so these deals are clearly getting done.”

Geography, availability of funding and collaboration driving global payments innovation

The Global Payments Innovation Jury today releases its 2017 Report, revealing that payments innovation in Europe is being propelled by progressive regulation, innovation hotspots and changing consumer behaviour.

The Global Jury is a panel of 70 CEOs and senior industry executives from 37 countries across 6 continents, making it the most global body to look into payments innovation. Every two years, the Jury convenes to compile a global research report into payments and fintech innovation trends.

Regional differences

While Asia remains home of the most payments innovation, a position it has held consistently since the inaugural 2008 Jury, for the first time in nine years, Europe has leapfrogged Africa, North America and Latin America to take second place in the global rankings.

“While Europe has never been rated favourably for payments innovation in the past, the 2017 Jury sees grounds for optimism. There is now a much more progressive regulatory environment in Europe, world-leading innovation hotspots have developed in London and Berlin and we are starting to see that consumers are more willing to give new financial service providers a go. All of this has kicked the UK and Europe up the global league table but realistically they are still well behind China and the rest of Asia” said John Chaplin, Chairman of the Global Payments Innovation Jury.

Funding shortfall

While investment continues to flow into fintech companies, the 2017 Jury highlights that attracting investment at specific points in the lifecycle of a business can be difficult. The Jury reports that on a global level, the picture is of a marked shortage of growth stage capital for payments companies in all regions with a third of the Jury describing it as poor or very poor.

“There is constant noise around the availability of funding for startups but generally, with the notable exception of Africa, entrepreneurs with good payments ideas manage to raise the initial finance to get their companies going. Where it becomes difficult is that many payments businesses take much longer to become profitable than originally hoped, and funding in the growth stage can become hard to obtain. We certainly have this issue in UK and Europe,” commented Chaplin.

“We’re seeing the appearance of ‘teenage zombies’ – stagnating startups that have grown into mid-sized businesses without succeeding in becoming profitable.  These companies are often being drip-fed just enough funding to keep them going but not enough to make a real breakthrough. This leads to some businesses surviving longer than they should while others are simply not receiving the funding they need to scale and succeed,” concluded Chaplin.

Collaborate to innovate

The Jury identifies collaboration between startups and larger, established players as a win: win strategy. It can help startups to scale up and succeed whilst simultaneously solving the problem that larger organisations in financial services have in innovating.

Chairman of the Global Payments Innovation Jury, John Chaplin, continued, “Payments and fintech startups are great at using technology to develop new business models but getting large numbers of users signed up can be really tough and involves major marketing spend. And the established players such as banks, have large numbers of customers but often struggle to develop new services. So this collaboration model makes perfect sense.”

However, the Jury points out that there are some hurdles to overcome to put these partnerships together and make them successful.

“Given that the financial services industry is heavily regulated and scrutinised in almost all countries, established players have to carry out extensive due diligence on startups they plan to partner with. This can be a shock to the system for startups used to operating a lean business model and making decisions quickly,” explained Chaplin. “Notwithstanding the challenges in creating agreements, almost three quarters (74 percent) of the Jury report that collaboration is higher than three years ago so these deals are clearly getting done.”