The Confusion Around Fintech Lists


I see this mega basket called Fintech and it’s the word of the year besides disruption (but both are generally used in the same sentence). I remember not too long ago it was Asset Bubbles. I guess the whole world of Internet finance 1.0 has transitioned into fintech 2.0.

Fintech seems to span everything from infrastructure (Blockchain/Bitcoin) to credit, payments, settlement, processing, analytics, and discrete detailed solutions.

What annoys me is the Fintech lists that throw companies together from all walks of life and rank who is best in innovation. For example, here is KPMGs Top 10 Fintech Innovators:

1. Wealthfront
2. Kabbage
3. Motif Investing
4. Klarna
5. Square
6. Lending Club
7. Ondeck
8. Borro
9. Kreditech
10. Xero

KPMG commented about the list

The 50 Best Fintech Innovators report is a collaborative effort between AWI, KPMG Australia and the SC and analyses the global fintech space. The report highlights those companies globally that are taking advantage of technology and driving disruption within the financial services industry.

The process for selecting the top 50 innovators involved a universal search for innovative fintech companies to create a comprehensive list that was then ranked based on 4 factors: total capital raised, rate of capital raising, location and degree of sub industry disruption and the judging panel’s subjective rating of the degree of product, service, customer experience and business model innovation.

A formula was then used to combine this data and determine the overall ranking.  You can download their report here 

Another site putting together lists is the FinTech50 2014 

Yes, subjective formulas. We all remember those from our college days –a weighted average decision matrix is supposed to help us make the perfect decision every time. Except the weights are usually subjective. These lists throw together a mish-mash of technology vendors and include the likes of equity crowdfunding platforms (think CircleUp), retail bank platform providers, asset creators, wealth managers (FutureAdvisor), peer to peer consumer lending (think LendingClub) and payments companies (Bitcoin, Square, Paypal.) etc.

I can see why all the excitement. There has been close to $10bn invested in this space since 2008, with Payment vendors taking close to 40% of that money in the last 5 years. We have seen some of our own vendors that we follow here closely at Spend Matters and Trade Financing Matters receive various infusions during this time period – Taulia, TraxPay, Kabbage, OnDeck come to mind. To date there has been few IPO exits (Lending Club and Xoom are notable here), but more are surely to come.

It would be nice if someone had deep understanding of how these models worked and provided an appropriate list for a specific category and profiled key differences between the vendors in that category. Maybe I am asking too much. That takes real work. Sticking to my knittings around all things working capital, I plan on doing some papers around various FinTech segments that do precisely that.

I am completing the first one around Electronic Invoice Marketplace vendors, and plan on doing one around Small Business Marketplace Lenders.

Stay tuned!

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