Fintech: a new world order?

, posted in PayNode News

If we asked you to name the global centres of cutting-edge technology, you might first think of ‘Silicon Valley’ in California, long established as an iconic leader. Or perhaps you would picture the great minds emerging from England’s University of Cambridge every year and then working in the surrounding cluster of high-tech companies, often called the ‘Silicon Fen’. Older readers will remember how the Japanese genius for personal electronics (think Sony Walkman) changed the world in the 1980s but will also be aware Japan’s strength in the international electronics market has long been declining. As you consider Asia, therefore, you might think instead of South Korea or Taiwan. At PayNode, of course, we hope you would mention Sweden among the countries leading the way in global tech. One name that might not appear on your list, however, would be China…and that would be a mistake, especially if we focus on the world of fintech.

China’s passion for digital payments, for example, is already beyond dispute. If you look at a global ‘heatmap’ of electronic payments in 2016 – and you can do exactly that at: – you will see China (even excluding Hong Kong) made transactions totalling US$412,033m in value, second as a nation only to the US (US$635,463m).

Chinese companies, in many sectors of industry, are now pursuing international opportunities and investments with great vigour. We should not, therefore, be remotely surprised if China has both the ambition and the ability to become the global leader in financial technology. In fact, a January 2017 report on digital disruption from Citigroup, the investment banking and financial services giant, claims China has already replaced North America as the leading global investor in fintech. Reasons for that Chinese growth include the rise of major fintech start-up businesses (sometimes called ‘Chinese dragons’), helped by light regulation, encouraging entrepreneurial e-commerce; the surge in internet connectivity, particularly through mobile devices; and the rise of a mass middle class in China.

So, are the established fintech powerhouses of the US and UK beaten? Not necessarily. We must remember how much economic and political uncertainty surrounds the new Trump administration in the US and the long-term impact of Brexit on the UK. Investors hate uncertainty, assuming the worst and becoming very risk-averse. But as confidence hopefully recovers, and predicted disasters fail to emerge, fintech investment in the US and UK may surge again.

In the US, the momentum of pioneering e-commerce companies such as Amazon, Apple and Facebook is very powerful. Furthermore, the growth of the devices, vehicles and buildings that make up the Internet of Commerce Things (IoCT) is significant and is predicted to continue throughout 2017. From cars that automatically pay for road tolls and petrol, through to refrigerators that electronically reorder milk when supplies run low, the IoCT will become more and more central to everyday life this year and beyond. (You can learn more about the global growth of the IoCT in this article: If US consumers can’t resist the IoCT, will US investors be able to resist the fintech industry either?

If there is any weakness in US fintech, many growing Canadian businesses will be happy to take advantage of the situation. The fragmented regulatory environment is a barrier to fintech progress in Canada. Other provinces and bodies should therefore follow the Ontario Securities Commission in agreeing to help fintech start-ups navigate regulations.

Sweden’s fintech industry is poised to exploit opportunities that arise if the UK falters in the face of Brexit. Sweden placed third for European fintech investment in 2015 (behind the UK and Germany), according to a report from Stockholm-based payments companies Klarna and iZettle are particularly powerful right now. If you think we’re biased about the strength of Swedish fintech here at PayNode, the facts in this article back up our confidence:

As you look around the world, also keep an eye on developments in Australia, where fintech investments more than tripled in 2016 compared to 2015, according to a report from professional services firm KPMG.

Leading the world in digital commerce and fintech is a very desirable prize. The Chinese position is undoubtedly strong, and strengthening daily, but established giants like the US and UK won’t be easily beaten. The battle rages on….

Do you have your own opinion on the fintech industry? We’d love to hear your views. Please feel free to share them here

Written by Magnus Henriksson, Global Business Director, PayNode.

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