FinTech Friday: coronavirus-accelerated shift in VC funding for European fintechs

FinTech Friday is our weekly check-in here at Spreckley, where we share all the most interesting and useful financial services and financial technology news, innovations and trends.

This week, we look at the coronavirus-accelerated shift in VC funding for European fintechs, which shows a clear move in investors’ appetite from ‘glitzy’ B2C across to B2B startups in the sector. We also consider the latest reports on changes in financial regulations, following the surge in fintech usage over the last seven months of the pandemic.

We also look at the alarming numbers of mobile banking customers that are still having troubles with using the latest mobile banking apps. Plus, we consider whether or not ’embedded finance’ is in danger of becoming the next over-used fintech buzzword.

VC Investors Love ‘Non-Glitzy’ B2B FinTechs

Much of the media interest in new financial technology innovations over the last decade has been focused squarely on ways in which fintechs have improved consumer finance. Something that is, according to this recent report on sifted.eu set to change considerably following the coronavirus outbreak.

“Fintechs are lauded for improving consumer finance, but investors are much more interested in startups that serve banks and small businesses,” the report notes. “European funding is now more heavily concentrated in business-to-business (B2B) fintechs than in consumer fintechs.

“This year so far, European fintechs have raked in €6.3bn; €5bn of which has gone to B2B fintechs across 373 deals. Meanwhile, consumer-fintechs have raised a total of €3.1bn across 209 deals (including several mega-rounds).”

Michael McFadgen, a partner at London-based fintech enterprise VC fund Element noted how, “for a long time, B2B has been overshadowed by the glitz of B2C fintech.”

COVID-19 and RegTech Innovation

Speaking of COVID-19’s impact on fintech, it is clear that the pandemic has seen a surge in use of fintech products and services. Something that has prompted central banks and other financial authorities to step up their own regulatory innovation efforts, reports Finextra this week.

According to a new report from the World Bank and the Cambridge Centre For Alternative Finance (CCAF) – based on a study of 118 central banks and other financial regulatory authorities in 114 jurisdictions worldwide – strong fintech take-up since the outbreak of the pandemic is seeing financial regulators responding in kind.

The report notes that 72% of regulators “have either accelerated or introduced initiatives on digital infrastructure, 58% have either accelerated or introduced initiatives regarding RegTech or supervisory tech, and 56% did so in regard to innovation offices.”

Mobile Banking Customers with App Problems

Next up, the boost in the numbers of banking customers using mobile apps over the pandemic has not been without its problems. A third of banking customers have apparently been complaining to banks about mobile app problems, according to the latest report on FSTech, based on a study of over 50,000 UK banking app reviews.

“With an increasing number of banking customers coming to rely on apps, those from leading UK banks are posing significant technical and customer service problems for consumers, going by the app reviews they leave after installing them,” that report notes.

“Among the top customer frictions, according to the research, were login and user authentication issues, with nearly a third of customers (30 per cent) having problems getting into them, while one in five cited problems with username and/or password authentication.

“Customer service was another key friction point, with nearly a quarter (24 per cent) of customers waiting too long for customer support, while over 22 per cent were unhappy with the customer resolution. A total of 16 per cent said that the support over chat was unavailable or not useful.”

Combating Fraud in User-Friendly Ways

Also in the news this week, it seems that one of the key challenges for fintechs and financial services businesses in the future is going to be how to effectively combat fraud while staying user-friendly, according to a report on FinTech Futures.

After all, user experience (UX) and customer experience (CX) are almost everything when it comes to distinguishing yourself from your competitors in an increasingly busy market.

As an industry, financial services is seeing unprecedented threats from cyber and technology risks,” reads the report. “As institutions work tirelessly to stay ahead of criminal activities, hackers continue to up the ante and advance their techniques.”

Embedded Finance: Not Just Another Buzzword

Finally this week, we have heard a lot over the last year or two about the concept of ‘embedded finance’, which it seems is now in danger of losing its meaning due to being yet another overused fintech buzzword.

““Embedded finance” could very easily become the next overused hype cycle,” according to Finance Monthly. “Another phrase that gets bandied about, over-hyped by the press and industry talking heads alike, but that ultimately fails to meet the weighted expectations placed on it.

“Embedded finance is already happening. And what’s more, it will only continue to improve the experience for both consumers and businesses across multiple industries, not to mention keep the fintech ecosystem growing in the coming years. As with any new concept, however, there are a number of misconceptions surrounding embedded finance – what it is, what it isn’t and the role it will play in the coming years.”

It certainly looks like ‘embedded finance’ is going to be an interesting challenge for fintech PRs and journalists alike in the coming months and years, in our continuing crusade to weed out the jargon from the plain English when attempting to explain the latest fintech innovations.