Partnerships with 'invest-techs' are becoming an integral aspect of incumbents' innovation strategies, according to a report published by Deloitte
Invest-techs are on the move, driven by a desire for innovation by investors and investment managers, says Deloitte in its Driving Innovation in Investment Management: Learning from - and Partnering with - Invest-techs report.
These young, innovative fintechs typically use advanced technologies and data analytics tools to create and offer investment solutions and platforms, or alternative data insights, to customers in the retail and institutional sectors. They are, says Deloitte, "dramatically changing established practices and challenging incumbents across financial services" by providing low-cost access and peer-to-peer platforms
Invest-techs have seen rapid growth in recent years, with funding reaching a record high in 2018 of $2.8bn driven, Deloitte explains, by a surge in late stage deals for those invest-techs that are targeting retails investors.
Growth in 2019, however, didn't reach those heights. Deloitte found that, while the year began strongly, investment levels fell behind those seen in 2018 in Q2; Q3 saw invest-techs receiving $600mn in funding.
Deloitte attributed the drop off in funding to a potential cautiousness among invest-techs, which it said may have been "waiting for a more opportune time to seek additional funding following the busiest quarter in four years for initial public offerings (IPOs)". There was also a decrease in the number of new invest-tech firms coming to market last year - one in 2019 compared to an all-time high of 81 in 2014, for example.
The report also points to actions by incumbents, which it says have moved to counter the rise of robo-advice (an invest-tech trend at its height in the mid-2010s) by creating their own technologies that offer similar services.
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North America dominates the market, although the Asian sector is seeing a noticeable uptick - it does, after all, have the largest population to serve and, according to Deloitte, is seeing strong support for the sector from the government.
On new funding trends, the report points to areas including institutional-focused invest-techs and those firms providing data analytics services to investment management infrastructure. Within the retail sector, two areas of development are driving growth: the provision of low-cost access to investment solutions and the development of community and crowdsourced investment platforms. The latter, it says, "plays heavily into the Millennial preference of sharing their experiences".
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