Canada, China and the U.S—Who Will Rise and Who Will Fall as a Fintech Leader in 2017?
We are only two months into the new year, and already the world of financial technology, or fintech, is seeing huge geographic shifts. Some fintech hubs have expanded wildly, unseating former leaders.
These developments are reshaping the way entire industries do business, and its influence will only continue to grow. PricewaterhouseCoopers (PwC) is estimating the cumulative investment in fintech globally to exceed $150 billion within the next 3-5 years.
The U.S has started lagging behind China in terms of fintech investment. However, Canada’s star is on the rise.
China, the New Global Leader of Fintech
Up until recently, the US was the undisputed leader of global fintech investment. However, the status quo has changed in 2017 with China overtaking the US.
In 2015, Chinese fintech investment accounted for 19% of the global total. By the end of January of this year, that number has grown to nearly 50%.
“In China, the biggest fintech accelerants involve the concurrent explosion of Internet connectivity through mobile devices and the rise of a middle class” writes Fortune writer, Robert Hackett.
China’s online population is vast, with over 710 million internet users. Nearly 60% of that number are using mobile online payments, according to this report by Ernst & Young and DBS bank.
Chinese fintech giants like Ant Financial (with a private valuation of $60 billion) have also played a part. They’ve strived to build “one-stop financial shops” within the country, whereas their Western counterparts have focused more on niche markets.
U.S Lagging Behind
The U.S currently accounts for 41% of the global fintech investment, a large percentage but a considerable drop from 56% during 2015.
There are a few theories as to the cause of the decline.
- Several promising fintech upstarts have failed to meet regulation standards or expectations
- A lack of a “coherent fintech regulatory policy” according to Business Insider.
- A smaller population compared to China, leading to smaller demand.
Canada, a Growing Player in Fintech
A recent global study conducted by the Toronto Financial Alliance (TFSA), ranked Toronto as one of the top global fintech centres. The city, currently ranked fifth, is predicted to become the fourth leading fintech centre in the near-future.
“Toronto is the second largest financial centre in North America, and Ontario has the second largest concentration of technology companies,” said Janet Ecker, the president and CEO of TFSA. “This unique ecosystem has created a perfect environment for a promising international FinTech hub to emerge.”
The reason behind the growth has to do with increased attention from venture capitalists. In 2016 alone, financing from this group for fintech increased by 74%.
Global fintech investment is seeing a geographic shift. While the U.S was the undisputed leader, China has outpaced them early this year. What this will mean for future global fintech development is unknown at this time. However, the shift has allowed for Canada to lay its foundations, and it’s set to become a fintech leader in its own right.