Investment or starting from scratch – what’s the best way to get into fintech?

20th November 2018

Investments in the fintech space are booming. If you’re in the business of artificial intelligence (AI), blockchain, machine learning, repo-advisory and the Internet of Things (IoT) then chances are you’ll get very keen investors interested in your business, or ‘they’ will be knocking on your door to talk about a possible merger.

Global fundraising for this year’s insurtech start-ups has already reached an all-time high volume with 204 deals and transaction values of $2.4 billion (£2,13 billion), according to The Insurtech M&A Report from Hampleton Partners.

There’s been a steady build-up of investment in this sector over the years. Hampleton Partners found that since 2016, the insurtech sector has reported 151 transactions with 22 buyers making more than one acquisition.

Sapiens International, an insurance enterprise software company and insurtech Charles Taylor appear to be doing most of the buying covering 87% of all the transactions, while private equity firms were only responsible for just 13% of the buying.

Essentially, successful insurtech businesses are being snapped up because it presents a natural solution to stamping out the competition and, for bigger firms, is the alternative to investing in research and development and growing organically (which, let’s face it, can take a long time if you don’t have the right expertise).

One example highlighted was that of insurance giant Zurich International which acquired Bright Box and its AI-first, connected car platform Remoto. Now Zurich Insurance Group is using the data gathered by its connected car technology to develop personalised auto insurance and services.

It looks like lessons can be learnt from the big providers and even the small ones who have the courage to innovate and develop tech that helps businesses and consumers. Insurtech firms have become a natural threat to big insurance players but they also pose an investment opportunity as they have already kick-started investments into technology, which for most is experimental.

A business that has a track record is especially sought after as in theory it would’ve already sorted out all the ‘kinks’ in the armour of the tech, making it the perfect candidate for an acquisition.

The new technologies are providing companies in the insurance sector with a variety of ways in which to expand. According to the research, the most popular way is launching new products, services and entering new segments.

For example BIMA, a mobile microinsurer based in Sweden is using mobile technology to disrupt the global insurance industry, especially in emerging markets where most low income customers are contacted by (and mostly operate with) their mobile phones to deal with financial services providers. According to BIMA’s website it now operates in 15 countries has raised $110 million in capital.

Being held back by old systems is now a thing of the past, thanks to the acceleration of the fintech sector and the willingness by others to invest in it either through funding or acquisition.

But it’s equally possible to create this technology within your business, cost-effectively, if you don’t have the funds to make a major acquisition like Zurich has. It’s all just about finding the right partner and specialists to help you. For more about how we can help you, click here.

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