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Is the Fintech bubble about to burst?

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I recently recorded a video for Meniga to show at their conference in London for Next Bank Europe.  We had to do this as I was in New York on the day of the conference, and the organisers wanted me to present so badly they agreed to come to my house to do record my presentation. A bit unusual but, there you go.

So, to my house.  I recently moved into a museum.  Seriously.  I spend every night in the museum (beats Ben Stiller any day). 

The museum is the Royal Historic Dockyard Museum in Chatham, Kent. This was one of the first dockyards built specifically to make warships under Henry VIII and dates back to the 16th century.

The real growth in naval warfare occurred during the 18th century however, and George III specifically invested in the Dockyard, which is why so many buildings here date from the late 1700s. 

The Dockyard built the HMS Victory (Battle of Trafalgar) and we have a lot of history here.  For example, my house dates to 1830.  In its heyday the Dockyard employed 7,000, and my grandfather worked here during the War, building ships.  Then, after the Falklands War, Margaret Thatcher made the decision to shut it down.

Now, it is a museum and one of the top attractions in Kent.  It’s also a film set, with movies like Les Miserables filming scenes here along with TV series like Call the Midwife and Mr Selfridge being regular visitors.

Here’s a film that shows you the beauty of where I live:

Chatham Historic Dockyard by Sam Biddle

And here’s the movie we made asking When will the Fintech bubble burst? (nothing beautiful about this :-)

For those who can’t watch it, the question I asked is whether there’s a Fintech bubble and is it about to burst.  With $12.7 billion raised for over 1,000 start-ups in the past five years, there’s a huge amount of people buzzing around this market and some say a further $20 billion is going to be invested in just this year alone.

What’s going on?

Well what is happening is a re-architecting of financial services with technology.  Today, it is the integration of technology with money; the digitalisation of money; and the move from local to global exchange.  That’s what I blog about every day but my claim in the video is that this is just what we’re talking about today, and it’s a transitory moment as the picture long-term is far bigger.  It is far bigger because we are completely rethinking how we exchange value.  It is why bitcoin is a big deal, because that is the most likely form of the digitalisation of money.  It is far bigger because the old bank model of the physical distribution of paper in a physical network is turned on its head when we are moving to the digital distribution of data in a global network.

Our world has changed thanks to the internet, and the most likely outcome is a new value exchange ecosystem of value tokens, value exchanges and value stores.  I’ll blog more about that another day but, meantime, this explains why (a) there is no Fintech bubble and therefore (b) it will not burst.

There’s no Fintech bubble because we’re re-architecting our world to digitise value exchange.  This will therefore morph our world into something different and new.  It is not until the different and new is finished that any bubble will burst.  For example, it is noteworthy that we talk about the internet bubble and burst of the 1990s, and yet we should note that the internet bubble burst in 2001 and then came back because we moved from Net 1.0 to Net 2.0.  As I’m saying we have another five generations of internet to go yet, there’s no bubble here.  Just a rise and fall of innovation as we move through the internet age.

That’s why there’s no Fintech bubble bursting.  Just a re-architecting of finance through technology that, until it finishes, will see us moving through waves of innovation and change.



This video was filmed very quickly in under two hours for 15 minutes of edited finished product.  It was completely unscripted, although I did make a few notes to think about beforehand so, just in the interests of completeness, here are those notes:

Why there’s a bubble:

  • Money2020 predicted that venture capital deployment in FinTech will top $20 billion in 2015
  • Silicon Valley Bank state that FinTech is one of the top five investment areas today with investments in over 2,000 startups between 2009-2013 and over $10 billion invested

It’s also an area that is being changed by technology itself.

For example, investments in FinTech start-ups saw crowdfunding platforms as a key component of developing this market.

But banks have responded:

Accenture note that FinTech investments by banks would reach at least $8 billion by 2018 in New York alone, around 40% of total

Barclays has The Accelerator, SWIFT has The Start-up Challenge, Finovate highlights the hot new guys and BBVA challenge them all to show their capabilities using APIs and so on.

Many of the largest banks are creating corporate venture capital firms.

SBT Ventures — the venture capital arm of Sberbank, the largest bank in Russia — led the $8 million seed round for Moven, as part of its $100 million investment fund.

HSBC’s fund runs at $200 million and Santander’s fintech fund has $100 million in capital.

Who are these new fintech firms?

If you look at the FinTech50 that came out at the end of January, the firms are mainly based around cryptocurrencies and mobile apps for retail banking and payments, P2P firms, wealth management, trading and even a few bank innovators like mBank in Poland.

Names you would recognise like Traxpay, Nutmeg, Crowdcube, Transferwise, Currency Cloud, Funding Circle.

And names of people you know are clever as backers like Richard Branson, Marc Andreesen, and Reid Hoffman.

These guys are in there because they see reformation.

And bitcoin, or rather cryptocurrencies, are reformational as is mobile.

Meantime, P2P replaces core banking products like loans, mortgages and insurances.

EGs Zopa, Funding Circle, House Crowd and Friendsurance.

It’s not just P2P though – as bitcoin is that – it’s replacing expensive physical infrastructure with digital infrastructure.

In code we trust.

And the banks are not ignoring this.

Just look at the size of the deals from bank funded venture capital groups and that banks like BBVA , Bank Inter and the NYSE and USAA are investing in cryptocurrency firms and buying businesses like Simple and you know there’s a big deal here.

Is it a bubble though?

This dockyard has seen plenty of bubbles, the most famous of which was perhaps the South Sea Bubble of the 18th Century.

In 1711, a war with France left Britain millions of pounds in debt and the government had its hands tied as the Bank of England was a private bank and the sole lender to the government.

As a result, a British joint-stock company was founded, the South Sea Company, as a public–private partnership to consolidate and reduce the cost of national debt.

To sweeten the deal, the government gave the company a monopoly for all trading in the South Seas along South America, an amazing gift people thought.

Because of their monopolistic position and strength with government backing, shares in the South Sea Company rose to ten times their initial public offering price.

Seeing the success of the first issue of shares, the South Sea Company quickly issued more.  Again, the stock was rapidly consumed as investors saw that the stock was going to the stratosphere and they wanted in.

Equally, many investors were impressed by the lavish corporate offices the Company had set up.

Soon, most of the members of the House of Commons and House of Lords had some sort of stake in the South Sea Company.  Everyone bought into the stock – the MADNESS OF CROWDS.

Then the 'bubble' burst because people discovered that the South Sea Company had yet to actually deliver any goods or produce from the South Seas.  The shares had been valuable on paper, but worthless in reality.

Hence, the herd mentality that caused this madness of crowds suddenly sobered up and everyone pulled their money out.

Is that’s what going to happen to FinTech?  Like the internet boom and bust of the 1990s, or the Mortgage Securities boom and bust of the 2000s, is fintech next?  I don’t think so and here’s why.

Fundamental shift.

Banking is dead because banking banked money.  It banked physical goods and services.  We are now supporting digital exchange.


Fidor Bank who bank gold –both physical and digital (world of Warcraft)

Value exchange: Move from the physical distribution of paper in a localised network to digital distribution of data in a globalised network.  That’s what the book is all about.

The recent announcement of BBVA, NYSE and USAA investing in Coinbase articulated more of what I mean about Value Exchange. For example, BBVA Ventures Executive Director Jay Reinemann said: “at its core, Bitcoin is a decentralized protocol that enables exchange of value among parties around the world, giving it the potential to alter the financial services landscape.” 

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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