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Best Practices 2018: FinTech for Business Incubators and Accelerators

With an aim to compete with the delivery of traditional financial institutions, products and services, the exciting business sector known as FinTech (or fintech) caught our eye recently when we were compiling data for the Case Studies 2018 report. Some of the top business incubators and accelerators in the world were experiencing explosive growth in fintech startup applications and success stories, so we set out to get the facts on the key areas to pass them on to program managers.

What is Fintech?

Fintech or financial technology is the innovative new way of banking. Using smart phones for mobile banking and investment services as well as cryptocurrency methods are examples of fintech. While there are hundreds of fintech startups, it is important to take notice of the old guard financial companies getting in on the game as well. We cannot help but think that there will be quite a few matches with startup companies and established banking giants with regard to new, innovative fintech on the market soon.

Nevertheless, banking and investments are not the only businesses under the fintech umbrella. Insurance, stock trading and risk management all fall under the fintech realm. Globally, investments in fintech increased more than 2,200%, growing from $930 million in 2008 to an excess of $22 billion in 2015. 

Cryptocurrency; the new money standard

The most newsworthy, intriguing, and, yes, confusing, part of fintech is cryptocurrency. Cryptocurrency has been taking the world by storm and creating new business opportunities as well as innovative ways to invest. Taking the bank out of banking, cryptocurrency may intimidate some people while others see it as the wave of the future.

Cryptocurrency is so named because it is a currency that uses cryptography for security, to create new units and to verify asset transfers. Cryptocurrency is used as a digital asset with a decentralized control base rather than electronic money or central banking systems.

Each cryptocurrency operates through a blockchain, which is a transaction database that is open to the public and operates like a ledger. Blockchain continuously grows, linked by secure cryptography and keeping track of all cryptocurrency records.

Bitcoin was the first cryptocurrency in 2009. Since then, many other cryptocurrencies have been created and are known as altcoins (alternative coins). Altcoins and Bitcoins are stored in cryptocurrency wallets that hold a record of addresses or keys. These keys are used to receive more units or to spend the units of currency already in the wallets. Wallets have no ties to individual people like bank accounts do; they are tied only to the keys. This keeps the owners of the bitcoins or altcoins unidentifiable.

The seven conditions of cryptocurrency

Cryptocurrency must meet the following seven conditions in order to be classified as such:

  1. No central financial authority
  2. System keeps track of cryptocurrency assets and owners
  3. System determines if new currency units can be created
  4. System follows through with origin and ownership records on any new currency units
  5. The only way ownership of currency units can be proven is through cryptography
  6. The system allows ownership changes of currency units
  7. If two conflicting instructions for currency unit ownership changes are received at the same time, only one will be carried out maximum

What is the outlook for fintech?

We believe, after consulting with the top business incubators and accelerators for Case Studies 2018, that the future of fintech will increase to include cloud-based high-security technology. This security technology is where the most innovation will take place. Much like publishing, financial services consist of information rather than a physical product. Protection of the information, in this case, cryptocurrency wallets and keys, is going to be crucial.

Riding the popularity wave of blockchain, startups are forming that will compete with global banking entities. Blockchain systems dramatically reduce the transaction cost associated with brick-and-mortar banks. Sooner or later, the big banks will step in to reclaim their territory. The best way for them to do this with the least risk is to invest in a startup.

Additionally, startups without established financial institutions sponsoring them will form their own business partnerships and establish university backing, which is exactly what was reported by many of the business incubator and accelerator managers we interviewed for our Case Studies 2018 report.

Threats and results

Financial regulation such as the Bank Secrecy Act and the multiple laws relating to money transmissions threaten the growth of fintech by casting doubt over the longevity of the startups. The protection of customer financial data is of concern, obviously, but this is more than satisfied by new cloud technology many startups are exploring and employing.

Startups in the fintech sector need marketing on their side to educate their customers on their security and unique features. At UBI Global, we believe in connecting the best, brightest fintech startups with universities, incubation programs and corporations. Our Case Studies 2018 report can offer further examples of thriving fintech ecosystems within the global startup community.



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