The end of 2015 ushered in a weaker VC funding environment and a freezing tech-IPO market, leading many Silicon Valley startups to make trenchant cuts. But one sector continues to enjoy healthy investment: FinTech. Global investment in FinTech has now rocketed to US$49.7bn. Data released by Thomson Reuters shows that funds invested in financial services in 2015 almost tripled compared with the previous year. There are currently 1392 FinTech firms located across 54 countries, but FinTech startups have been a particular success in Asia. KPMG stated in December that seven of the world’s 50 top FinTech companies are in China.
But quite apart from the speed of growth, the most unusual aspect of the FinTech boom is the extent of government involvement. The UK government has committed to creating an information hub for FinTechs and outlined a plan to build ‘FinTech Bridges’ with priority global markets. The USA has tripled its investments in accelerators and incubators to help start-ups connect with investors. Hong Kong, on the other hand, has allocated $250m for the development of businesses in the burgeoning sector.
The Taiwanese government is also taking bold steps to stimulate the local FinTech industry. Recently, it launched FinTechBase, financed by the Taiwan Financial Services Roundtable and managed by the Data Analytics Technology & Applications (DATA) department of the Institute for Information Industry. FinTechBase will be assisting the "FinTech Development Foundation" (established by the Financial Supervisory Commission to promote the development of the FinTech industry in Taiwan) with investments in startups, as well as providing courses and international accelerator resources and services.
FinTechBase provides two types of services: general and investment.
General: Linking FinTech industries, matching accelerator resources and offering counseling
In addition to helping startups connect with major domestic horizontal innovation accelerators, business incubation centers, innovation and entrepreneurship-related public organizations, FinTechBase is also working in conjunction with European, American, and Asian-Pacific FinTech accelerators, including well-known Singapore accelerator Startupbootcamp FinTech. Through its general services, FinTechBase will act as an information, learning and networking hub.
Investment: a maximum of NT$2m in capital investment
During its initial fundraising efforts, the "FinTech Development Foundation" raised NT$200m from banks, brokerages, insurance associations, the Taiwan Stock Exchange, the Taipei Exchange, the Taiwan Futures Exchange, the Taiwan Depository and Clearing Corporation, the Financial Information Service Co., the Joint Credit Information Center, and the National Credit Card Center of the R.O.C.
Of the NT$120m currently set-aside for investment by the foundation, a maximum of NT$2m will be invested in 20 companies per year over the course of three years. FinTechBase will gain a maximum 5% equity stake in the startups it invests in (return on equity flows back to the Foundation itself), but members of the foundation will not occupy board of directors seats nor will they receive voting rights granted to common stockholders.
The DATA department of the Institute for Information Industry has hired outside experts to form an investment evaluation committee. Evaluations began in May and applications to receive investment are now being accepted. The evaluation committee will decide on the list of startups to receive investment. In order to avoid the dominance of the traditional financial industry in the committee’s decisions, a wide range of web technology experts and experienced members of various international FinTech accelerators have been enlisted.
However, as funders of the FinTech Development Foundation, the Taiwan Financial Services Roundtable has the right to the final say in all investment decisions. In other words, the traditional financial industry still wields great clout in the choice of startups to receive investment.
Government Support Paves Way for Success
At the 2016 Innovate Finance Global Summit, the Economy Secretary to the UK Treasury, Harriet Baldwinn, reiterated the British government’s commitment to supporting the nation’s FinTech industry, which boasts a workforce of 60,000 employees. Treading the same path of active collaboration, Taiwan’s government may also succeed in stimulating high growth in local FinTech startups.