Capital market firms have little appetite for investing in large-scale fintech projects and are instead showing an overwhelming preference for cheap, short-term projects according to research.
The study from London-based PR consultant CCGroup showed that 63% of fintech projects over the last 12 months required investments of less than $500,000 and of these a further 45% were below $250,000. Just a small minority of projects involved sums of more than $1 million.
The low level of investment is indicative of a change in the fintech sector and a move towards short-term endeavours rather than long-term system overhauls that are considered more time-consuming and labour-intensive, according to Imran Majid, deputy head of Fintech at CCGroup.
This preference is predominantly driven by the cost-cutting among financial services firms, evidenced by the current popularity of cloud-based services.
The study also looked at the critera for selecting a fintech vendor, concluding that the process is still driven by age-old factors like size and reputation. Almsot 20% of respondents cited industry profile as their primary criteria while just 3% base their selections on the vendor's unique insights that challenge their own thinking.
“The buying and influencer landscape in capital markets is a dichotomy. Capital markets firms are forward thinking in terms of eschewing major technology investments, to focus on CAPEX-light projects. In contrast, traditional influencing factors such as relationships, reputation and profile make the difference when a buyer is selecting a vendor,” says Majid.