The financial technology sector is not just hot, it’s smoking hot. In the first six months of 2014, $346 million was invested in fintech venture deals in Europe, that’s already more than double what was raised in the whole of 2013*. U.S.-based fintech start-ups also attracted an estimated $1.3 billion in the last quarter alone. This flow of money into fintech is only set to intensify over the next 12 months; sending a game-changing blaze throughout the finance sector. A sector, btw, which is worth more than a trillion dollars.

In the coming months we’ll see increased interest in companies who want to change how consumers and institutions carry out financial tasks; companies that are innovating new ways for friends to transfer money to each other, companies that aim to change how people borrow and lend money and companies that aim to force banks to alter the way they comply with regulations. Moreover, it is now significantly easier for startups to enter the sector - the rise of open source software and cloud technology has ensured that demand is soaring from a creaking finance infrastructure.

In essence, the era of cheques books, debit cards that require punched-in pins, costly wire transfers that take days to clear and weeks-long waits for loan and mortgage approvals will soon be subjugated to the smouldering embers of the past. Their last bastion of innovation, the ATM, will stand as the flagship of what was. The financial revolution is upon us - but it won’t be easy. Obstacle courses of loops and red tape, compliance-process-marathons and boxing rings with the heavyweights of cheap capital stand in the way though admittedly, the difficulty will also be dependent on which slice of the financial pie a company is opting for. One of the most promising areas is wealth management; the empowerment of more people with the ability to invest smarter and take control of their savings.

Take MoneyFarm as an example, one of our portfolio companies. MoneyFarm is the only independent online financial advisor in Italy. Their revenues derive only from client’s fees and they don’t take any back-end fees or commissions from other financial institutions. The company guarantees impartiality; something a traditional financial advisor often can’t be trusted to provide. They also guarantee lower fees than a traditional advisor too thanks to their technology and focus on investment instruments with low structural costs such as index funds (ETF). To date the model has proven highly successful and MoneyFarm counts more than 12, 000 users and a growing community that supports the values of their project. We can’t wait to observe the companies growth in the coming year.

Returning to the subject of obstacles…there has recently been some discussion concerning a gap in the funding of FinTech companies that have reached beyond the early start-up stage but are not yet turning proper profits. Entrepreneurs are complaining that it is tough to get the follow-up investment that is essential to scale up their businesses. There is a lack of firms in the middle that can provide the skills of an early stage investor and the capital of a private equity investor. However, in the next 12 months we’ll start to see this addressed with larger buyout firms starting to make smaller investments and providing growth capital.

As Alexis Thieriet, founder and managing director at fintech corporate advisory firm FTCL,said: “Increasingly in European fintech, there will be the need for some blurring between larger venture capital rounds and what some of the more traditional UK or European private equity shops look at.”

Many of the big boys of private equity are typically limited by fund documentation which dictates the types and sizes of businesses they are able to invest in. A way in which I envisage this will be overcome in coming months is by the setting up of specific funds to invest in these smaller, fledgling FinTech businesses.

It’s a hugely exciting time for financial technologies and the progress we’ll make in the next twelve months is set to be astonishing. Indeed, analysis suggests the market will reach $18 billion** by 2018. We’re on an upward trajectory...

*Source: Pitchbook

** Source: Accenture, Partnership fund analysis of CB insights data