Fintech is a term applied to describe technological solutions for business and consumers developed in various financial services areas, such as online banking, mobile payments, cryptocurrency and insurance.
Fintech is an industry on the rise, as it can be seen by the growing number of global investments in the following subsectors:
1. Payments/transactions — $60 bln investments in 2021 (B2B and B2C transfers through virtual cards, voice payments, open API technology and IoT market development).
2. Blockchain/cryptocurrency — $32 bln investments in 2021 (blockchain technology with the financial services industry AND/OR relating to any use case of cryptocurrency).
3. Lending — $450 bln market size in 2020, growing at a CAGR of 27% from 2021 to 2030 (any non-bank using online technology to lend money to businesses and individuals through cloud based solutions).
4. Insurtech — $15 bln investments in 2021 (technologies to increase the speed, efficiency, accuracy and convenience of processes across the insurance value chain, in particular through robo-advisers).
5. Regtech — $12 bln investments in 2021 (technology-driven services to facilitate and streamline compliance with regulations and reporting through compliance software)
6. Wealthtech — $1.5 bln investments in 2021 (wealth management services using technology to increase efficiency, lower fees or provide differentiated offerings).
According to KPMG, global investment in fintech accounted to $108 bln in H1’22. Investments in fintech in 2021 grew by 144% as compared to 2020.
Overall the global fintech market is anticipated to grow at a CAGR of around 20% over the next four years. The market value is expected to reach around $305 bln by 2025, according to GlobeNewswire. VC investments in fintech take the global lead with $53 bln investment in H1’22. While the Americas attracted the largest amount of VC funding ($27 bln), Europe, Middle East and Africa (EMEA) region saw a new record high level of funding for a 6-month period ($17 bln).
With a view to record high fintech development in 2021 and opinion experts, fintech investment in 2022 is likely to follow the following patterns:
1. M&A will increase as corporates and private equity firms see the opportunity to make acquisitions at better prices than have been seen in recent years.
2. Interest in cybersecurity automation will keep growing as a means to improve cybersecurity management.
3. B2B solutions will become more attractive to investors.
4. Fintechs will continue to focus on data-driven solutions.
5. Crypto and blockchain investments will increasingly focus on the modernization of financial market infrastructure.
Conclusion
Overall, the use of digitalized financial services leads to economic growth and poverty reduction, which means that countries with a strong financial system promoting fintech can achieve a higher economic growth, while developing countries can access basic financial services to help increase their incomes and, as such, promote innovation. Therefore, investors’ interest to global fintech industry is on the rise.
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