The value of the worldwide fintech market was 111 million dollars in 2019, which is anticipated to increase to 158 million dollars in 2023 and 325 million dollars in 2030. But with the present boom in fintech finance, several experts believe the business will grow much more over the next ten years.
A CB Insights analysis claims that “mega-rounds,” or financing rounds in which fintech companies raise more than $100 million, show historical spending evidence. If 30 fintech investments totaling nine figures were made in the fourth quarter of 2020, the first quarter of 2021 is already well ahead with its US$228 million funding boom.
Fintech was unaffected by the pandemic, unlike the majority of businesses. Fintech investment growth will pick up speed in 2022 and is predicted to hit US$310 million. And that’s during a sharp decline in spending brought on by the lockdowns and restrictions related to Covid-19.
More customers turned to fintech services during the Covid-19 lockdowns than conventional banking, insurance, and lending. Three out of four consumers globally will use fintech applications for money transfers in 2021. For small and medium-sized businesses (SMEs), the adoption rate of fintech is now at 25% and is expected to reach 64% within the next few years.
The four bases of the development of fintech
A quick peek at the fintech market overview is all it takes to see that the sector is expanding and will likely do so in the future. But why is fintech expanding so quickly? Its expansion is fueled by several important causes, including enhanced customer service and compliance rules. Let’s examine each element in more detail.
Technology is primarily to blame for the rise of fintech. It has completely changed how financial services work, making them nearly unrecognizable from a decade ago because it functions almost exclusively in the virtual world. Fintechs are superior to traditional financial institutions in several ways because technology has enabled us to automate tasks that humans previously did.
More efficient:- Automation speeds up mundane activities and gives personnel more time to work on challenging projects like strategy and innovation. Productivity has grown as a result.
Anyone’s reachable:- Fintechs eliminated mediators like brokers and bank managers by providing a wide range of financial services online and through applications, granting everyone immediate access to services and information.
Lower cost:- Fintech companies could hire fewer people while maintaining a very high level of productivity thanks to technology, which also reduced the need for physical offices. Fintech products can appeal to a broad audience by offering lower service prices due to staffing and local branch cost savings.
Generally speaking, rules might make it harder to be an entrepreneur. Although the financial technology sector is subject to regulatory requirements, many are less stringent than the standards that fully licensed banks must adhere to. As a result, financial technology firms can introduce new financial products more quickly.
Additionally, a lot of countries actively promote digital banking. For instance, the UK Competition and Markets Authority mandated in 2016 that nine of the nation’s top banks allow authorized startups access to their transaction data. This paved the path for other fintech companies to appear and give users new options for managing their smartphone accounts.
Currently, the UK dominates the global fintech market, accounting for about 10%. The nation, though, doesn’t take its success for granted. The UK’s Financial Conduct Authority (FCA) replaced its outdated Gabriel reporting system with RegData. This new platform is more flexible and simplifies data submission to lessen the load of regulatory reports for fintech.
3):- A client’s expectations
Financial technology businesses initially caused adjustments in customers’ expectations. With its reduced costs, charges, quicker services, and accessibility, fintech companies were even more alluring after the 2008 financial crisis, when consumers lost faith in traditional financial institutions.
Clients are now transforming the financial sector through their demands, signaling a revolution in the industry. Over the past ten years, people have grown accustomed to better customer experiences and all-around conveniences, such as personalized offers and same-day retail deliveries. The typical banking consumer anticipates similar behavior from the financial industry. Additionally, fintech is more adaptable and better able to meet customer needs than conventional banks.
Additionally, Covid-19 sped up the implementation of fintech. According to the Swiss Finance Institute, during pandemic lockdowns, download rates for fintech apps rose from 29.2 percent to 32.8 percent. Even cautious clients flocked to fintech to manage their funds since traditional banks were ill-equipped to handle most banking operations remotely.
The transformation of the sector is the last but not the least factor in the growth of fintech. With the increased sophistication and access to capital, businesses in the financial technology sector matured. They then scaled and reimagined financial products and services. The evolution of fintech is entering a new stage.
As an illustration, Zopa, the first peer-to-peer lender in the United Kingdom (established in 2005), is now a bank. Revolut, another unicorn fintech company, has applied for a banking license in the UK and is currently operating as a bank in some EU nations. Revolut is still a fintech company because it still provides cryptocurrency services, but obtaining a banking license would help it build consumer trust.
If Revolut is granted a license, British consumers will at long last be qualified for the Financial Services Compensation Scheme (FSCS), which insures deposits made with Revolut up to £85,000 per person. Revolut will no longer be a unicorn fintech startup thanks to that boost; instead, it will become an established company that will continue to grow as it attracts more money and consumers.
Where to locate fintech business possibilities
There are four solid reasons why the financial services business is expanding, as we’ve already mentioned. Fintech appears to be at or near its top right now, but according to some industry insiders, the market is still only 1% complete; therefore, there are still many prospects. The question is how to uncover the opportunities that the expansion of fintech presents.
According to experts, possibilities vary amongst nations. Retail banking and SMEs, for instance, are the most competitive fintech segments in the UK, with a high customer base but a low value-per-customer (VPC). Fintech goods for medium and large businesses, for example, are among the segments with a lesser consumer base but a higher VPC that is virtually untapped.
The wealth (investment apps, personal finance management applications) and retail banking areas are where US fintech is primarily focused. In contrast to the UK market, the SME sector is moderate and friendly to newcomers.
Entrepreneurs on both sides of the Atlantic have a bright future thanks to the fintech providers market. Like LexisNexis and DueDil, you might launch your own business to offer data for Know Your Customer (KYC) requirements. Or your company could assist larger fintech with their staffing requirements. In the provider environment, you only need a valuable service to get a piece of the enormous financial technology industry; you don’t even have to be a pure fintech company. Whatever strategy you choose, you’ll need a solid technology-based product to succeed in the fintech sector.
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