Since the beginning of the global pandemic, fintech entered an entirely new phase of development – it ceased being an option (or even, as perceived by some, a disruption) and became a must-have for users and the banking and finance industry. Here is why.
The recent shift to the online world, greatly accelerated by the COVID-19 pandemic, made it clear the future of financial services is their digitalization. The rise of digital payments, blockchain technology, cryptocurrencies, and the incredible growth of e-commerce changed the industry and democratized financial services, making them accessible for everyone, anytime and everywhere. And the great winner is fintech.
Fintech – all you need to know
So, what is fintech? The simplest definition says it is a combination of the words “financial” and “technology”, referring to businesses using the newest technology to modify, enhance, automate and digitize financial services and processes, with their customers (both commercial and individual) in mind.
According to its definition, fintech may refer to software, algorithms, apps, hardware, or platforms that make financial services such as depositing checks, transferring money, paying bills, or opening accounts quicker and easier. The word also refers to a financial company that is based on new technology.
Fintech in statistics
Today the world of fintech is simply huge. To truly understand its significance and power it is worth looking into some numbers. McKinsey states that almost 80% of financial organizations have already entered the fintech space. According to Deloitte, the whole fintech industry is worth approximately $180 billion and is estimated to reach $213 billion by 2024. Since 2017 its revenue increased by 97%, while at the end of 2021 fintech investment reached an unprecedented amount of $210 billion.
Currently, there are about 26 000 fintech start-ups – their number has more than doubled in the last two years. But fintech is not only about those new companies – but it’s also about large and established organizations working with new technologies.
According to CFTE the largest fintech company in the world is Visa (valued at $384.08 billion), followed by Ant Financial (valuation of $312 billion) and Mastercard ($291,14 billion). The annual Forbes Fintech 50 list, containing the most innovative start-ups, is topped by Stripe, a payment processing platform founded in 2010, followed by Klarna, valued at $46 billion Swedish company offering financing options.
Fintech adoption rates
The adoption of fintech varies depending on the country. The undoubted leader in China – according to EY over 90% of Chinese citizens use fintech banking, payments, and financial management solutions. The second place is held by the US, with an adoption rate of 52%
Fintech and innovation
As its definition suggests, fintech is all about innovation. And while some time ago innovation meant credit cards and online transfers, today it may mean cryptocurrencies, blockchain, contactless payments, or online money exchange, available anyplace and anytime. As listed by Forbes, some of the most intriguing new technologies used by fintech organizations include:
- Bots – robotic process automation programs that allow companies to save time and money by automating repetitive tasks,
- Internet of Things – intelligent devices used for contactless transactions or to withdraw cash,
- Voice recognition – a system used to check balances, transfer money, or buy goods.
The lack of expertise
As the world of fintech keeps evolving at an unprecedented speed, one of its main challenges is finding people with enough experience and expertise to help it grow steadily and safely. Given the global lack of IT talent in the job market, more and more fintech companies look for external partners to outsource app development and use their expertise to their benefit. Outsourcing also helps in better time and money management, as it reduces app development costs and allows the teams to concentrate on things they are best at.
Fintech companies are less regulated than traditional financial services and often exist at the edge of the banking system. This means that issues such as money laundering and data privacy may not be monitored there as strictly as is the case of traditional banking. This problem is being reviewed all the time by the banking authorities and there is a strong possibility fintech will soon become an even safer space.
Fintech – the future
No one can predict the future, but there are some things we can be sure of. The first of them is the ongoing digitization of every single aspect of our lives, and the second is our growing reliance on new technology. Combine those two things and we can be sure that in the years to come fintechs are going to rock, always coming up with new (sometimes flashy, sometimes very handy) improvements and services that will make our lives easier.