Global Fintech Market 2020-2025

October 19, 2020
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GLOBAL FINTECH MARKET

KEY FINDINGS

  1. COVID-19 has adversely affected the existence of Fin techs as markets have become volatile and they may face challenges fundraising as investors retreat to more cautious positions and consumer investments would fall on account of increased savings.
  2. The FinTech Market is inching towards maturity on account of increasing regulations, changing technology and consumer behavior and funding to such companies in later stages of their life which would hamper growth in their initial stages of incorporation.

INTRODUCTION

FinTech, short for Financial Technology, refers to firms whose financial services are primarily based on digital technology to improve products and perform business services more efficiently.

FinTech is emerging as a new kind of financial services that are trying to transform the way transactions were done traditionally. Using modern and effective methods, FinTech firms are deploying advanced devices in financial sectors to enable money transfers, mobile payments, funding, loans, and wealth management.

After explosive growth , the fintech sector is inching towards maturity which will lead to a number of consolidation and failures of top companies as well. Firstly, the new technologies that helped in achieving  innovation in this arena (e.g., artificial intelligence) have saturated and hence newer avenues for growth must be looked for.

Secondly, A lot of funds that invested in the first generation of companies that tried to capitalize and build on top of the destruction caused by the financial crash in 2008 are reaching the end of their life and hence greater amount of funds are required to achieve growth that is becoming difficult to achieve on account of increasing regulations across geographies.

Thirdly, the macroeconomic situation, particularly in the UK (one of the most advanced fintech markets) and in Europe, has deteriorated, resulting into the fall of funds for young and newer companies.

IMPACT OF COVID-19 ON GLOBAL FINTECH MARKET

Covid-19 outbreak has blurred lines between banks and fintech and accelerated digital adoption, it has led to decline in number of alternate lenders.

Limited access to capital will force several players to shut down, leaving the industry to larger and stronger companies. It is evident that startups are struggling as Sequoia Capital sent out a warning that it would need at least three or four quarters to recover from the Covid-19 crisis.

Prolonged uncertainty will decrease the number of fintech startups and in turn give momentum to the companies able to cope up with the challenges. New players will find it even more difficult to catch up. However, there is still a chance for them, as even large players will nevertheless grow weaker amid the pandemic outbreak.

Quarantine restrictions have raised the use of remote services—from online shopping to delivery, to entertainment, streaming services and mobile payments. People accustomed to the advantages of the digital world which would give a boost to the industry.

Traditional banking is increasingly looking at fintech. The inevitable digitization is not the only reason. The industry has been facing a decline in financial performance since last year. Bloomberg Intelligence stated that the average cost-to-income ratio at the top European banks amounted to 67 per cent in 2019, the highest rate since 2008. Return on equity fell to the lowest level in three years at -8.7 per cent.

It is expected that profits of almost all banks across the world are expected to decline by 30% as compared to last year as banks are not willing to lend on account of increasing unemployment and falling incomes which is forcing them to acquire Fin techs to sustain their presence across customers.

The recent acquisition of AsiaKredit by the financial supermarket GoBear and the takeover of Africa’s largest platform MPESA by Vodacom and Safaricom serve as an example.

 

infographic: Fintech Market, Fintech Market size, Fintech Market trends and forecast, Fintech Market risks, Fintech Market report

BIGGEST FINTECH M&A DEALS (2019)

AcquirerTarget CompanyDeal Size
FidelityWorld PayUSD 43 Billion
London Stock Exchange GroupRefinitivUSD 27 Billion
Global PaymentsTotal System ServicesUSD 22 Billion
FiservFirst DataUSD 22 Billion

 

FINTECH SERVICES ADOPTION RATES

 

Fintech Category201520172019
Money transfer and payments18%50%75%
Savings and investments17%20%34%
Budgeting and financial planning8%10%29%
Insurance8%24%48%
Borrowing6%10%27%

 

MARKET SEGMENTATION

 

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EMERGING CATEGORIES FOR COMPANIES

Open Banking

The changing customer preferences and increasing regulation have encouraged financial institutions to embrace the journey of open banking. Various fintech players in the market are developing platforms that can allow financial institutions to connect to the broader API ecosystem, particularly in the European Union. This is, in part, due to revolutionary new regulation that was introduced in the EU, the Payments Services Directive, PSD2, and in the UK.

One of the significant example of a start-up which capitalised on this opportunity is True Layer which recently received a funding of USD 35 Million from Temasek, one of the major investor in Ant Financial.

Artificial Intelligence And Machine Learning-powered Platforms To Manage Core Business Processes

These tech instruments have become quintessential to the complexity of the financial world and are data intensive. These are instruments that allow users to analyse data, mostly either to provide decision-making support or to detect anomalies.

This is the new state-of-the-art approach to fraud detection and compliance to anti-money laundering laws, adopted by companies like FICO and Finastra. A common application is credit scoring.

Personalized Advice Platforms From Investment To Lending

This category focuses on providing user experience which is scalable by providing a captivating UI interface to the users which facilitates quick decision making and simplified reporting. This is specifically used in the field of wealth management, life insurance or loan subscription.

A good example is Nutmeg, a so-called robo-advisor that provides (simple) automated asset allocation services and advice through machine learning. Nutmeg recently received a cornerstone investment from Goldman Sachs, which has also partnered with it to start delivering their wealth services to retail clients.

Payment Technologies

Ranging from cryptocurrencies to global account management and FX management, fintech in the payments industry offers a broad range of innovative solutions. TransferWise is the European unicorn that was recently valued at $3.5 billion after the founders sold a stake.

 

TRENDS IN THE INDUSTRY

Companies Will Make Digital Systems a Priority

 As communities continue to promote self-isolation as a means of slowing the spread of the virus and businesses shift to remote work, banks will need to find ways to incorporate better digital solutions. Fin techs are well-positioned to step in to offer solutions to replace legacy systems.

One platform, Multiple services

One thing a consumer prefers the most would be, multiple services across one platform. Many Fintech brands have already rolled out this process of offering multiple services across one app, but the increase in offerings of robust solutions through powerful API integrations will add on.

In the coming days, consumers who need banking services are likely to turn to those financial players, who can offer convenience and ease of transactions that is entirely safe and secure. To address these consumer needs, banks cannot do much, but technology can help a lot in digitalizing consumer demand.

Blockchain & Cryptocurrency

This trend holds greater significance as sending money across the globalised world through bank accounts would not be possible or costly. This helps explain the explosion in growth and popularity of blockchain and  cryptocurrencies that allow people to send and receive digital money at little to no cost with minimal regulatory oversight.

Many companies have rigorously tested and embedded protocols to ensure blockchain and cryptocurrencies become secure ways to complete digital transactions

 

COMPANIES PROFILED

 

Sl noTopic
1Market Segmentation
2Scope of the report
3Abbreviations
4Research Methodology
5Executive Summary
6Introduction
7Insights from Industry stakeholders
8Cost breakdown of Product by sub-components and average profit margin
9Disruptive innovation in the Industry
10Technology trends in the Industry
11Consumer trends in the industry
12Recent Production Milestones
13Component Manufacturing in US, EU and China
14COVID-19 impact on overall market
15COVID-19 impact on Production of components
16COVID-19 impact on Point of sale
17Market Segmentation, Dynamics and Forecast by Geography, 2020-2025
18Market Segmentation, Dynamics and Forecast by Product Type, 2020-2025
19Market Segmentation, Dynamics and Forecast by Application, 2020-2025
20Market Segmentation, Dynamics and Forecast by End use, 2020-2025
21Product installation rate by OEM, 2020
22Incline/Decline in Average B-2-B selling price in past 5 years
23Competition from substitute products
24Gross margin and average profitability of suppliers
25New product development in past 12 months
26M&A in past 12 months
27Growth strategy of leading players
28Market share of vendors, 2020
29Company Profiles
30Unmet needs and opportunity for new suppliers
31Conclusion
32Appendix

 

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