Even if you’ve never heard the word “fintech,” you—and your customers, leads, students, etc.—are most likely using it right now.
That Venmo payment you made to a friend for dinner? That instant transfer from your checking to savings using Zelle? Those robo advisors you’re using to invest? All examples of fintech.
Given its wide adoption among most stakeholders in the financial technology market, it’s no surprise that the fintech industry is thriving.
According to our latest report at BCC Research, “Fintech: Investment, Innovation, Ideology and Technology,” in 2018, fintech products and services received almost $53 billion in investments, and the market is showing no signs of slowing down.
Now is the time to cash in on the opportunities in fintech and we don’t want you to miss out.
That’s why today’s blog is dedicated to getting you up to speed on the market quickly with the trends and data you need to know in order to make your next move—whether that’s in your business, startup venture, personal career or something else.
Fintech stands for “financial technologies.” This all-encompassing term refers to the technologies used in the financial services sector, from the world’s top financial institutions to small banks to insurance companies and more.
Recently, fintech has come to be associated with customer-oriented technologies that are disrupting traditional financial services, including financial advice and education, wealth management, lending and borrowing, retail banking, fundraising, money transfers/payments, investment management and more.
Fintech also includes the development and use of crypto-currencies, such as bitcoin.
1. Fastest-Growing Segments. The fintech industry encompasses many sub-industries, including the following:
- Lending and financing;
- Data analytics.
Insurtech is by far the fastest-growing sub-industry, as it is estimated to grow 58.7% annually, followed by Regtech (38.2% annually) and Wealthtech (26.9% annually).
2. Market Drivers.
Technologies. Unsurprisingly, the success of fintech can be attributed partially to the rise in various technologies, including the following:
- AI and Machine Learning (ML): AI is being deployed in backend services to automate decision-making in lending, trading and financial analysis, and in the frontend to power customer-facing services such as help desks and transaction support. Applications of ML in fintech include data analysis and advanced analytics, fraud prevention and detection, algorithmic trading and advanced chat-bots.
- Blockchain. Blockchain technology is able to simplify, speed up, and make payments less expensive. Peer-to-peer transactions cut out the “middlemen,” resulting in faster and less expensive transactions. Blockchain also helps lower the remittance costs on the total transfer amount from about 20% to a mere 3%.
- Application Programming Interfaces. Fintech companies can integrate APIs into their application easily, so they can focus on bringing the unique features of their application to their users. Additionally, APIs protect security and accountability. Users’ sensitive financial data need to be properly secured, resulting in additional costs and regulatory requirements. It is generally easier and safer for a fintech to rely on the expertise of a third-party company, which developed the API and bears the storage costs and responsibility for the security of the data hosted on its servers.
Wireless Infrastructure. The infrastructure needed to support a growing fintech sector includes a robust telecommunications infrastructure supporting widespread internet access, particularly wireless internet.
In 2018, the International Telecommunications Union (ITU) estimated that 80.9% of the population living in developed countries was able to access the internet, compared to 45.3% of people living in developing markets—findings that support the growth of fintech.
Demographic and Economic Trends. Financial service technology companies tend to target two major demographic groups: Millennials and Baby Boomers. They both represent an attractive marketing opportunity for fintechs.
For example, Millennials are the most digitally literate generation, having grown up with smart phones and mobile apps. Additionally, they have largely embraced the “sharing economy,” such as financial information sharing and peer-to-peer lending. They also value quick, transparent access to information and, being that they are relatively young, they haven’t yet formed strong relationships with legacy financial institutions.
Similar to Millennials, Baby Boomers also represent a lucrative target market for fintech. As they retire, they’ll need help managing their money and making it last for as long as they need it, which represents a major market opportunity for fintechs.
Additionally, more than 60% of Baby Boomers use smartphones, especially those between 50-59 years of age. Finally, this group shops online actively, spends about 27 hours per week online, utilizes search engines and uses social media.
Learn More About the Global Fintech Industry
To learn more about the global fintech industry, download a complimentary chapter of our recent report, “Fintech: Investment, Innovation, Ideology and Technology.”