Bedtime Reading to Better Understand the Soaring Fintech Sector

GDS Modellica

03/01/2022

“The past decade has seen considerable disruption in the traditional banking industry, especially in the areas of payments, lending, wealth management, and retail banking. Interestingly, this change has not been limited to financial technology (FinTech) start-ups. Large technology and eCommerce companies such as Google, Amazon, Facebook, Apple, and Alibaba have managed to leverage their massive reach and technological capabilities to pose a stiff challenge to competitors.”

These are the opening words of the latest report on the Fintech sector by Statista, a leading statistics website. The report itself contains 160 pages and more than 120 data tables, analyses 55 companies and can be purchased for the respectable price of $2,000.

The weighty document covers a number of interesting subjects, including a deep dive into Blockchain, a study of revenue models, case studies, the competitive landscape, a list of companies and banks and an important section on the role of women in this industry.

The report breaks down the FinTech market into the following segments:

Digital Payments.
Neobanking.
Alternative Financing.
Alternative Lending.
Digital Investment.

Of these five segments, Digital Payments is where accounts for the greatest volume of transactions. This is partly due to the general acceptance, in both developed countries and emerging economies, of digital lenders and payments companies, including mobile wallets, P2P payments, alternative lending, cryptocurrencies and robo-advisors. Within the digital payments market, the authors identify three types of “players”:

Providers with their own wallet, such as Venmo or PayPal;
Providers of online payment interfaces like Stripe;
Providers of offline B2B payments like Square. These providers earn money by charging tariffs for each transaction, which is generally paid by the seller.

Unsurprisingly, the report also puts a heavy focus on the distributed accounting technology Blockchain. The first six months of 2021 saw an exceptional surge in investment in Blockchain and cryptocurrency start-ups, amongst venture capital, private equity and mergers and acquisitions (VC, PE and M&A). This investment had fallen from $5 billion in 2019 to $4.3 billion in 2020 because of the COVID-19 pandemic. But now that the end of the pandemic is in sight, in the first six months of this year alone, investments reached $8.7 billion.

On another important topic, the report’s executive study draws attention to something which is well-known but still relevant: throughout history, women have had to overcome many challenges and stereotypes in order to establish themselves in leadership positions. “However”, the report goes on to say, “as has been the general trend across all industries in the last decade, women have not only begun to assume more leadership roles in established companies but have also founded more new businesses offering innovative products that arise mainly from their own frustrating experiences”. The report mentions companies like Ellevest, CNote, Omnius and Penta, as just “some examples of emerging Fintech companies founded and directed by women”.

As for the market analysis, as to be expected, the United States boasts the largest number of FinTech companies in the world. “Specifically, the majority of the most important FinTech companies in the USA are found in California and New York”. These are emerging FinTech companies with names that are more than familiar in the sector, such as Venmo, Stripe, Ondeck, Lending Club, Prosper, SoFi, Betterment and Wealthfront. “Even though they offer services in the same segments, their conditions and specific characteristics vary greatly”, explains Statista.

There are also special mentions for other companies, like Ant Financial, the most valuable FinTech company in the world and affiliate of the Chinese Alibaba Group, or Robinhood and SoFi, the two best-funded emerging FinTechs in the USA, with funds of $5.6 billion and $3 billion, respectively.

Without a doubt, this exhaustive analysis should be part of the bedtime reading for any FinTech enthusiast or industry professional looking to keep up with the latest trends and players in the FinTech sector.