In recent years, FinTech
(or “Financial Technology”) has been gaining a significant amount of interest globally. According to the EY Global FinTech Adoption Index 2019, the adoption of Fintech grew at 64% globally last year with consumer awareness at an all-time high of 96%. Rapid adoption of financial technology solutions have even opened up a new wave of market opportunities for innovative companies and businesses. From blockchain-based cryptocurrencies
to peer-to-peer lending and investment options, payments processing, crowdsourcing, wealth management, regtech, and insurtech, businesses have a lot to gain from the FinTech solutions. Individuals and businesses now have a convenient and affordable platform to interrupt the bank monopoly. There are a number of factors driving Fintech growth and adoption across the global scale. In this blog post, we will explore the major factors behind the imminent Fintech boom.
Digitalization of Financial Services
Rapid advancements in technology have provided a great boost to the digital capabilities. Evolution of mobile devices, have become a key focus for the banking sector as it renders better ways for customer engagement and financial operations. Banking-app based smartphones have emerged as an effective alternative to the troublesome and expensive branch transactions.Informative visual interface, automated processes and high security architecture of the self-service banking tools have enhanced the overall operational efficiency of banking operations. Since modern day customers expect an unparalleled level of customer experience
, fintech solutions have been gaining immense acceptance. Digitalization of financial services have automated the traditional banking services thus ensuring convenience and time savings for customers. Nowadays, customers can find a huge number of financial channels and ecosystems for conducting their banking operations. And this shift in dynamics has majorly driven the growth of fintech across the globe.
Also known as “Marketplace lending or Crowdsourcing”, peer-to-peer lending (P2P lending) has been gaining immense popularity in recent years. According to the research findings published by Morgan Stanley, P2P lending companies could raise up to $480 billion in loans by 2020. Driven by technology, modern P2P lending is a business innovation that connects borrowers and lenders directly, making the returns effectively much higher. P2P companies operate online and provide a platform to offer identity verification, loan approval, loan servicing and legal compliances. Since these financial technology companies manage the funds coming in from many disparate sources, it cuts out the middleman and overhead fees, thereby improving the economic efficiency of lending and investments. The applications of peer-to-peer lending goes beyond personal or commercial loans as the specialty markets include crowd-investing (equity crowdfunding) and peer to peer fundraising. When it comes to people with low or no credit, P2P lending offers a better alternative to traditional banking systems
. This new fintech innovation provides a wide array of benefits to lenders and borrowers such as faster approval and funding, transparency, distributed load, lower risks, security assurance and higher gains. Moreover, P2P platforms are economically relevant in the financing of small and medium enterprises
as it helps in filling in funding gaps and carving out increased revenues.
Huge Venture Capital Funding
Although Fintech is just taking its baby steps in the digital economy, it is quickly revamping finance as well as other business verticals. So much so that money continues to be poured into the Fintech industry as it hits a historic peak value of $112 billion in 2018 (KPMG Pulse of Fintech report). When people choose to invest in FinTech
, they are gaining access to a new world of opportunities. Financial technology is poised to create an impact on different businesses as it covers a wide variety of technologies, audiences and services. Investors can explore tones of avenues that will reap good returns. According to the KPMG Pulse of Fintech report, the exponential rise of global fintech funding is fueled by mega M&A and buyout deals. Strong diversity of global fintech hubs and its subsectors (regtech and insurtech) makes it a perfect choice for the investors.
Innovative business models, scalability and new technologies arriving at a rapid pace are some of the key factors fueling this Fintech storm. As the financial service industry moves swiftly through a state of digital transition, we believe Fintech
is well-positioned to experience rapid adoption and growth in the near future.