Thu. Feb 22nd, 2024

What To Know About The Future of Fintech

If you haven’t heard of fintech, or financial technology, you need to get with the times.

You’d be forgiven for not knowing the term because you are almost certainly familiar with the companies dominating this emerging industry that lives at the intersection of disruptive technologies and innovative forms of finance.

Whether it’s an investing app like Robinhood, a payment system like Stripe, or a company in BNPL (Buy Now Pay Later), like Klarna, the boom of fintech is so robust and global that it may represent the potential for a decade of economic expansion.

In the U.S., fintech businesses brought in $12.8 billion during the first quarter of 2021, which represents a 220 percent increase from the same period in 2020, according to an article in Forbes. The trend isn’t only about investments, but also about the valuations of fintech companies, which continue to skyrocket.

The average valuation of the 11 still-private U.S. fintechs on this list (we were aiming for 10, but there was a three-way tie for No. 9) is $19.5 billion, more than double last year’s average.

This trend comes as no surprise to Bardya Ziaian, a Canadian entrepreneur within the fintech industry who believes it will transform the world over the coming decade.

“It’s hard to undersell how big a change we’re experiencing right now through fintech,” Bardya Ziaian said. “In a few years, this will be a household term because there’s no one who will be untouched by the changes brought by this industry.”

The financial crises that resulted from the largest companies on Wall Street has led to consumers becoming more leery of trusting big financial institutions. That history has played an important part in the quick growth of decentralized finance and fintech apps, according to Dan Dolev, fintech equity analyst at Mizuho Securities.

In an article for Entrepreneur, Dolev said that the new generation of “neo banks” created by the fintech revolution is going to replace many of the oldest banks and financial institutions in the world.

“Cryptocurrencies have surged in the past year as proponents build momentum toward a future free from the control of what they view as financial overlords,” Dolev said. “Firms like JPMorgan Chase & Co (NYSE:JPM) and Goldman Sachs Group Inc (NYSE:GS), which powers Apple’s mobile payment service, are taking steps to reach a younger audience, but it may not be enough.”

The Internet now abounds with investment strategies for those trying to cash in on what seems like the next big emerging industry. Many experts believe that fintech will become the dominant economic driver of the 2020s, resulting in a new tech boom.

According to Forbes, these are some of the most interesting recent developments of major fintech companies:

  • PayPal: The company’s stocks are up by 22 percent. PayPal has also recently indicated an update to its app that will allow stock trading by U.S. customers, putting it in competition with Robinhood.
  • Square: Another company with stocks on the rise by about 22 percent. Square announced in August 2021 that it would acquire Afterpay, an Australian buy now, pay later (BNPL) company, for about $29 billion in an all-stock transaction.
  • Visa: After returning about 2.5 percent over the last year, Visa experienced slow cross-border volumes and a slump in consumer spending, likely from the pandemic. But with the vaccine rollout and economies reopening, its business prospects could improve soon.

There’s so much to learn about this industry. If you’re an investor or you just want to make smart decisions about how and where to put your money, a thorough understanding of fintech will only become more important in the years to come.