One of the most revolutionary and disruptive emerging markets to develop in recent years is fintech. This very broadly-scoped industry has, in the coming years, the potential to seriously shake up the financial world and to potentially leave the methods of consumer interaction with the economy unrecognisable in comparison with those of today. It is widely recognised as the fastest-growing market of 2018 and, with rapid developments unfolding, it presents many lucrative prospects for innovators and investors alike. But first of all, let’s define what the fintech industry is.
What is fintech?
There is a wide variety of definitions out there, but in a nutshell fintech is the industry in which businesses disrupt and improve financial services through utilising and applying technology.
This covers a wide range of areas such as mobile banking, investment applications, cryptocurrencies, digital payment methods, expenditure tracking and alternative loans, and this list is by no means exhaustive.
How has fintech changed the financial services industry?
Fintech has already disrupted the offering of many areas of financial services. Here are some examples.
The mobile banking area of fintech tends to be focussed on challenger banks. These are alternative banks that have no physical high street presence and operate solely via the cloud. An example of such a company is Monzo. Founded in 2015, Monzo initially offered prepaid debit cards. This came about due to a restricted license placed upon them by the Prudential Regulation Authority and the Financial Conduct Authority. These debit cards served as a testing method for Monzo in anticipation of their restrictions being lifted. This occurred in April 2017, allowing the company to then offer current accounts. Monzo has received almost £200m in investments since their foundation; £156m of that coming between November 2017 and October 2018. Such heavy investments in one of many companies in the same area gives rise to the opinion that this could be the future of retail banking.
The rise of a wide range of investment apps has given potential investors a variety of options when compared to dealing with a traditional investment advisor. The array of apps currently on the market has made investment a lot more accessible. Each app tends to have its own niche or unique identity. Acorns, a platform launched in 2014 for example, encourages customers to invest as little as $1 a month. The customer then alters their settings to fit their situation and goals and the app recommends portfolios of investments, which the client can ponder over; they can even allow the app to take charge. This provides flexibility unavailable through traditional sources. It Is impressive that after only four years, $1bn is invested through the platform. One platform in a sea of many. This is clearly a lucrative area of the fintech universe.
In late 2017 and early 2018, the cryptocurrency Bitcoin worked its way into popular culture. Bitcoin mania sprung up as people with little or no investment history began speculating on this virtual currency which was skyrocketing in value whilst attracting mainstream media attention. Such numbers getting behind a financial instrument was unprecedented. Millionaires were made as the value of one unit reached $19,666, up from the 2011 starting price of $0.30. In December 2018 the price settled at around $3,250. This example shows the appetite of the wider public for this type of investment.
What will happen next in the fintech sector?
The mark the fintech industry has left on the financial world after its short life is indelible and it is arguably the most important economical development since the dot com boom. It is therefore to be expected that this sector will see plenty of M&A activity during 2019 as investors seek to join the fintech revolution.
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