Looking to diversify your portfolio and expand into a booming industry? A growing number of investors are putting their money in the financial technology space, or fintech, with great success.
What is Fintech?
Though the term fintech is commonly used, few people know how to actually define it. However, chances are you’ve been affected by it, as the industry has been disrupting the financial scene for years and changing how we bank, invest, and do business.
It is usually applied to technology startups that are developing products and services related to combining finance with technology through mobile payments, money transfers, fundraising, loans, asset management, and more. Fintech relates to the apps, and chatbots in the financial world that have seen explosive growth in recent years.
Global investment in the space grew from $930 million in 2008 to more than $12 billion by the start of 2015. During that time, Europe saw the most growth, with an overall increase of 215%. More than $150 billion could be invested in the space in the next three to five years. In London, employees in the financial and technology services space make up an estimated 40% of the workforce.
Fintech is changing the traditional financial services industry and doesn’t show any signs of slowing down. As technology increases, the industry looks for ways to combine the newest innovations with traditional banking behaviors to increase productivity, better reach customers, and rework financial regulations. With its strong trajectory for the future, it’s obvious why fintech is a popular place to invest.
What Can We Expect in the Future?
When it was first starting, fintech was often viewed as a threat to traditional financial services firms. Now, however, those groups are seeing the staying power and potential of fintech and often incorporating the technology into their existing services instead of competing against it.
Although there may be some growing pains as traditional and technology services figure out how to best work together, experts are predicting that many financial firms will re-evaluate their strategies and partner with fintech in the coming months and years.
Fintech is fairly well established throughout Europe and North America, and now startups are expanding their reach into developing countries around the world, where there is a huge demand for such services. These companies are bringing basic banking to rural villages in Africa, helping people in Mexico easily access their credit scores, and introducing financial education to people around the world.
Because of the great value presented by fintech, people in developing regions are adopting these programs at a faster rate than people in financial hubs like London and New York. Many people predict that growth will continue and expect fintech to shine around the world.
How Can You Invest in Fintech?
There are many opportunities to invest in fintech, with a number of startups seeing great success. However, when considering where to invest, look for startups that are expanding and moving their services into new areas.
In an industry that has such potential for growth, the best investment opportunities come from companies that have strong growth plans for the future and can easily scale their products and services to new regions and applications. Up until this point, many fintech companies have focused on B2C services, but the area with the most potential for growth is now in B2C, with many startups reaching out to customers to provide convenient mobile opportunities.
With such rapid change in the industry, 2017 is expected to feature a number of fintech-related acquisitions. Consider this when investing in the space—look for companies with good M&A outlooks that show growth opportunities. Although fintech is a growing space, remember that 90% of startups fail, so invest wisely in new companies.
Fintech is a powerful space that is revolutionizing the financial world and has great investment opportunities. By researching forward trends, investors can likely have great success in the area.