Witness the rise of the Fintech industry with numbers
Technology has always reinvented industries. For instance, Amazon, Inc. reinvented how retail is done and introduced a completely new category called e-commerce two decades earlier. While Amazon started offering its service selling only books to a then tiny group of internet users in the United States, they now are the largest e-commerce company in the world.
Similarly, there are a lot of companies who are redefining the banking industry with new technology during the last few years. While banks have in fact adapted to new technologies to provide a better service to its customers, experts believe that they have been too late to catch up. Due to their large size and monopolistic position in the markets that they operate in, banks have found it difficult to adapt to new technologies continuously.
A slew of new startups have taken this as an opportunity and started offering technology-oriented finance services to their customers. These are called financial technology companies, or Fintech for short, due to their focus on technology.
The people at DealSunny have devised a nice infographic explaining the recent growth of the Fintech sector as shown below.
Here are a few facts we gathered from this infographic
- Fintech might be a new industry but it already exists in over fifty countries around the world. While most of the companies dealing with financial technology are startups, there are 1362 companies in total across 54 countries. These companies have also attracted a lot of private and public funding totalling $25.8 billion. That is a staggering $44 million per company on average which is one of the largest for any industry.
- Many governments have understood the importance of hosting financial technology companies in their country and are offering attractive regulations and incentives for the industry. The countries that offer the most government support for the fintech industry are the United Kingdom, the United States, Singapore, Hong Kong and Luxembourg in order.
- The United Kingdom offers the most incentives by way of a £860 million funding through its Cyber Security Programme and collaborative tax incentives for fintech startups. Singapore, Hong Kong and Luxembourg offer similar incentives for financial technology companies like special government financing incentives, connecting startups to investors in the country, providing a good IT infrastructure, etc.
- The top Fintech investments went to companies dealing with Lending, Payment processing and Mobile wallets with 19%, 14% and 10% of the total investments made respectively. The other popular categories that received the most investment are financials security & fraud analysis, international remittance and peer to peer payments which received more than 5% of the total investment each.
- Financial Technology might be a relatively new industry but it already has a number of companies with more than a billion dollars in valuation, which clearly shows their huge potential in the finance industry. Some of the companies with the highest valuation in the world are Lufax, a finance marketplace based in China with $10 billion valuation, Stripe, payment processor based in the United States with $5 billion valuation and Zenefits, an Insurance startup based in San Francisco, CA with $4.5 in valuation.
It is important to note that these companies reached this valuation before even considering an IPO. Social Finance, Credit Karma, Powa, Adyen and Klarna are other examples of Fintech companies with more than $2 billion in valuations.
While conventional banks should be looking at this huge growth in the Fintech industry with a keen eye, a number of banking groups have understood their inevitability and have started investing in the fintech startups. What the future holds for Fintech startups is yet to be told, however, with the recent advancements in technology and a trend towards cloud based applications and banking, there is no reason to believe that Fintech is going anywhere any time soon.
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