The global trend for fintech is up. You can see it in the level of investment, user adoption, and especially in valuations. Some expect the value of fintech companies to grow to a market value of $324 billion by 2026—that’s about three times the size of the market today. This has been driven by forced adoption of digital technology in the wake of a pandemic; QR codes, online shopping, contactless banking, and access to e-payments are all good examples of tech we no longer think twice about.
It hasn’t all been smooth sailing, though. In a world of disruption and uncertainty, it has been the mature FinTech companies that have kept their head above water in 2020 and now 2021. Start-ups in the early stage of investment were hit hardest with access to funding a major issue and many were propped up by government grants. There was also the added issue of governance. Firms in supported environments (open banking and regulatory sandboxes) could establish and grow more rapidly.
2021 Fintech trends in the US
While uncertainty in the US initially tightened the reins on business growth in 2020, fintech adoption and its ability to meet consumer needs were eventually put on show. While some challenges remain, COVID-19 has opened up opportunities for fintech in the US—not only for traditional financial services products, but also for e-commerce and SMEs.
Since March 2020 in the US, there’s been a surge in fintech use. Access has spread across the usual Millennial demographic to Gen X, Baby Boomers, and new geographic regions. The ability to service those most vulnerable, while making the most of market dynamics, has fostered fintech growth.
FinTech in the UK leading the charge
The UK is a global fintech hub with London its epicentre. As the pandemic unfolded during the first half of 2020, many companies were forced to adapt fast. New solutions and services helped British companies survive the short-term fall-out.
When the dust cleared, consumers and businesses gained better access to more seamless financial services. Media pundits applauded the UK’s ability to innovate in the face of adversity. Overall, COVID-19 served as an opportunity for fintech companies to highlight innovative solutions to wider audiences. UK customers are now hyper-focussed on services like contactless payments and mobile banking.
A test of maturity for Australian FinTech companies
Over recent years, we’ve seen the Australian Fintech ecosystem mature. FinTechs have surged on a wave of financial growth and a thriving investment environment. New regulatory conditions to support entrepreneurship and the rise of non-traditional finance have boosted the sector, too.
But with three quarters of Australian fintech firms not making a profit when COVID-19 hit, the industry was severely threatened. Many companies grappled with survival during the initial market downturn. The struggle had an especially big impact on the short-term viability of revenue and customer growth. A standout was ‘buy now, pay later’ service provider, Afterpay (ASX: APT) which bottomed around $12 from highs of $40. The company now trades around $120 and has a market cap of AU$35 billion.
But there was a silver lining—and this was increased demand for financial services in all aspects of everyday lives for Australians. As per the US and the UK, adoption happened faster than it would have otherwise. Through social distancing and lockdowns, we’re now seeing more fully digitised end-to-end customer experiences meet our personal and business financial needs.
The challenge for fintech firms in 2022 and beyond
While many banks across the world are prioritising risk management strategies, banks of the future are actively supporting the underbanked and climate agendas of consumers. A third of consumers have indicated they are willing to shift to a new provider for environmentally and socially friendly products. We’ll see technology harnessed as a force for good.
Tomorrow’s fintech stars are being built around a modern core. Mid and back offices are being replaced with the cloud. Open platforms and APIs will become a reality at scale. Hyped-up market valuations may start to ebb, with investors turning their attention to mature and diversified fintech firms already headed for long-term growth.
Getting the message right for your fintech
Unsure sure where to start when it comes to producing a content strategy that works for your FinTech? We’d love to learn about your challenges. We’ve partnered with a broad range of clients over many years. Contact us today.