When the term fintech (financial technology) first appeared in the early 21st century, it applied to technology deployed by financial institutions to their back-end systems. Leading up to 2020 and beyond, a significant shift in fintech has introduced more use cases focusing on the consumer side of the sector.
At its core, fintech helps consumers and businesses better manage their financial processes and operations by using special software and algorithms that are available on a host of devices, including smartphones. With the growth in the use of the internet and mobile devices, fintech has expanded tremendously to encompass the technological innovations in the world of finance.
For a long time, established financial institutions provided their services under a single platform. To most, the brick-and-mortar model is the main platform to offer services such as loans and mortgages. However, fintech has revolutionised how services are offered, unbundling services into individual offers and using technology to streamline operations and make access easier. ‘Disruption’ is the term used to describe this change, with fintech innovations making it possible to move services and products that were once the domain of salesmen and branches into the hands of users through applications and software programs.
Fintech solutions, and the companies behind them, are designed to challenge and be a threat to the traditional financial services providers. They do this by providing easier or faster access to financial services and by targeting a segment of the population that’s underserved. These qualities have given rise to a crop of fintech start-ups and companies that are quickly making a mark in different industries around the world.
The Most Innovative Fintech Companies
In February 2020, Forbes released its ranking of the most innovative fintech companies in the world. This ranking, called the Forbes Fintech 50, was curated based on data provided by Accenture, a professional services company. The list is based on data analysed in 2019 that showed more than $53 billion was invested into fintech start-ups in the year.
Among the standouts from the list is MoneyLion, an app that provides users with access to free paycheck advances, debit cards, and checking accounts. Additionally, it allows its six million (and growing) users to manage exchange-traded fund (ETF) portfolios through the app. Another app is Dave, which helps its five million-plus users build credit scores and provides checking accounts. Investors have put more than $70 million into the app, which is already valued north of $1 billion.
19 companies on the Fintech 50 are making it into the list for the first time. While these first-timers are making a mark with the respective services, later-stage companies continue to grow in their valuations. Payments company Stripe grew in valuation to $35 billion (a $13 billion growth from the previous valuation). At the same time, Chime (a digital bank), saw its value swell from $1.3 billion to $5.8 billion in just nine months.
Emerging Trends
Investors and business people who have established projects in fintech, such as Razi Salih, understand that as the sector grows, some of its innovations will make it to the mainstream financial sector and even influence how the overall industry grows.
In this regard, the following trends, backed by fintech, are those experts see emerging in 2020 and beyond:
- Automated Technology: Many compliance and regulation tasks are performed manually, but experts see this as one area that fintech may change. Technologically-focused solutions are expected to come on board and streamline this aspect of the financial services industry.
- Decentralised Finance: The use of blockchain in cryptocurrency is expected to cross over into legacy financial applications and make it easier and faster to transact. These decentralised solutions will also reduce the fees associated with many financial transactions.
- Partnerships and Joint Ventures: More fintech companies are realising the power and value of partnering and working together. Additionally, expect to see more joint ventures and co-development among fintech companies in sectors and industries where inefficiencies and high costs are the norms.