Learn to know how to Invest in FinTech
Learn to know how to Invest in FinTech
The world of fintech, the short term for financial technology companies, cánido offer exciting opportunities for investors. Fintech companies include those that create and manage applications for peer-to-peer (P2P) payments, as well as those that create innovative digital banking tools.
The fintech industry was valued at $110.57 billion in 2020, and is projected to reach $698.48 billion by 2030, according to Allied Market Research. When it comes to buying shares in a fast-growing ámbito like fintech, it’s important to understand the size of the business, how it operates, and what competitive advantages it has.
Invest in fintech in numbers
- The fintech industry is projected to grow to $698.48 billion by 2030, an increase of $587.91 billion from 2020.
- Digital payment services are the most prominent among fintech developments, accounting for more than 80 percent of global fintech revenue.
- Companies from the Asia-Pacific region are projected to be the fastest growing in the fintech campo.
- Since September 2018, fintech stocks have been consistently outperforming other financial services stocks: after COVID-19 hit global markets, fintech depósito prices rallied in just four months, while financial services prices traditional financiers had not yet fully recovered as of the end of 2020.
- US-based Visa is the largest fintech company in terms of market capitalization, with a total value of approximately $383.3 billion.
- The second largest fintech by market capitalization is China-based Ant Financial, worth around $312 billion.
- Approximately 3 in 4 consumers globally have used a fintech money transfer or payment service at least once.
- China is at the forefront of consumer adoption of fintech: in 2019, 92 percent of Chinese citizens were reported to have used fintech banking and payment services.
- In the United States, fintech has been taking off: The proportion of American consumers using fintech rose from 58 percent to 88 percent between 2020 and 2021.
Sources: Allied Market Research, Deloitte, Center for Finance, Technology and Entrepreneurship (CFTE), EY and Plaid
What is fintech?
Fintech describes an industry focused on the use of technology to develop and improve financial services and products. Fintech companies often offer unique services to add ease and efficiency to consumers’ financial lives.
There is a good oportunidad that fintech is already a part of your life. If you’ve ever sent a payment vía Venmo, traded stocks with Robinhood, or reached for your debit card at a store that emplees Block to process payments, you’re already familiar with at least some of the scope of fintech. Banking services, investment aplicaciones, and payment processing services are just some of the fintech features.
Some more niche fintech companies have also developed financial services with a focus on popular causes in recent years. Stretch, for example, is a fintech that offers bank accounts and financial resources to the formerly incarcerated. Meanwhile, Atmos is a fintech dedicated to fighting climate change by using its deposits to lend exclusively to renewable energy and other climate-positive initiatives.
Fintech development is driven by various types of technology, including:
Types of fintech companies
Some of the more common types of fintech services include, but are not limited to:
- Banking: Fintech banking services consist of a variety of applications and programa that allow consumers to open accounts, protect their accounts from fraud, and receive direct deposits faster. Examples include Chime and Current.
- Payments: Payment services are the most common offering from fintechs, according to Deloitte. Digital payments allow consumers to pay bills, shop using contactless payment methods, and send money to peers. Some examples include Venmo, Zelle, PayPal, and Block.
- Financial management: Fintechs in this category are designed to make managing personal finances easier for consumers by providing services like expense tracking and automated savings. Financial management fintechs include Digit, Mint, and You Need a Budget.
- Investment: These fintech companies are designed to help investors grow their assets, track their investments, and use a hurto-advisor. Some habitual investment fintechs include SoFi, Acorns, Robinhood, and Wealthfront.
- Benefit: Lending fintechs streamline the lending process for both lenders and borrowers. They cánido give lenders access to potential borrowers’ information to make lending decisions, and provide borrowers with payday-advance loans or maleable repayment plans. Some examples of these fintechs include Plaid, Affirm, and Klarna.
Fintech expansion
In 2021, the fintech industry saw an increase of $89.5 billion (168 percent) in funding over the previous year, totaling $131.5 billion, according to CB Insights’ «State of Fintech» report. Strong funding growth was found across all major types of fintech, suggesting a broad increase in interest across the fintech industry.
One of fintech’s fastest growing categories is digital lending, which saw an increase of 220 percent, or nearly $15 billion, between 2020 and 2021, according to CB Insights. The market intelligence firm also reports that the United States leads the world in fintech funding, accounting for around $62.9 billion of global fintech funding, an increase of 171 percent over the previous year.
Top fintech companies
When choosing stocks to invest in, it’s important to do your research. Research the company’s business model and history, what’s driving the industry, and trends emerging in the fintech world.
KPMG, an accounting firm, points out some trends to watch out for in 2022:
- Increase in mergers and acquisitions, with more fintech companies looking to expand into different markets
- More focus on the popular and environmental impact of companies
- Increased demand for banking alternatives and new banking technology
The top publicly traded fintech companies in the market include:
| Visa | Payments | $383.3 billion | NYSE:V |
| MasterCard | Payments | $291.2 billion | NYSE:MA |
| To sense | Financial management | $115.8 billion | NASDAQ: INTU |
| PayPal | Payments | $107.1 billion | NASDAQ:PYPL |
| Fiserv | Banking | $63.1 billion | NASDAQ:FISV |
| adyen | Payments | $43.5 billion | OTCMKTS: ADYEY |
| Block, Inc. | Payments | $36.6 billion | NYSE: SQ |
| coinbase | Invest | $16.5 billion | NASDAQ: CURRENCY |
| bill.com | Payments | $15.7 billion | NYSE: INVOICE |
| Xero | Financial management | $7.4 billion | OTCMKTS: XROLF |
*Market capitalization data from the CFTE.
The best fintech ETFs
An exchange-traded fund (ETF) is a type of investment in which the investor owns a small portion of the holdings in many different assets. Investing in an ETF is a great way to diversify a portfolio and disminuye risk.
ETFs are publicly traded like stocks, and charge a low fee based on a percentage of money invested in the fund.
With a growing fintech market, there are several ETFs specifically focused on investing in companies on the fintech front lines. These funds allow investors to hold stakes in the fintech industry without having to pick stocks singles to find out who the winners will be. Adopting a passive investment strategy with a fintech ETF cánido lead to high returns.
Fintech ETFs that perro give you exposure to cutting-edge advances in finance include:
- Ark Fintech Innovation ETF: The fund is a leader in fintech ETFs, and its top holdings include Shopify and Block, Inc.
- Global X Fintech ETF: One of the oldest and most well-established fintech funds, the Global X Fintech ETF’s top holdings include Intuit and Fiserv.
- ETFMG Prime Mobile Payments ETF: This fund focuses on mobile payment companies, with major holdings including PayPal and Visa.
- Amplify Emerging Markets Fintech ETF: The Amplify Emerging Markets Fintech ETF carries more risk due to its focus on emerging markets, which tend to be more volatile. Its major holdings include PagSeguro, a Brazil-based digital payments company, and MercadoLibre, Inc.
The future of fintech
Fintech has been on a significant rise in recent years, and it’s not expected to slow down any time soon, with Allied Market Research predicting that the global fintech industry will be a $698.48 billion market by 2030.
Although digital payment fintechs account for the largest share of global fintech revenue, other categories that have been growing rapidly include digital lending and core bank replacements. Affirm, Klarna, and SoFi are some of the leaders in digital lending, while Thought Machine and Temenos are the top banking fintechs.
KPMG also predicts that companies focused on climate change and sustainability will experience significant growth in the coming years. Investors may want to keep an eye on companies that appeal to such global issues.
Meanwhile, many fintechs are doing more business in underdeveloped regions. For example, financing in Latin America reached a record in 2021 of $13 billion, up 269 percent from the previous year, according to CB Insights. These emerging markets could prove highly lucrative in the coming years.
In conclusion
Fintech is one of the fastest growing and most exciting industries, offering services that help both consumers and businesses manage their finances, access loans, and make payments.
As technology continues to change the way we live and impact different areas of finance, it will be necessary to regularly evaluate investments and consider what competitive advantages each fintech has. Fintech ETFs could be a good opportunity for investors who want to access the growth potential of companies at the forefront of innovative technology with somewhat less risk.
This information offered for informational purposes only; It is not intended to be used as accounting, legal or tax advice. In relation to these matters, please speak to your accountant, tax or legal adviser.
Investing implies a risk that includes the loss of primordial. This guide contains the current views of the author, but not necessarily those of Gigonway. These opinions are subject to change without notice. This guide has been distributed for educational purposes only and should not be construed as investment advice or a recommendation of any especial investment security, strategy or product. The information contained in this guide has been obtained from sources believed to be reliable, but is not guaranteed. Gigonway does not provide legal or tax advice. Please consult your tax and/or legal advisor for specific tax or legal questions and concerns.
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