Based on its sustained growth over the past year, the fintech industry could experience even greater growth moving into the coming year. Financial technology targets a number of areas within the financial industry, including payments and wealth management.
Following a solid year of significant investment in the industry, fintech could finally make its way into an even stronger growth pattern in 2016. Along with increased attention, the industry could see a large number of launches.
Over the past several months, a number of new platforms using algorithms for determining investment allocations have been launched. Big banks have also begun to experiment with blockchain technology for securing payments as well as releasing mobile-payment apps designed to make services easier.
Fintech Funding Booms
In recent years, funding for the fintech industry has boomed. In 2014, investors funneled more than $12 billion into fintech companies, an increase from less than $3 billion in 2012. During the first quarter of last year alone, this sector saw almost $3 billion in investments.
Over the course of the last 12 months, nearly $14 billion in funding has made its way into the coffers of fintech startups, representing an almost 46 percent year-over-year growth rate.
The fintech industry has experienced a steady increase in funding since 2010. Among the top categories receiving funding are cryptocurrency, payments, online lending, and personal financial management. In total, private equity firms and venture capital companies have invested approximately $50 billion in fintech companies over the past five years.
To be certain, the fintech sector has experienced a tremendous amount of growth since the first companies made their debut into this sector. Most of these companies began with the idea of taking a revolutionary approach to retail financial services. Once the financial crisis hit, the concept that regulated institutions, including banks, were vulnerable began to take hold. This naturally presented a tremendous opportunity within the financial sector. Entrepreneurs entered the scene with the idea of transforming everything from lending to payments to finance. Venture capitalists quickly took notice and started to fund new generations of fintech entrepreneurs and startups looking to change how finance was handled.
VC to Crowdfunding
In 2016, funding for the fintech sector is not expected to decrease, but funding could come from different sources in the future. An emerging trend shows that crowdfunding could actually outpace venture capital funding in the coming months. This is quite interesting considering that crowdfunding itself is considered a sector within the fintech market.
Fintech adoption could actually double in 2016, according to some reports. Urban consumers tend to use fintech services at a greater rate than any other population. On a global scale, consumers in Hong Kong represent the highest rate of fintech adoption and use. While the fintech industry as a whole is clearly on a path toward greater growth, the potential for the industry does vary based on product category. Research shows that payment services hold the highest rate of adoption at 17.6 percent. This category includes money transfers and the use of non-bank providers for paying for goods and services. The second-largest category is savings and investment, with a usage rate of 16.7 percent.
The Bottom Line
The significant amount of funding being invested in fintech startups serves to underscore precisely how much technology, particularly online technology, has dramatically changed financial services. From the way in which people decide how they will spend their money to the tools they use for making payments and investments, finance is experiencing an unprecedented level of change.
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