KPMG estimates that worldwide spending on tech stocks will reach $210 billion in 2021. According to Vantage Market Research, the worldwide fintech market will develop at a CAGR of roughly 19.8 % between 2022 to 2028 and reach a market size of around US$332.5 billion. Rising influxes of venture money, investor interest, and private equity funding have bolstered investment in fintech. Keep reading to find out more about this booming industry.
An Overview of Navigating the Future of the Fintech Industry
The fintech business is maturing, and with it comes a lot of trends. The benefits of fintech are becoming increasingly apparent in the wealth management industry and among portfolio companies. Real estate, auto financing, peer-to-peer lending, and general lending are just a few examples of how the financial technology sector is making strides globally and nationally.
Many factors, including embedded finance, cross-border e-commerce, blockchain technology, mega app platforms, artificial intelligence (AI), and machine learning, have been cited by Forbes as trends driving the infrastructural side of fintech.
The BNPL industry is expanding as a part of integrated finance since it enables customers to pay for their purchases through retailers in instalments. By 2025, the global market for this type of fintech transaction is projected to grow to $680 billion. Since blockchain-as-a-service solutions are both secure and efficient, they are being used by an increasing number of financial institutions. Cryptocurrency and blockchain technologies are being implemented by a growing number of companies, including financial heavyweights like Goldman Sachs (NYSE: GS) and Citigroup (NYSE: C).
Business-to-consumer (B2C) sales, business-to-business (B2B), and consumer-to-consumer (C2C) sales are all examples of cross-border e-commerce. According to projections made by Vantage Market Research, the value of the international business-to-consumer market might rise to US$3.4 billion by 2028, expanding at a CAGR of 25.1% during that time period. The Asia-Pacific region is expected to be the market leader in this niche.
Super-apps are one example of a rapidly growing area of fintech. They offer various packages of products and services from one platform. Super applications are designed to keep users tied to their system by meeting a wide variety of demands, much like traditional superstores that sell everything from food and clothing to electronics and hair care. WeChat and AliPay are two examples of such powerful applications. Fintech companies use artificial intelligence (AI) and machine learning to analyse data and generate insights that help businesses and consumers.
According to the Mordor Intelligence report, “Machine learning and AI have helped fintech and banks, as they are capable of processing a great deal of information about customers.” “This data is used to obtain findings about suitable goods or services that customers want, which has helped in establishing customer relations,” The market research organisation estimates that by 2026, the artificial intelligence (AI) industry in fintech will have grown to over US$26.67 billion, a compound annual growth rate of 23.17 percent.
Also Read: Robinhood’s Class Action Lawsuit Settlement Story
Investing in Innovation: Fintech Stocks & ETFs for Financial Growth
Exchange-traded funds (ETFs) and equities are two of fintech investors’ most common entry points. ETFs in the fintech industry give investors a diversified portfolio of holdings. They are:
- Early in 2019, ARK Financial Technologies Innovation Exchange Traded Fund (ARCA: ARKF) debuted. The purpose of the fund is to account for “the introduction of a new tech product or service that changes the manner in which the financial sector works.”
- In September 2016, Global X introduced the FinTech Thematic Exchange Traded Fund (NASDAQ: FINX), despite its name, holds mostly shares of US businesses (65%).
- There are two ETFs dedicated to the mobile payments industry: ETFMG Prime Mobile Payments ETF (ARCA: IPAY), which has been trading since 2015, and Ecofin Digital Payments Infrastructure Fund (ARCA: TPAY), which began trading in February 2019.
Weighing Risks and Share Price Profits of Fintech Investments
Investors can take advantage of emerging countries’ tremendous development potential by investing their money into fintech businesses. These new businesses are able to quickly develop and respond to client needs because they have smaller balance sheets, more nimble operations, and fewer regulatory obligations. However, a thorough analysis is required to guarantee a startup’s feasibility and profitability.
Investors should prioritise fintech businesses based on their ability to effectively address customer pain points and improve upon existing solutions. Despite having access to cutting-edge technology, some firms are having trouble meeting customer demand. Long-term viability and differentiation require a plan that goes beyond product launches and cost reductions.
A startup’s success and profitability must evaluate the likelihood of client adoption. They should analyse customer service, acquisition methods, and retention rates. The innovation and expansion of a startup might be hampered by excessive scrutiny of its intellectual property, partnerships, and strategic relationships.
Investors need a long-term perspective, as many fintech businesses take several years before they begin to turn a profit. Investment research relies heavily on the evaluation of potential exit options such as mergers, acquisitions, and share prices. It is also important for a startup to have a firm grasp on the industry’s competitive landscape and its prospects for developing a lasting competitive advantage.
A fintech startup survival depends heavily on its management staff. Instead of relying solely on superficial measures, investors should evaluate the team’s ability to lead strategically and get things done. By remembering these things, investors can better manage the ever-changing landscape of fintech startup investments.
Endnote
Some investors may feel overwhelmed by the proliferation of fintech startups. Start with the Canadian fintech stock list, research Australia’s offerings, and then investigate whether US fintech companies are worth considering. No matter your preferred method of investment, it is certain that the fintech industry has expanded significantly over the past several years. The industry seems to remain growing in the future as firms continue to develop in the field of finance and, ultimately, the capital markets.
