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Fintech began booming as an industry, and as a result, many investors started investing in this field.
According to KPMG, in 2019, the overall investment in fintech exceeded US$37 billion, which is much more than in the past. For example, in 2013, the fintech market only had US$4.05 billion invested.
The growth of investor interest, venture capital funding and private equity financing has led to greater innovation and investment in fintech. Read on for more information about this promising market.
Many private equity firms like Blackstone, P2 Partners and Silver Lake have already noticed this trend and placed their billions of dollars into fintech. In the U.S. alone, the amount of money invested in this sphere exceeded $54 billion in 2018. It was significantly more compared to $29 billion in 2017.
In 2018, not only the US but also Asia ($22.7 billion) and Europe (34.2 billion) reported record financing levels in fintech. In the KPMG report, it was stated that automation and artificial intelligence (AI) are the most promising subsectors of the fintech industry.
In the third quarter of 2018 in Canada, there were 995 fintech companies; more than 70 percent of fintech firms there were small businesses and had less than 50 employees.
With the development of this sector, we started to see more and more characteristics of this industry. According to the Fintech Growth Syndicate, paytech companies (they enable the electronic transfer of value) make up 25 percent of the whole industry.
Experts state that four main trends shaping the capital markets are AI and advanced analytics, distributed ledger technology, post-trade products, and quantum computing. Many firms, for example, Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS), are using blockchain technology and cryptocurrency for their operations.
Recently S&P Global reported 276 fintech completed deals that by the end of 2019; their total deal value was $127.99 billion. Interestingly enough, the number of fintech deals decreased since 2018, but deal values increased by a lot, thus proving that the market continues to do well.
If you want to invest in fintech, there are many ways to start, like stocks and exchange-traded funds (ETFs).
Let’s talk about ETFs first.
Launched in September 2016, The Global X FinTech Thematic ETF (NASDAQ:FINX) is mostly focused on American companies regardless of the name.
Another example of a fintech ETF is The Tortoise Digital Payments Infrastructure Fund (CBOE:TPAY), which started trading in February 2019 and focuses on companies from the digital payment sector.
Now onto fintech stocks.
Fintech companies are popping up everywhere, so it can get overwhelming. This is a brief list of fintech stocks worth your attention: First Global Data (TSXV:FGD) GoldMoney (TSX:XAU), and VersaPay (TSXV:VPY).
The fintech sector has been growing in recent years. There are more and more companies entering the market, and it looks like the industry is going to keep growing in the future.
Why Should You Invest in Fintech?
Fintech, or financial technology, is any technology used to prioritize consumer financial services in a convenient, secure and efficient way. It has revolutionized the financial industry, and come to be known as the backbone of cryptocurrencies and other digital assets.
Benefits of Investing in Fintech
Investing in fintech offers numerous advantages that stand out among the rest, including:
- Increased automation: Automated technologies make financial processes more efficient, reducing costs and increasing speed for the customer.
- Improved customer experience: Fintech provides an improved customer experience through greater convenience, better accessibility, and digital security.
- Higher return on investment: Investing in fintech can lead to higher returns on investment than traditional financial instruments.
Frequently Asked Questions about Fintech Investment
- What is fintech investment?
Fintech investment is the process of investing in financial technology, the backbone of the global cryptocurrency and digital assets market.
- How can I invest in fintech?
Investing in fintech can be done by investing in companies specializing in fintech, or through exchange-traded funds that specialize in the sector.
- What are the risks of investing in fintech?
Fintech investments come with their own inherent risks, such as the risk of fraud, markets manipulation, and new technologies not achieving their promised potential.
Fintech, or financial technology, is a field of technology used to prioritize consumer financial services in a secure, efficient and convenient way. Investing in fintech brings numerous advantages, such as improved customer experience and higher returns on investment. It is possible to invest in fintech through companies specializing in the sector, or through exchange-traded funds. As with any investment, investors should be aware of the potential risks, such as fraud, market manipulation and new technology failing to meet its potential.