The growth and development of the Fintech sector looks unstoppable, even the Covid-19 pandemic has brought new opportunities and shown the importance of alternatives to traditional banking.
What are Fintechs?
Fintech, or financial technology, is the umbrella term for companies that offer financial services different to traditional offerings. The industry itself is called Fintech but could also refer to the individual companies.
There’s a huge variety of Fintech specialities. Whether they be online payment solutions like PayPal, modern insurance and pension accounts, AI financial software developers or alternative banking solutions like Suits Me, they all come under the Fintech banner.
Whilst government entities and big banks have invested millions in the Fintech industry, the market is dominated by smaller private firms who have unique offerings their well-established competitors can’t match. The market was worth $127.66 billion in 2018.
Where are These Companies Based?
Global Fintechs and Challenger Banks
The US and the UK are the two largest Fintech markets for now, with the UK leading the way in alternative banking solutions. The map above shows some of the world’s most successful companies which offer alternatives to old fashioned bank accounts.
Why the UK is Leading the Way (for now)
The UK has always provided industry-standard financial services. In the last two decades, it has taken huge strides to develop and evolve fintech to where it is now. The country leads the global digital banking industry and hosts some of the world’s most successful challenger banks.
There are a couple of key factors at play that make innovation like this easier in the UK. The Financial Conduct Authority (FCA) has allowed hundreds of licences for digital-only banks, the flexibility has given the opportunity for creative alternatives to come onto the market.
The government’s support of the financial sector has also benefitted Fintech. They praised the Fintech industry for its role in helping unbanked and underbanked people in its Financial inclusion report 2018-19.
Even Lockdown couldn’t slow Fintech down, the market has continued to evolve in recent months. The estate agents Savills said that as lockdown restrictions were relaxed, they were met by competing Fintechs battling for office space in London, each desperate to expand in the capital.
The move online has also made all-online banking solutions a no brainer for some and has provided potentially struggling SMEs and consumers the support and features they need to get out the other end of lockdown financially stable.
There have been shocks too. A market leader in credit card issuing, the German company Wirecard, went bust following nearly £2 billion of fraud last month. The ensuing vacuum in the market could lead to massive competition and innovation in the coming months.
Fintech is a quickly growing market in the Asia/Pacific region and have a growth rate exponentially higher than both Europe and North America. China currently leads the way in setting the pace for Fintech development in the region but even they’re starting to have competition. Hong Kong regulators allowed licenses for eight new virtual banks, following in the FCA’s example. Singapore’s government has increased investment in the sector and has started to hand out licenses too.
These companies all plan to bring the fight to the UK’s fintech giants, their massive growth rate suggests that the Asian Fintech market could be real competition very soon.