Fintech is one of the world’s most booming industries at the moment. Worth almost US $4.7 trillion and with more than 12,000 fintech-related start-ups across the globe, it’s never been a better time to invest in the sector. But what is a fintech company exactly, and how can you invest in it? Read on for a fintech guide.
The story behind fintech
Fintech is a term for financial technology, which is the relationship between new technologies and financial services. The purpose of a fintech company is usually to develop the software and algorithms behind fintech and supply various solutions and services to businesses and consumers, especially when it comes to finance. So, why is fintech becoming so popular? That is largely in part to the growing number of investments made by technology-savvy individuals including those from the Millennial and Gen Z age groups. In fact, a study showed that 89% of 9,000 people aged 18–35 that were interviewed said that they invest in fintech. And more people from all ages are embracing the speed and reliability that fintech solutions offer.
Fintech has also been of great benefit to small business owners, minorities, immigrants, and women making it a more inclusive option and providing services to the vast majority of people.
More reasons for the rise
One of the major drivers of people investing in fintech goes alongside with the rise of cryptocurrencies and blockchain. Many people are using digital funds like Bitcoin alongside traditional currencies to make online payments, investments, and cross border transactions. Fintech companies are already capitalizing on Bitcoin, integrating it into their platforms, and even launching their own versions. But there are other reasons for the success of fintech. Data security, for instance, has become an increasingly important issue as more and more banking transactions happen online. Fintech companies have been at the forefront in creating safer ways to spend with convenient transactions and smooth, safe operations. Utilizing fintech can also save companies. By automating and relying on tech over human help, they can cut back on the cost of employing large teams of individuals to deal with customer service enquiries.
Then, of course, there’s the rise of other technologies and the ways they integrate with fintech. More and more people than ever are working, playing, and banking from their smartphones and devices. Tech-focused publication TechCrunch says that in 2020, 90% of users will use an app to make a mobile payment, with mobile payments set to break the US 1$trillion record during the same year. Fintech is the backbone that supports these mobile, financial transactions and provides more innovative solutions for security and speed as technology evolves.
How to invest in the future
Getting into fintech investment is relatively straightforward, with a few different options available depending on what best suits your needs. Many people step into the sector through fintech ETFs (exchange-traded funds) including the Global X FinTech Thematic ETF and the Tortoise Digital Payments Infrastructure Fund. There are also many different fintech stocks to invest in popping up all over the place, giving loads of different opportunities and a variety of options depending on the preference of the individual.
The fintech space will continue to grow as more private equity and investors enter the space, technology pushes forward, and consumers continue to enjoy its services and solutions.