AA1: The Future is FinTech?
Global fintech revenues are expected to grow more than 3x from USD 150bn in 2018 to USD 500bn in 2030
Cash is king - at least for now. I still bought some groceries with cash yesterday; and it remains the most popular payment vehicle in the world, accounting for over 50% of transactions in most countries.
But there could be a seismic shift soon - I’ve started doing up to 60% of my transactions online but physical stores still need cash.
There’s a new normal and Fintech (short for financial technology) is powering it.
COVID-19 has accelerated the world’s transition to performing our activities online. From March 2019 to 2020, e-commerce spending doubled in the United States to 22% of all retail sales. China, who hadn’t fully supported crypto, is making moves to create a digital currency that is backed by its central bank. And Nigeria rose to the top in bitcoin transactions at the height of the country’s economic lockdown.
The FinTech Universe encompasses products and services that use the internet, software, mobile or cloud capabilities to enable individuals, businesses and governments with anything related to money.
Global FinTech Boom
Global fintech revenues are expected to grow more than 3x from US$150bn in 2018 to US$500bn in 2030. The average annual growth rate is also expected to be faster than the broader financial sector. We’ll be seeing new entrants and quick-to-adapt traditional institutions take a position to claim significant market share in payments, wealth management, trading & investing and insurance.
Take for example the rapid rise of saving, wealth management, investing and trading platforms in the last 2 years in Africa, especially Nigeria. Taking the cue from digital stock brokerage trading platforms like U.S. platform Robinhood who has seen its user base 10x in 3 years, Nigerian trading apps give simple and fast access to the local and global markets, while traditional brokers, and even regulators, try to adapt to the new expectations from users.
Talking about traditional financial institutions been forced to adapt, Access bank, Sterling bank and GTbank have all sought to become Hold-Cos this year mainly to participate in other areas of finance like asset management, payments, pensions using technology.
Looking abroad, PayPal and other third-party wallets already are accepted at nine of the 10 largest U.S. online retailers. Apple Pay is also gradually becoming one of the top players already accounting for 5% of the global card transactions and could reach 10% in a few years.
China is the e-commerce capital of the world helped with online payment platforms and digital wallets that make it easier to populate shoppers’ payment details and delivery location. Alibaba’s Alipay has a huge share of that market with more than 1 billion users.
Public Markets Performance of FinTech
The publicly traded markets have been betting on the growth potential of Fintech.
Compare the performance of the Global X FinTech ETF (FINX) (in blue) to the S&P 500 (in red) in the last 5 years, and you’ll see this:
But they are also recognizing it’s future growth potential, too. Between 2020 and 2022, the FactSet Global Fintech Index is expected to see its earnings per share grow at an annualized 43%—double the average forecast for the MSCI All Country World Index.
You could benefit from the future of fintech by starting a company in the space, working in a fintech or investing in a diversified way through major indexes that have payment industry leaders, technology companies creating innovative fintech services, and traditional financial companies deploying a pure fintech strategy.