How 2020 Is Still a Big Year for Fintech

Synopsis: Not even a pandemic and recession can stop the acceleration of FinTech adoption. The financial technology sector is predicted to see double digit growth despite of and because of the coronavirus outbreak.

The year 2020 started with the deaths of many beloved personalities, geopolitical tensions, and a pandemic that led to recessions in nearly all economies of the world. However, it’s not all gloom and doom ahead. There are opportunities for the resourceful and ingenious.

The FinTech sector is particularly attractive during a pandemic and recession. According to The Business Research Company, the global FinTech market is set to grow at an annual rate of 24.8% in the next two years. It is projected to become a $309.98 billion market by 2022.

The research identifies substantial investments in technology-based solutions by banks and financial services firms as the primary growth driver. More financial institutions are embracing the use of technology in financial services to boost efficiency and improve their reach. Additionally, financial technology companies have nearly perfect their solutions that they are able to provide low-cost personalized products.

The trend of increased investments is unlikely to change even if COVID-19 is already under control. “This is a one-way street,” says Nigel Morris, founder of QED Investors. Several companies have received more funding as the pandemic made ecommerce and digital transactions a necessity. Online payment and billing company Stripe raised $600 million. Fast, a tech firm specializing in one-click checkout, received $20 million. Similarly, online payment platform Finix attracted a total of $45 million in funding at the start of the year.

The technology sub-segment of the global FinTech industry is set to experience the biggest growth according to Research and Markets. This segment consists of sub-segments that attract significant research and development funding. Artificial intelligence and blockchain technology, in particular, are being rigorously tested and enhanced for practical applications. Forecasts set a 21% CAGR for these sub-segments of financial technology for the next five years.

Artificial intelligence is also utilized to secure online banking accounts by monitoring activities and detecting possibly anomalous transactions. Shape Security, for example, has an AI system capable of detecting credit card applicable fraud, scraping, credential stuffing, and gift card cracking. Similarly, cybersecurity firm Vectra provides an AI-powered cyberthreat hunting solution for securities exchanges.

Financial technology addresses needs not covered by conventional banking and financial services. It helps consumers in dealing with restrictive factors such as the high cost of banking, and excessive regulation. FinTech also advances financial inclusion especially as the pandemic-dominated global economy calls for physical distancing, digital transactions, remote work, and other arrangements that minimize personal interactions.

FinTech serves a crucial role in the current economic situation. That’s why it’s not surprising that it remains on track to achieve double digit growth in 2020 and the next few years to come, even with the lingering effects of the pandemic and economic downturn. FinTech companies, however, need to work with regulators, continue innovating, and work on building consumer trust to remain appealing and relevant.

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