Fintech Market (FinTech) Finance, Information, Technology

Russian fintech market

Main article: Financial technologies (fintech) in Russia

Ukrainian fintech market

Main article: Fintech (Ukrainian market)

European Fintech Market

Main article: Financial technology (fintech) in Europe

Indian fintech market

Main article: Financial Technology (Fintech) in India

Lithuanian fintech market

Main article: Financial technologies (fintech) in Lithuania

Kazakhstan fintech market

Main article: Financial technologies (fintech) in Kazakhstan

2024:5 global fintech trends for the coming years

The global fintech industry continues to develop actively, revolutionizing the financial services industry. The fintech sector accounted for roughly 2% of global financial services revenue in 2023, according to estimates from Boston Consulting Group (BCG) and QED Investors. By 2030, the costs in this area are expected to reach $1.5 trillion. In a review that TAdviser got acquainted with at the end of October 2024, analysts highlight five key trends in global fintech for the coming years.

Fintech's development is still in its early stages, but these technologies will continue to transform the financial services industry. More than half of the world's population still does not have or has insufficient access to banking services, while fintech solutions open up qualitatively new opportunities. Therefore, all stakeholders should seize the moment, "says Deepak Goyal, Managing Director of BCG.

5 key trends in global fintech for the coming years.

1. Asia-Pacific to become largest fintech market

The growth of this region is primarily due to the huge number of residents with insufficient banking services, a large number of small and medium-sized enterprises and a growing audience of consumers who are well versed in modern technologies. Significant cost increases are expected in countries such as China, India and Indonesia. North America, which as of 2023 has the world's largest financial services industry, will remain a critical fintech market and innovation hub.

2. B2B2X and B2B will become drivers of the fintech market

At the first stage of the formation of the fintech industry, as noted in the study, the focus was on payment solutions. However, in the future, rapid growth is expected in the B2B2X segment: this is a model in which banks, financial and non-financial companies cooperate with each other to provide users with a seamless service. With this model, all the services in demand are combined in one application or ecosystem. In addition, the authors of the report predict the growth of the V2V sector (small business services).

3. Increasing the importance of neobanks

Given that a huge number of people in the world are not covered by modern financial services, neobanks will play an increasingly significant role. These are digital-based banking organizations that provide their services through mobile and/or web applications. Neobanks communicate with customers and provide services without offices, branches and branches.

4. Industry regulation

It is noted that the regulation of the fintech market has traditionally been relatively weak, inactive, fragmentary and, in some cases, even lagging behind. When introducing new regulations, regulators should take a balanced approach to avoid deterring innovation, the researchers stress. Authorities should consider supporting the industry through measures such as ensuring faster licences for banking and payment institutions, supporting digital infrastructure, and promoting an open banking ecosystem.

5. The course towards strengthening the market position

The current situation is very different from the one that was in 2021 and at the beginning of 2022, when many fintechs were able to attract significant funding. In the new realities, industry participants need to save money, as well as consider strengthening their competitiveness and implementing aggressive strategies, such as attracting talent, entering new geographical markets and exploring the possibilities of mergers and acquisitions.^[1]

2023

The main trends in the global fintech market in 2024 are named

In 2024, serious changes may occur in the global fintech market related to the use of artificial intelligence technologies, the development of the cryptocurrency sector and the introduction of digital currencies of central banks. This was announced in mid-December 2023 by the independent consulting company deVere Group, which named six main trends in the global fintech industry.

1. Growing importance of cryptocurrencies

Analysts say the growing acceptance of cryptocurrencies by traditional financial institutions along with additional regulatory measures in 2024 will further spread digital assets. In addition, the US Securities and Exchange Commission has officially approved the opening of spot investment funds (ETFs) related to bitcoin. This will open up access to cryptocurrency in the traditional financial market.

2. Distribution of Central Bank Digital Currencies (CBDC)

In tandem with the growing popularity of cryptocurrencies, the development of CBDC, deVere Group believes, will become one of the defining trends in the global fintech market in 2024. Several central banks around the world are actively exploring or developing their own digital currencies, seeking to modernize payment systems and increase the availability of financial services for citizens and businesses. CBDCs offer governments greater control over monetary policy and provide an opportunity to streamline financial transactions. In addition, such digital currencies can reduce dependence on cash and increase the efficiency of cross-border payments.

3. The introduction of artificial intelligence

Analysts believe that in 2024, fintech companies will more actively use AI to improve the quality of customer service, optimize operations and make more informed decisions. In addition, AI algorithms will help in identifying threats and reducing potential risks. At the same time, chat bots and consultants based on neural networks will change the way they provide financial services.

4. Growing demand for mobile payments

The convenience and availability of mobile payments are making them increasingly popular, a trend deVere Group believes will continue in 2024. Consumers around the world recognize the ease of transactions using smartphones by pressing just a few buttons. Analysts believe that fintech companies will continue to invest in the development of convenient mobile payment solutions. Such technologies provide access to digital financial services, including residents of remote and hard-to-reach regions.

5. Cyber security

Against the background of the rapid development of the fintech industry, new fraudulent schemes and more complex cyber threats appear. Therefore, analysts say, in 2024 cyber security , increased attention will be paid to the financial industry. At the same time, methods such biometric authentications as fingerprint scanning and facial recognition will be of great importance. Biometrics provides an additional layer of security while protecting personal data users.

6. Global Financial Inclusion

Fintech plays a key role in providing financial services to populations around the world, including where access to traditional banking services is difficult or lacking. Fintech companies are expected to use solutions such as mobile banking, microfinance and blockchain in 2024 to bridge this gap. Increased access to financial services, especially in developing regions, can help reduce poverty and develop economic opportunities on a global scale.^[2]

Investments in global fintech for the year fell by 48% to $51.2 billion

At the end of 2023, investments in the global fintech amounted to approximately $51.2 billion. This is 48% less than in 2022, when the figure was at around $99 billion. Such figures are given in a study by Innovate Finance, the results of which were released on January 10, 2024.

The funds invested in fintech in 2023 were distributed in 3973 transactions, compared with 6397 transactions in 2022. Thus, the drop in this value was recorded at 61%. The largest investment in the fintech sector in 2023 fell on the United States - more than $24 billion in 1530 transactions. Britain is in second place with $5.1 billion, and India closes the top three with $2.5 billion. This is followed by Singapore with $2.2 billion and China with $1.8 billion. It is noted that in 2023, the British fintech sector received more investments than the next 28 European countries combined.

Investments in the amount of $5.1 billion attracted by British fintech companies were distributed in 409 transactions. For comparison: in 2022, these figures amounted to $14.6 billion and 592 transactions. The fall in monetary terms was at around 65%. This decline is in line with many other markets in the top 10. The US, for example, has seen a 44% reduction in investment compared to 2022. London continues to be the world's leading investment center in the fintech sector: in 2023, $4.5 billion was raised, which is 56% less than in 2022. In general, the top 10 states are as follows:

1. USA 1,530 deals, $24.2 billion;

2. Britain: 409 deals, $5.1 billion;
3. India: 187 deals, $2.5 billion;
4. Singapore: 176 deals, $2.2 billion;
5. China: 76 deals, $1.8 billion;

   54 deals, UAE$1.3 billion;

   97 deals, France$1.2 billion;

6. Germany: 86 deals, $1.1 million;

   Hong Kong 41 deal, $912 million;

   92 Canada deals, $884 million

Despite a significant slowdown in venture capital investment in the vast majority of countries around the world, analysts say there are some indicators of the industry's recovery. In 2023, the average deal size, according to Innovate Finance, fell to $12.9 million from $15.5 million in 2022, although it is still above the $10.3 million average recorded in 2012-2020. In the top ten, Asian countries secured more investment than European states for the first time. If we consider only the European region, then the top 10 countries in terms of investment include:

1. Britain: $5.1 billion (409 deals);

   $1.2 France billion (97 deals);

# Germany: $1.1 million (86 deals);

1. Switzerland$594 million (76 deals);

   $261 Netherlands million (39 deals);

   $242 Spain million (54 deals);

   $200 Sweden million (36 deals);

2. Denmark: $106 million (20 deals);

   $102 Italy million (31 deals);

# Belgium: $95 million (9 deals).

While economic hardship has become a major challenge for the fintech industry globally in 2023, it's encouraging to see Britain's fintech sector demonstrate significant resilience, maintaining its position as the second-largest global investment powerhouse after the US, and holding the lead in Europe, says Janine Hirt, CEO of Innovate Finance.

The top 5 largest deals of 2023 included:

1. Stripe - $6.9 billion (payments, US headquarters);
2. Rapyd - $950 million (payments, headquartered in Britain);
3. Xpansiv - $700 million (commodity market, headquarters in the USA);
4. BharatPe - $520 million (payments, headquartered in India);
5. Ledger - $493 million (cryptocurrency services, headquartered in France).^[3]

Which countries have the most fintech startups worth from $1 billion

As of 2023, the United States is leading in the number of fintech unicorns, that is, startup companies that have received a market valuation of more than $1 billion. In second place in the ranking is Great Britain, and India closes the top three. Such data are given in a research Statista and CNBC, the results of which were released on October 26, 2023.

According to published statistics, there are 134 fintech unicorns in the United States. These are, in particular, companies such as Stripe ($95 billion), Chime ($25 billion), Ripple ($15 billion), Plaid ($13.5 billion), Devoted Health ($12.6 billion) and Brex ($12.3 billion). In the UK, there are 27 startups in the field of financial technology, whose market value exceeds $1 billion: this is a specialist in the field of online banking Revolut ($33 billion), a supplier of cryptocurrency wallets Blockchain.com ($14 billion), as well as developers of payment solutions Checkout.com ($11 billion), Rapyd ($8.75 billion) and SumUp ($8.5 billion). There are 17 fintech unicorns in India.

The rating also includes China (8 startups with an estimate of more than $1 billion), France, Brazil and Germany (each country has 6 fintech unicorns), Mexico and Singapore (five startups), the Netherlands (four unicorns).

The study says that in terms of the cost of financial technologies, the United States makes the greatest contribution to the global industry: as of 2023, 8 of the 15 largest financial technology companies with a total value of $1.2 trillion are located here. Visa and Mastercard alone account for about $800.7 billion. The US has a vibrant financial technology market, not least thanks to wealthy investors. China is the second largest financial technology industry: the total market capitalization of its giants in this area is $338.92 billion.^[4]

Develop open standards for cloud fintech

On July 27, 2023, the independent non-profit organization Fintech Open Source Foundation (FINOS) announced the development of global open standards for the deployment of a public cloud in the financial services sector. Read more here.

How the world fintech will develop in the coming years

The volume of the global financial technology market, according to analysts at Boston Consulting Group (BCG) and QED Investors, will increase approximately sixfold from 2021 to 2030 - from $245 billion to $1.5 trillion. Such data are given in the report published on May 3, 2023.

Experts note that the fintech sector has huge growth potential. It is estimated that in 2021 the total volume of the global financial services industry was approximately $12.5 trillion. Of this amount, the fintech segment accounted for only about 2%. By 2030, the authors of the study believe, financial costs globally will reach $21.9 trillion, and fintech will account for 7%. Financial technology is said to have particularly good prospects in emerging markets. According to estimates, approximately 1.5 billion adults worldwide still do not have access to banking services, and another 2.8 billion people are insufficiently provided with banking services, that is, do not have a bank card. In total, this makes up more than half of the world's population. Moreover, nearly 44% of adults globally still rely heavily on cash to make large transactions.

In 2022, the fintech sector faced difficulties due to the emerging macroeconomic situation, market uncertainties and sharply reduced consumer purchasing power. However, analysts believe that these problems represent a short-term "hitch" on the path of long-term growth.

The development of fintech is still at an early stage - this direction will continue to revolutionize the financial services industry as we know it. More than half of the world's population still lacks access to banking services or receives insufficient banking services, and technology continues to rapidly open new options for providing services, says Deepak Goyal, Managing Director of BCG.

The Asia-Pacific region (APAC), a historically poorly established market with a total financial services income of almost $4 trillion, according to the authors of the report, will outstrip the United States by 2030 and become the world's leading fintech market. During the period under review, the CAGR (compound percentage CAGR) is expected to be 27%. This growth will be driven primarily by developing countries, as they contain large fintech companies, large unbanked populations, large numbers of small and medium-sized enterprises, and tech-savvy youth.

North America, which has the world's largest financial services industry, will remain a critical fintech market and innovation hub. The corresponding segment, according to forecasts, will quadruple by 2030 - to $520 billion, and the CAGR indicator will be at around 17%. The UK and the European Union combined represent the third largest market for financial institutions in the world and are expected to show significant growth in the fintech sector by 2030. Costs in the fintech segment in this region are estimated to grow fivefold between 2021 and 2030, and the payment sector will become a key area of ​ ​ development. Latin American markets led by Brazil and Mexico are projected to show a 29% CAGR during the period under review. The report also states that the CAGR in the fintech segment in Africa will be 32% by 2030, and South Africa, Nigeria, Egypt and Kenya will be the key markets.^[5]

Named 4 main fintech trends

On January 23, 2023, the international payment integrator PayU announced a list of main trends that will determine the further development of the financial technology market.

As noted by Daniel Cohen, director of products at PayU, in 2022, compared to 2021, there was a slowdown in growth in many fintech sectors, including banking and insurance. This is explained by global macroeconomic difficulties, high inflation and general uncertainties. At the same time, recession often contributes to innovation and the emergence of strong players. The list of four trends in 2023 is as follows:

1. Cross-Border Payment Segment Transformation

Companies continue to prioritize streamlining internal processes and reducing costs. New business models and innovative payment systems can provide less expensive and more efficient cross-border payments, meeting the existing needs of the industry. It is noted that such transactions are key for international customers. The study showed that buyers in many regions shop online from international retailers. E-commerce in 2023 will contribute to the further transformation of the cross-border payment segment.

2. Payment systems Innovations

Using cryptocurrency and blockchain as a means of payment has a number of advantages over traditional methods, but only a small number of countries, financial institutions and regulators have adopted these methods. To increase confidence in the crypto industry and meet the need for uniform regulatory oversight in cryptocurrency markets around the world, effective regulation is required in this segment. Against this background, the fintech sector, according to the authors of the report, should continue to be proactive. Enterprises will have to create advanced payment services and products with an eye on customers.

3. Consumer and Payment Security

Payment methods, both traditional and brand new, are gradually being digitized, which requires additional security and prevention of online fraud. According to Statista estimates, the global e-commerce market in 2022 lost about $41 billion due to the fault of cybercriminals, and 2023, this figure is expected to grow to $48 billion. Therefore, enterprises must be able to effectively identify problems so that customers can make secure purchases on the Internet. In particular, it is important to have a reliable fraud protection solution that complies with local laws and uses advanced security protocols.

4. Transparency of payments

The fintech industry continues to ensure transparency of its products and services, especially in loan transactions. Moreover, in the current macroeconomic environment, the importance of lending has increased. To protect customers from bottomless debt pits, according to experts, it is necessary to introduce innovative lending schemes that should remain transparent. It is noted that 2023 promises to be another year with continued inflationary pressure and an increasing cost of living. The fintech industry has to deal with these problems. In 2023 and in subsequent years, the introduction of innovations, experts believe, will be crucial to provide consumers with broader opportunities and ensure that companies constantly increase user experience and expectations from online purchases.^[6]

2022

Why tough times have come for the Indian fintech market

On December 28, 2022, Bloomberg announced the forecast of Rakesh Pozhath, an expert at Bain & Company consulting company: the analyst believes that difficult times await the financial and technological sector in India. Read more here

Visa and Mastercard become unnecessary

On November 21, 2022, an article on the transformation of the global payment market appeared on the pages of the Financial Times business newspaper. Experts say Visa and Mastercard are under increasing pressure from new digital services. Read more here.

Dubai is the centre of attraction for fintech start-ups

In mid-February 2022, an article was published on The Next Web portal telling about how Dubai it became a place of attraction fintech-. startups The emerging digital economy, coupled with innovative solutions in the region, uniting the Maghreb and Middle East countries make Dubai an attractive place to launch or scale a startup for an increasing number of global entrepreneurs, observers said. More. here

7 top trends in fintech

In January 2022, Digital Horizon analysts made their forecast for the top trends in the financial technology market in 2022. For each of the fundamental trends in the field of fintech, experts proposed optimistic scenarios for the development of events.

Democratization of the non-public asset market

The market is becoming more transparent, new opportunities are opening up for retail investors: marketplaces for private stock transactions, tools for money management, or financing new business models, including digital assets.

Scenario: Regulators will either restrict the access of mass investors to the market for non-public assets, or will be able to find a balance between people's desire to earn more and concern for their financial security. Regulators will have to learn how to work in new realities, and not just issue more bans.

Products for the self-employed

The self-employed face problems in obtaining funding: most banks do not know how to work with those with volatile incomes. Fintechs can offer scoring and credit solutions based on transactions on freelance platforms or tools to manage risk and financial stability.

Scenario: The principles of products for the self-employed will either be moved to the mainstream and generally change approaches to scoring, or remain niche solutions.

Fintech for open ecosystems

Open ecosystems that bring together independent players have become a new distribution channel that helps counter marketplaces and other types of centralized platforms. Universal checkout services and embedded investment products are actively developing.

Scenario: If independent players come together, the fragmentation of the financial market and the specialization of fintech solutions will intensify. If on the contrary, the gap between closed ecosystems, centralized platforms and marketplaces will grow.

Post-Big Data era

To improve the quality of analytics, companies are developing a more selective approach to data - taking into account user scenarios. Fintech solutions are being developed that use synthetic data, audit information, or specialize in processing certain types of data.

Scenario: Either a monopolist will appear - a centralized system that knows everything about everyone. Or specialization in data processing will increase, and consumer companies will buy signals that have weight in a certain scenario.

Tokenization of the real world

Real sectors of the global economy need additional funding to overcome the crisis caused by the COVID-19 pandemic. To attract it, the real sector will have to restructure and tokenize the existing illiquid assets. An infrastructure for digitizing rights and operations with new asset classes is already being created.

Scenario: Tokenization will be deeply integrated with other business processes, which will allow solving non-standard cases.

Fintech for metaverse

In the metaverse, consumption occurs in real time and is not limited to one platform. They provide users with advanced capabilities to personalize interaction. Therefore, more financial products will appear, embedded on demand. The reputational data management solutions segment will also grow.

Scenario: Depends on which path metaverse creators choose: fully decentralized when, in accordance with Web 3.0 principles, user rights to manage data and content are expanded, or more centralized when control is on the side of developer companies.

"Green" fintech

Governments are adopting programs to achieve carbon neutrality, industry is rearmament, and investors are actively supporting green projects. For example, using calculators that calculate the user's personal carbon footprint.

Script: "Green" fintech will become mainstream, the only question is how fast: in 3-5 or 10-15 years. The trend will accelerate if regulators and society require ESG sustainability parameters to be used in scoring and credit models and influence funding decision-making.^[7]

2021

The annual volume of the global fintech market is estimated at $245 billion

At the end of 2021, the volume of the global fintech market reached $245 billion, of which approximately $225 billion fell on the banking sector, and the remaining $20 billion - on the insurance segment. Such figures are given in the report of the Boston Consulting Group (BCG), published on May 3, 2023.

It is noted that five years ago (in relation to the beginning of 2023) fintech companies were perceived to be largely secondary to the financial services industry. However, the COVID-19 pandemic served as a catalyst, provoking the rapid development of the corresponding segment. As a result, fintechs have become mainstream in certain areas, especially in the field of payments and transactional banking.

Over the past decade (by early 2023), fintech companies have raised more than $500 billion in funding. At its peak in 2021, fintechs represented approximately 9% of the total estimates of financial services in the world, and their total public value reached $1.3 trillion. At the same time, in 2021 and 2022, the cryptocurrency sector accounted for more than $50 billion in financing.

However, as noted in the report, since April 2022, the fintech market has faced significant difficulties due to the emerging macroeconomic situation, the crisis, high inflation and sharply reduced consumer purchasing power. Valuations fell across all segments and geographies, and funding for fintech companies went down rapidly. Thus, the volume of investments at the initial stage in 2022 amounted to about $4.6 billion, which is 24% less than in the previous year ($6.1 billion). Funding for the Series A and Series B rounds decreased by 37% and 38%, respectively, to $9.7 billion and $12.6 billion. The fall at the Series C and Series D stages amounted to 48% - to $11.8 billion and $9.6 billion in 2022. At the Series E stage, a 72% decrease was recorded - to $6 billion.

Reimagining the Future of Finance

Investment in global fintech reaches a record $210 billion

On February 17, 2022, analysts KPMG published a study according to which investment fintech in increased sharply over the previous year, despite the ongoing coronavirus pandemic. In COVID-19 2021, investors invested a total of $210 billion in fintech developers, which is almost $90 billion more than a year earlier, but slightly less than the amount of investment in 2019 ($214 billion).

In the twelve months of 2021, more than 5,600 transactions were successfully completed - transactions of all shapes and sizes, from small investments in startups (seed investments) and investments in growing startups (series A or B investments) to investments in established players (series C or D investments) and complete acquisitions.

European fintech companies (in the KPMG report, the region is merged with the Middle East and Africa, or EMEA) set a new record with a total investment of $77 billion.

Venture capital was the largest source of funding for fintech projects. Venture capitalists entered into about 4,700 transactions, the total value of which amounted to $115 billion. Private equity funds (which pay more attention to fintech companies in the late stages and at the expansion stage) invested $12 billion in companies in about 140 transactions.

Corporate investment in fintech (also known as corporate venture capital investments) also increased in 2021 to $83 billion. The number of deals rose sharply - by almost 300 and reached a new record high of 820 deals.

The largest investment in fintech in 2021 involved the American company Generate, which raised $2 billion. Experts also noted the attraction of investments by Klarna ($1.2 billion), Nubank ($1.1 billion), Chime ($1.1 billion), FTX ($1.0 billion) and N26 ($900 million).

As for acquisitions, the acquisition of Refinitiv by the London Stock Exchange (LSE) was the largest fintech transaction ($14.8 billion).

In all areas, payment services, cybersecurity of the financial sector, insurtech (technology in insurance) and sustainability were the most demanded areas of investment. Investments in services focused on cryptocurrencies and blockchain reached a record $30 billion. The inflow of investor funds into payment technology companies amounted to $51.7 billion, in the cybersecurity sector of the financial market - $4.9 billion.

2021 was an incredible year for global investment in the payment sector, which was largely facilitated by the accelerated development of digital trends, the growing introduction and use of digital and contactless payments, as well as the rise in demand for alternative payment methods, such as "buy now, and pay later," the study says.

While venture capital investments in the payments segment updated the record in 2021, M&A (M&A) deals have become dominant in the sector. Experts note the sale of the Danish fintech company Nets rival Nexi for $9.2 billion and the purchase of the Japanese Paidy by the PayPal payment system for $2.7 billion.

Increased attention of venture investors was focused on digital banks, including Chime, Revolut and Varo, which in 2021 raised $1.1 billion, $800 million and $510 million, respectively.

The study also talks about the aggravation of competition in the American payment services market, in which foreign players have a difficult time. Thus, European startups N26 and Monzo Bank were forced to leave the United States largely due to the peculiarities of local regulation of the financial market.

In 2021, investments in Insurtech startups in the world reached $14.4 billion against $16.3 billion. The number of transactions in this market increased - from 327 to 418. MediTrust Health ($308 million), Acko ($255 million) Bolttech ($247 million), At-Bay ($205 million) and Leocare ($118 million) participated in the largest rounds of funding for technology developers for insurance. ^[8]

London and Dubai lead fintech investment

In 2021, London attracted more foreign investment in financial companies than any other city.

Britain The dollars capital attracted £600m (764m) of investment in 114 financial and professional services projects in 2021. According to this indicator, he is ahead of,,, and Dubai. Singapore New York Paris

3 forecasts for fintech from IDC

In mid-February 2021, IDC analysts published a study by IDC FutureScape: Worldwide Financial Services 2021 Predictions, which examined the possible development of global financial technology services during the year. Risk management will once again be a key driver of investment and business decisions, experts said. Financial institutions must ensure that they can withstand high arrears, and investments will flow into credit decision-making, recovery and recovery systems, as well as asset and liability management systems.

In this regard, analysts presented a number of forecasts in the field of fintech, which will affect the IT industry, as well as buyers and technology suppliers:

• Forecast No. 1: by mid-2021, 50% of lending decisions in retail banking will be carried out using financial technologies, which indicates a rapid strengthening of cooperation between banks and fintech.

• Forecast No. 2: by 2024, 50% of transactions in branches will be conducted in the form of pre-prepared transactions or meetings that are initiated on digital platforms and performed using technology owned by banks.

• Forecast No. 3: by 2024, 75% of all consumer loans and loans to small businesses will be issued through automated processes with AI support.

In 2021, one area stands out - lending. Lending serves as an indicator of possible growth in income and profitability of banks, and the ability to issue loans in a crisis attracts the attention of many organizations, "said IDC Deputy Vice President Michael Araneta.

However, in 2021, other trends in the activities of banks and insurers related to fintech are expected to appear. Although fintech companies faced various problems in early 2021, many financial institutions are willing to cooperate. This can be noted even for the most traditional business transactions, such as lending and accepting deposits. Araneta notes that the lending ecosystem is undergoing a radical transformation.

If earlier banks owned the entire credit value chain from provision to service, now the focus is shifting to specialization in certain parts of the overall digital lending value chain, "explains Araneta. - Banks and financial institutions seek to build capacity to effectively manage the various components of the value chain through collaboration with fintech companies.

In addition, priorities in ensuring the quality of customer service have come to the fore. IDC Research Director Ganesh Vasudevan notes:

The 2020 experience has given confidence to banks that have had to work with digital transactions. With investments in the cloud, virtualized infrastructure, and real-time payment systems, they can cope with the surge in digital channel usage among customers and staff. Operational risk management measures have allowed them to survive isolation, and financial institutions are now able to support the emergence of new forms of customer engagement.

Financial institutions face a host of challenges, the researchers said: new competitors, demographic shifts, rising customer expectations and changing regulatory demands. Technology offers solutions to enable banks and other financial institutions to reduce costs and become more efficient.^[9]

2020

Global investment in fintech projects fell 13% to $42.14 billion - CB Insights

In 2020, the volume of venture capital investments in fintech projects in the world reached $42.14 billion, which is 3% less than a year earlier. The number of rounds of financing decreased even more - by 13%, to 1991 transactions. This is evidenced by data from analysts at CB Insights.

According to their calculations, in the fourth quarter of 2020, 522 investment transactions were made in the fintech industry, which is 11% less than a year ago. Such weak dynamics was last observed in the third quarter of 2019. Series A, B and C rounds accounted for 90% of deals. Higher activity in early and mid-stage transactions explains why the share of mega-rounds (transactions over $100 million) in total funding fell from 59% to 44%, the researchers note.

The fintech industry is gaining momentum in South America. From 2016 to 2020, funding for such startups in the region increased by 64%. About 40% of transactions during this period fell on alternative credit and payment companies. In this region, access to lending, as well as receiving and sending funds by consumers and enterprises, is fraught with certain problems. Some startups, including Creditas and dLocal, have offered effective services to solve these problems, thereby attracting a significant amount of funds in 2020.

Europe overtook Asia for the first time in terms of the number of transactions in the quarter, the last time Europe held a leading position in the second quarter of 2019. Activity in Europe rose 6%, while in Asia it fell 2%. However, funding for fintech projects in Asia rose by 10%, while funding for European companies fell by 17%.

In 2020, M&A activity grew by 25%. For example, Visa and Stripe made purchases in emerging markets, absorbing YellowPepper and Paystack, respectively. Market data providers Bloomberg and FactSet bought the companies to supplement their own offerings - Second Measure and Truvalue Labs, respectively.

CB Insights explored global investment features in financial technology in key segments:

Payment projects attracted more than $12 billion in 2020, there was an increase of 3%. The number of transactions in the same period decreased by 7% to 337. It is noteworthy that in 2020 there were 37 mega-rounds, compared with 30 in 2019.

Banking sector: With a 12% increase in funding for digital banking companies, the number of transactions has not changed.

Alternative lending: investment activity in alternative lending decreased significantly in 2020 - approximately 35%. This applies to both the number of transactions and the volume of investments in them. The number of mega-rounds has also dropped, from 25 in 2019 to 15 in 2020.

Capital management: the number of investment transactions in such companies decreased by 11% in 2020. However, funding increased by 86% thanks to 10 mega-rounds, which accounted for 50% of total funding in 2020.

Insurance: Activity on deals with insurtech companies remained flat throughout 2020, but funding fell 6%. However, there have been several IPOs in 2020, including the listing of Lemonade, Root Insurance and Metromile.

Capital markets: Funding rose 21%, but deal activity declined 13% as rounds increased. Only mega-rounds accounted for 60% of total funding in 2020. In addition, the number of megaphonds more than doubled from 13 in 2019 to 27 in 2020.

Small and medium-sized businesses: financing and the number of transactions increased by 18% and 13%, respectively. The second quarter of 2020 made the largest contribution to financing and transaction growth - 41% and 29%, respectively.

Real estate: Real estate funding fell 43%. In annual comparison, transaction activity decreased by 23%. Quarterly transaction activity has not shown growth since the third quarter of 2019.^[10]

Digital Horizon experts predicted the development of the fintech market in 2021

Digital Horizon on December 23, 2020 announced the forecast for the development of the fintech market in 2021.

The study clearly shows how the main trends in the financial markets of Europe and Russia are developing.

2020 accelerated the transformation processes that began earlier, and also highlighted systemic problems that the financial world has not yet learned to solve.

Trend# 1. Banking outside banking applications

2021 will further move banks away from customers. Embedded finance tools allow you to integrate payments, debit cards, loans, insurance, and even investment instruments into almost any non-financial product. For example, you can get a loan directly on the website of an online store or supplier company without filling out questionnaires. And the money can be transferred through applications that, it would seem, have nothing to do with finance. This approach will increase the profits of banks and fintechs, as it will compete with players who are trying to drive customers into their banking applications.

Trend# 2. Live data

Information about the financial position of customers began to become outdated at such a speed that in order to make decisions, banks need to track it in almost real time. But the more data, the higher the load on data departments, which means that the cost of calculations increases. Therefore, a rapid growth of analytical and scoring products that provide insights in real time and are able not only to calculate historical scoring, but also to predict on the basis of big data is likely.

Trend# 3. Rebirth of insurance and loans

User scenarios make you look at traditional financial products differently: insurance enters the territory of loans, loans appear where insurance has always dominated, hybrid models arise that combine credit and insurance components. For example, solutions for financing deposits when renting real estate.

Trend# 4. Unmanned finance

2020 further "shook" financial discipline and forced people to look for other ways to preserve and increase savings. The answer to this need may be automated financial solutions, the first prototypes of which were bank accounts - "piggy banks." But fintech products are capable of more. Both ordinary users and businesses are waiting for an automatic treasurer who will distribute cash to the accounts of banks offering the best conditions.

Trend# 5. Payments without intermediaries

The pandemic has led to a sharp increase in online payments and exacerbated the issue of transaction costs. Business updates the request for alternative methods of online payments, including using electronic wallets, QR codes, cryptocurrencies. Of course, international payment systems will not disappear. However, solutions will actively develop that will affect the change in the role of Visa, MasterCard and acquiring banks.

Trend# 6. Fintech Designer

Traditional financial institutions have accelerated the renewal of infrastructure and the transition to digital, and this has led to the development of a trend towards simplifying digital infrastructure. In the short term, we are talking about low-code developments (that is, with minimal requirements for code knowledge), and in the long term - no-code solutions. In the future, banks will be able to collect customized solutions that will meet the needs of customers as much as possible.

Trend# 7. The rise of digital assets

Following China, dozens of countries announced in 2020 that they are starting to develop their own digital currencies or are exploring - as Russia - such an opportunity. In parallel, regulators have tightened control over cryptocurrencies, obliging crypto services to identify users in the same way as banks do. As a result, many players in the financial industry have changed their attitudes and tuned in to create a hybrid model with digital assets. PayPal, BBVA and Visa have already launched crypto solutions, the rest are closely following the leaders. In the coming year, with a high probability, large players will not only develop their own, but also integrate third-party crypto products.

Alan Waxman, founder and managing partner of Digital Horizon:

2021 will further move non-eco banks away from customers, demonstrating how limited value banking apps have on their own. Growing competition with fintechs is pushing traditional financial institutions to find common ground with customers through third-party products and services that can integrate traditional functionality ― payments and loans with embedded finance technologies. These can be marketplaces, aggregators, accounting programs, business planners, games, streaming services ― any digital spaces where users consume products or services. This approach allows banks to simultaneously service millions of transactions and reduce the cost of attracting customers and maintaining infrastructure. The changes will be gradual, but at the same time deep, systemic and long-term: banks are gradually turning into regulated SaaS company.

Having met in 2020 with the same challenges, the financial systems of Russia and Europe react to them in different ways. While companies in Russia continue to build ecosystems and superapps that know everything about human life, as well as universal decision-making tools, European market players rely on open banking and narrow niches to help segmented audiences in certain areas of life based on data from different banks. At the same time, both financial ecosystems are united by the desire to provide users - both individuals and legal entities - with the opportunity to make better financial decisions. And this is certainly the main long-term fintech trend.

Raiffeisen Bank: Fintech trends

2019

Investment in fintech companies fell due to China

The global investment in fintech developers in 2019 amounted to $53.3 billion, down 3.7% from 2018. The decline was due to a decrease in investment activity in China, which, in turn, is associated with an aggravation of the trade conflict between Beijing and Washington, according to data from the consulting company Accenture. The research was carried out in conjunction with research firm CB Insights, which specializes in exploring the venture finance market.

According to experts, in 2019, 3472 investment transactions were concluded on the fintech market against 3251 a year earlier, when the volume of investments was measured by a record $55.3 billion. Despite the decrease in the amount of money that fintech startups received, 2019 was the second most invested since 2013, the South China Morning Post notes.

It also recalls that the maximum in 2018 was achieved largely thanks to Ant Financial Services (known primarily as the owner of the Alipay payment system), which then raised a total of $14 billion. Excluding this figure, investment in the fintech sector in 2019 would have jumped 29% and updated the record.

Despite strong demand for financial technology around the world, it is likely that as startups grow older, investment will flow into fast-growing economies, where there is still a huge unresponsive consumer and corporate market hungry for innovation, says Accenture Senior Managing Director of Financial Services Julian Skan.

Despite the future potential of emerging markets, fintech investors continued to favor the United States, which retained the top spot in funding related startups. The total value of investment transactions in the United States at the end of 2019 jumped 54% to $26.1 billion. In Britain, investments grew by 63%, to $6.3 billion. Significant investment growth was also recorded in India, Brazil and Germany.

In the United States, Europe and Asia, the number of transactions in the early stages (seed round and round A) has decreased and the number of transactions at the round B stage and above has increased. This suggests that more and more mature startups are emerging on the market.

The total investment in fintech companies in the Asian market in 2019 decreased to $7 billion from $23 billion a year earlier. Despite the decline, experts see potential in this market.

Although Asia may seem far from the financial institutions that operate in most advanced economies, rising investment in Asia will allow technology to improve the position of newcomers and undermine the position of leaders, said the authors of the report, Paul Gestro and Amit Gupta. - With a fairly open public policy in much of Asia and a generally underdeveloped banking sector that allows innovation to flourish, scaling will be rapid.

The Accenture report says that in 2019, almost half of the total investment - $17.2 billion - in fintech accounted for 83 of the largest transactions of $100 million or more. These transactions were made by mature startups that preferred private financing to go public.

In total, there were 67 fintech unicorns in the world with a total estimate of $244.6 billion. Of these, 24 companies became unicorns in 2019, including eight in the fourth quarter: Next Insurance, Ebanx, Riskified, Rapyd, Wefox Group, Ripple, Bright Health and Figure.^[1]

Russia entered the top three countries in terms of the popularity of fintech services

Russia entered the top three countries in terms of the popularity of fintech services. This is evidenced by the results of the EY study, released on November 21, 2019.

Experts estimated the penetration index of fintech services in Russia at 82%. The higher rate is only in China and India (87%). The top five also included South Africa (82%) and Colombia (76%).

According to RBC, compared to the study in 2017, the three states with the largest share of the population using fintech services have not changed. At the same time, the degree of penetration of such services in the Russian Federation over two years increased by 39 pp, in India and China - by 35 and 18 pp, respectively.

Experts associate the high popularity of fintech services among Russians with the youth of the financial system, as a result of which consumers are easier to perceive technological innovations.

Russia's financial system began to form relatively recently, and it is not as conservative as in Europe, says Roman Prokhorov, head of the Financial Innovations Association. - In fact, from the savings book stage, we immediately switched to payments using mobile phones. The consciousness of our consumers is more susceptible to fintech innovations than the popularity of these services is explained.

The most popular fintech services in Russia are transfers and payments: 100% of respondents know about such services, and the share of their users has reached 90%. In other categories, citizens' awareness ranges from 81 to 86%, but the application of some services is close to zero. Unpopular services include, for example, investments in securities - the fintech market mirrors the level of development of the country's classic financial market.

For the study, EY analysts interviewed about 27 thousand users in 27 markets on five continents. Respondents were asked to assess how actively they use fintech services.^[2]

Accenture: Global fintech investment totaled $22 billion in the first half

On October 25, 2019, it became known that Accenture studied the global investment in fintech services in 2019 in the world. The growth of investments is dictated by an increase in demand from users for fintech services.

Fintech companies are smart online services that provide technologies for banking and corporate financing, capital markets, and insurance. In the first half of 2019, investments in fintech in the world amounted to $22 billion.

In the first half of 2019, compared to the same period in 2018 in the United States, the value of fintech transactions increased by 60%, reaching $12.7 billion. Most of the funds raised were related to startup lending and payment services.

In the UK, investment in fintech almost doubled over the same period - to $2.6 billion, and the number of transactions increased by 25%. Investors are mainly attracted to challenger banks (banks built from scratch on modern technology platforms) and payment companies.

In Germany, infusions into fintech almost doubled in the first half of 2019 to $406 million to $829 million compared to the same period in 2018. Fundraising in Sweden increased 4 times to $573 million, in France - by 50% to $423 million.

There is also interest of investors in this area in the countries of the Asia-Pacific region: the value of transactions in Singapore, for example, quadrupled to $453 million, in Australia it tripled to $401 million. The decline in the volume of attracted finances mainly affected China.

Most of the investments in the global fintech market are in projects related to payments and loans - 28% and 25%, respectively. Another 14% - for services for the insurance sector.

According to Rinat Maksutov, head of Accenture's New Technologies practice in Russia, more than 80% of Russians use fintech services. First of all, in the field of money transfer services and payments. He notes that in Russia there is a high susceptibility of users to innovations in the financial sector.

In Russia, a significant number of people use online and mobile banking, and the so-called challenger banks like Rocketbank or Tinkoff gained wide popularity in our country much earlier than their Western counterparts, says Rinat Maksutov

The same situation with the use of payment services like Apple Pay: Russia was one of the first countries where such services took the lead compared to other payment methods. In his opinion, this is due to the strong regulation of the financial industry in the West, as well as to the conservatism of suppliers and consumers of financial services.

Until now, in many countries it is difficult to find a terminal that accepts contactless payment, and somewhere you still have to sign the check after paying with a card. And there is no question of paying in a small outlet by transferring money to a phone number, notes Rinat Maksutov

At the same time, according to him, the Russian fintech does not stand out for a large number of major transactions. The main drivers of fintech development in Russia remain traditional banks that are actively introducing financial services, building entire ecosystems around them.

McKinsey: 60% of banks will die. They will be supplanted by IT and fintech companies

On October 22, 2019, the consulting company McKinsey released a study of the banking industry, in which experts predicted the closure of many banks in the world. They will be supplanted by IT and fintech companies, analysts are sure. The report was titled "The last pit stop? Time for bold late-cycle moves Time for bold steps ").

This is probably the last pit stop this cycle for banks to quickly rethink their business models. The inventive are likely to lead the way in the next cycle. Others risk remaining footnotes in the margins of the story, according to the report.

According to experts, about 60% in the world are not able to withstand the financial crisis and may disappear because of this. To survive, they need to "reinvent the business model" and take an example from technology companies like America's Amazon and China's Ping. The latter attract customers through new solutions in the most profitable areas, for example, pay special attention to acquiring, which traditionally brought good income to banks.

We believe we are at the end of the economic cycle and banks should take bold steps now because they are not in the best shape. At the end of the economic cycle, no one can afford to rest on their laurels Bloomberg , "senior partner McKinsey Kausik Razhgopal told the agency.

By "bold steps," it means investing in technology development, gaining weight by merging with other organizations, and outsourcing.

McKinsey estimates that by 2019, about one-third of all banks in the world have problems due to the use of flawed business models, lack of finances and presence in unfavorable markets. If these organizations fail to deliver the right transformation, they risk being sold to a stronger competitor.

Analysts at the consulting company advise banks to work as quickly as possible in two main areas: create new technologies to increase the profitability of the business and plan merger and acquisition transactions in order to increase capital. Experts consider the process of enlarging banks important, which, in their opinion, is the only way to win the technological race.

The study provides data according to which fintech companies direct more than 70% of the budget to technology development, while traditional banks - about 35%.

The authors of the study point out the inevitability of the financial crisis is still in question. But in any case, banks now have little time left to rethink their own models and adjust.

McKinsey partner and study author Chira Barua believes that every bank can start taking measures to change its fate and start a new cycle of strengthening its financial position, but there is less time left.

Boards of directors and management should now actively consider strategic steps instead of forcing the onset of a cycle that will take them into decline, the expert said.

The report sets out key priorities for banks, among which are the intensive implementation of AI-based risk management systems, the search for unique groups of customers, the creation of a database of digital specialists and the use of tools for data analysis.

The McKinsey study lists four categories that banks around the world can be included in. The first of them is called "market leaders" which includes 20% of the world's leading companies. They account for 100% of the economic added value of the entire industry.

The second category is flexible companies. It includes 25% of banks that have retained leadership in complex markets, including in Europe

The third category - "followers" - includes 20% of banks that have not reached scale and are weaker than their competitors, despite favorable market dynamics.

They [followers] are at risk of a downturn and must act promptly to scale up their current business, change business models to differentiate and cut costs radically, the report said.

Finally, the final category includes "problem banks." These include 35% of organizations on the verge of sale.

At the same time, experts point to inequality in how regulators treat IT companies and traditional banks. In any country, credit institutions are under regulatory pressure from Central Banks. In particular, the regulator applies requirements for the growth of equity to the bank, reducing the risk ratio, forces it to abandon maloliquid assets.

In September 2019, PwC Luxembourg and development agency Luxembourg for France said European banks and private equity managers should actively embrace "Amazonization" and adopt consumer technology driven by online platforms.

Since Europe's financial industry is on the verge of Amazonization and related critical topics such as ESG innovations and technologies (environmental, social and management), more traditional players should focus and invest if they want to remain globally competitive, "said John Parkhouse, senior partner at PwC Luxembourg.

Notes

2018: Investments in fintech amounted to $111.8 billion; 120% growth

In 2018, global investment in the financial technology sector reached $111.8 billion, an increase of 120% compared to the previous year, equal to $50.8 billion. This is stated in a study compiled by the consulting company KPMG.

In their calculations, analysts took large M&A (M&A) deals, as well as venture financing and LBO (leveraged company buybacks).

The largest transactions in fintech in 2018 were:

• investing a Blackstone fund of about $17 billion in a major data and infrastructure provider for financial markets, Refinitiv;
• acquisition of the British payment system WorldPay by the American processing company Vantiv for $12.9 billion;
• buying the Swedish fintech startup iZettle by the American payment system PayPal for $2.2 billion;
• Blackhawk Network's $3.5 billion buyout by Silver Lake and P2 Capital Partners funds;
• acquisition of bank terminal maker VeriFone by Francisco Partners for $3.4 billion.

The total number of transactions in the fintech sector in 2018 increased from 2196 to 2165 in 2017. In 2018, three contracts were concluded in the amount of $10 billion and 14 contracts worth more than $1 billion.

Investments in the European fintech market in 2018 rose to $34.2 billion from $12.2 billion a year earlier. In the United States, 1,061 transactions worth $52.5 billion were registered, and in all countries of the Americas - 1,245 transactions worth $54.5 billion. In the Asia-Pacific region, investment in fintech almost doubled to $22.7 billion in 2018.^[1]

M&A in the fintech sector have come out of the age of the initial surge with fairly casual deals among early stage innovators. Now corporate and financial buyers are chasing larger and more targeted investments to help streamline support services, improve digital customer experience and cut costs, says Hampleton Partners managing partner Joe Goodson.