These Fintech Statistics Show an Industry on the Rise
The term fintech (financial technology) refers to innovative digital technology solutions that aim to optimize financial services and banking. Cutting-edge innovations like blockchain and artificial intelligence are ushering in new ways of doing business in the financial industry. Fields including electronic payments, banking, insurance, personal loans, and wealth management are all getting a digital facelift.
Over the past five years, the financial industry has been buzzing about the disruptions fintechs are causing by providing consumers with alternatives to traditional options. Statistics show that the tide is turning. More than ever, established companies realize the potential and necessity of these new technologies.
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Consumers have come to expect a seamless digital experience when handling their funds. Financial companies must provide such a service if they want to stay afloat. That’s why partnerships and mergers between established companies and fintech startups are becoming more frequent. It isn’t rare for a fintech business with a business-to-consumer model to transfer completely to a business-to-business approach. In this way, it can offer its technology to larger companies and access massive client pools.
We’ve created this fintech industry overview - replete with a hand-picked collection of interesting statistics - to give you an idea of how technology has already changed the market and what the future may hold.
Fintech Statistics - Editor’s Choice
- A considerable chunk of incumbent financial institutions (88%) believes that part of their business will be lost to standalone fintech companies in the next five years.
- Globally, fintech companies acquired $25.6 billion in investments in H1 2020.
- Digital banking services are taking over: 46% of people exclusively use digital channels for their financial needs.
- 77% of traditional financial institutions plan to increase their focus on innovations to boost customer retention.
- The total transaction value of digital payments grew from $4.1 trillion in 2019 to $5.2 trillion in 2020.
- More than a third of fintech industry deals are made outside the US, the UK, and China.
Relations Between Established Financial Giants and Fintech Innovators
A considerable chunk of incumbent financial institutions (88%) believes that part of their business will be lost to standalone fintech companies in the next five years.
At a time when new fintech trends are emerging in the industry and as innovative technologies become the norm, established financial giants have a decision to make: stubbornly ignore the obvious or adopt, adapt, and improve.
They know it’s coming, too; 88% of global finance leaders see new technology as a threat to their existing business model. Moreover, 81% of banking CEOs are concerned about the speed of technological change.
In the next three to five years, 77% of incumbent financial institutions will increase their focus on internal innovations to boost customer retention.
Retention rate statistics for the fintech industry show that established companies consider ease of use and more intuitive product designs to be the most significant changes they need to implement.
Cutting-edge technologies like artificial intelligence and blockchain can help prevent their customers from switching to newer competitors.
According to a 2020 global survey, 75% of banks are investing in developing a more customer-focused business model.
Statistics reveal that 61% of bank executives consider the development of a customer-centric model, which would give them the opportunity to act on clients’ needs in real time, extremely important. However, only 17% feel prepared for a seamless omnichannel model.
Differences in management and culture are the biggest barriers for integrating fintech business startups into traditional companies, 55% of fintech representatives say.
While young fintech whippersnappers worry about how they’ll fit into the corporate culture, established companies cite IT security as the biggest challenge of merging their business with the fintech market.
The old and new schools will have to find a way to settle their differences on the fly, as more fintech companies turn away from a purely B2C business model. These startups are realizing that integrating their solutions into existing financial platforms will give them access to much larger customer pools.
Fintech Stock and Market Statistics
Fintech companies acquired $25.6 billion globally in investments in H1 2020, according to the latest fintech industry report. The coronavirus outbreak caused fintech VC funding to drop to $6.1 billion in Q1 of 2020.
(KPMG, CB Insights, The Block)
Global fintech mergers and acquisitions hit a record high of $97.3 billion in 2019. Meanwhile, international tech giants such as Alibaba, Alphabet, Baidu, IBM, Microsoft, Apple, and Tencent pumped $3.5 billion into fintech deals, marking an increase in deals for a fifth straight year.
In the same year cybersecurity-related investments increased to $646.2 million, which is more than double year-over-year; investments in cryptocurrency and blockchain dropped sharply to around $3.7 billion (versus $4.5 billion in 2018).
Almost 2,700 fintech deals were made worldwide in 2019, compared to 1,221 in 2020.
As a result of the coronavirus outbreak, in Q1 of 2020, fintech investments dropped across all continents quarter-over-quarter, with the most significant decrease recorded in Asia (69% drop). This was the worst Q1 for investments since 2017.
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Fintech investment is expanding beyond the major markets, with 39% of deals in the industry made outside of traditional hubs like the US, the UK, and China.
Fintech hubs are sprouting up all over the world and helping the rise of new markets. Globally, the number of fintech companies grew to 1,463, with 2,745 unique investors. Throughout the period from 2016 until 2020, funding to South America-based fintech companies grew at a 64% CAGR.
Global venture capital activity in the fintech market reached $35.8 billion in 2018, dropping to $20.8 billion in 2019. In H1 2020, the total amount was $12.2 billion.
A growing number of financial corporations have been investing in financial technology companies over the last few years, realizing that innovations are necessary in order to stay afloat. Interest in investments and partnerships is growing, with more fintech companies opting to provide B2B services to incumbent financial companies. However, the impact of the COVID-19 pandemic has taken its toll on the total annual deal value.
Two years ago, Chinese payment service Ant Financial had the biggest round of investments in history, with $14 billion raised.
This wasn’t just a record for fintech but investment history as a whole. Of this amount, $10 billion came in dollars, while the rest was invested in Chinese yuan.
The platform provides digital payment services for almost two billion people. It spun off from the eCommerce platform Alibaba before its listing in 2004. Millennial fintech app statistics show China and many other societies are getting closer to becoming completely cashless as online native generations mature.
As of January 2021, there are 79 unicorn fintech companies around the world.
A unicorn company is a private company with a valuation of over $1 billion. Variants include decacorns, valued at over $10 billion, and hectors, valued at over $100 billion. As of the beginning of 2021, there are more than 500 unicorn startups with the cumulative value of $1,780 billion. When it comes to fintech unicorns, statistics show that six new companies reached this prestigious goal in January 2021.
Asia’s fintech market size made a run for the top spot globally in 2018, with a record amount of funds raised: $22.65 billion from 516 deals. Also, two of the top three global fintech investment deals of 2020 took place in Asia.
(CB Insights, KPMG)
This represents a 38% year-over-year increase compared to 2017, despite political trade tensions across the Pacific. According to some predictions, Asia’s fintech industry size will outgrow that of the US, making it the largest in the world.
The per-share value of the Global X Fintech ETF more than tripled from $15 in 2016 to $47 in 2021.
The Global X Fintech fund facilitates access to investment opportunities in the fintech industry. The share price and overall health of the stock have been rising steadily in value and show no signs of dropping in the near future.
San Francisco-based Stripe, worth $35 billion, is perched atop the list of the largest financial technology companies in America.
Founded in 2011, Stripe started out as a payment-processing service for small businesses. Now, the company’s clients include the likes of Facebook and Amazon. With these big names on board, Stripe’s value has skyrocketed to $35 billion.
That’s 3.5 times the value of the second-largest company, Ripple, a payment protocol and exchange network provider valued at $10 billion.
Stats About Different Fintech Areas
Digital banking services are taking over: 46% of people exclusively use digital channels for their financial needs.
With the “digital native” generation maturing, standing in line to pay your bills is quickly going out of vogue. If traditional banks fail to take the fintech industry seriously, their future could be in jeopardy.
In H1 2020, the bank-owned Zelle platform almost doubled the payment volume ($133 billion) of Venmo and PayPal’s fintech payment processing app ($68 billion).
(S&P Global, Statista)
Fintech payment systems perform two key functions: they store and transfer payment information. Consumers use these applications to pay for goods and services directly as well as make peer-to-peer funds transfers using their mobile devices.
Created by the biggest banks in the US, Zelle is a platform that links digital payments directly to the customer’s primary bank account. This model has proven extremely convenient, allowing the big banks to regain their share of the digital wallet market.
Almost half of the consumers who do not use payment apps cite the ease of use of traditional payment methods as the main reason for sticking with them.
The second most common reason for not using fintech payment solutions relates to security concerns. Digital payment-processing companies need to invest in patching up security holes and show consumers that the convenience of their services outweighs everything else.
If they can do this, their market share is sure to grow.
Only 24.4% of mobile bank customers use their app less than once a week, while 13.7% use it several times a day.
Almost 85% of mobile bank users consider checking their account balance to be the most important feature of their mobile banking app. Statistics for fintech show that 30.8% of users would like an option to turn their credit and debit cards on and off using their phones.
Mobile banking is a must in this industry. Users expect a seamless experience from their financial applications, no matter where they are or what device they’re using.
The total transaction value of digital payments grew from $4.1 trillion in 2019 to $5.2 trillion in 2020.
Digital payments are, without a doubt, the main driving force of the fintech sector. With a 12.8% projected CAGR from 2019 to 2023, the total value of transactions is expected to reach $6.7 trillion by 2023.
Chatbots will save banks $7.3 billion by 2023.
That’s a 3,400% increase compared to the figure of $209 million in 2019. Chatting to a robot is much easier than chatting to a human for everyone involved.
It turns out many customers prefer to chat with automated customer service operators, while banks appreciate the fact that they don’t ask for a salary and never take cigarette breaks.
As natural language processing advances, artificial intelligence is becoming increasingly important for fintech in the US.
Artificial intelligence will save the insurance industry nearly $1.3 billion by 2023.
There’s a lot of talk about the disruptive nature of fintech. Artificial intelligence plays a big role in that. In the insurance industry, computers can automate post-incident data collection, analyze photos of accident scenes, and perform many other functions that reduce the time and money required for insurers to settle claims.
The industry is expected to save $1.3 billion by 2023.
In 2017, 27% of car insurance premiums were sold using the direct response method, which includes online sales.
According to a fintech industry analysis published by S&P Global, $90 billion worth of auto insurance policies will be sold by the direct response method in 2022.
The auto insurance sector has been among the easiest for fintech to penetrate, with insurtech startups bringing innovation to policy design, user experience, and data analysis.
Insurance fintech companies raised about $3.8 billion worth of investments in 2020, the largest amount in at least five years.
Of the two main business models - digital agencies and full-stack companies - the latter has received more funding, with nine companies raising more than a billion dollars combined. This is understandable, seeing as digital agencies sell policies but do not underwrite them.
Full-stack companies, on the other hand, are responsible for distributing, underwriting, and servicing their policies.
The number of new insurtech startups peaked in 2016, when 28 new fintech firms were founded in the insurance sector. There were 19 insurtech IPOs in 2020.
Currently, investors are mainly focused on startup growth rather than profitability. Insurtech companies are currently doing both, which is why experts predict investments in this sector won’t dry up anytime soon.
The combined assets under management of digital wealth-management companies that focus on retail are expected to reach $600 billion by 2022.
The bulk of this growth is still among incumbent financial firms. This is because new fintech firms tend to provide low-fee or no-fee stock trading and robo-advisor services, which lead to smaller profit margins.
The future is uncertain for these startups, as established corporations are also starting to take on this business model.
Loan origination in digital lending was $41.1 billion in 2017, a 30.1% year-on-year growth according to fintech statistics.
There are three main types of digital loans: personal loans, business loans, and student-focused loans.
While most companies focus on one type of loan at the start, most end up creating hybrid loans to keep up with the market. These are often provided by online lending platforms that offer loans for different business purposes.
Of the projected $73.7 billion in loan origination in 2022, $35.6 billion will come from personal loans, $13.6 billion from small and medium entrepreneur loans, and $24.5 billion from refinancing student debt.
Total global investment in blockchain and cryptocurrency amounted to $1.2 billion in H1 2020.
(KPMG, S&P Global)
The financial world is yet to fully embrace cryptocurrency. However, its proof-of-concept days are slowly passing, and its reach continues to grow. The Nasdaq has been one of the most avid supporters of blockchain technology, mentioning it during 32 conference calls in 2018.
Not all banks are completely on board with the transparent and decentralized ideas that cryptocurrency promotes. Consumers aren’t completely sold on the idea either, with only 6% of them using fintech blockchain applications to transfer cryptocurrencies. They cite security issues as the biggest concern regarding this new technology.
Globally, 24% of businesses say they are very or extremely familiar with blockchain technology.
Blockchain cannot be ignored, and it looks like the benefits it brings will far outweigh the potential downsides. The technology’s funding shows that it emerged from its proof-of-concept phase. In 2017, blockchain companies reached a record high of $450 million in funding, a 79% year-on-year increase compared to 2016, according to fintech statistics.
For comparison purposes, blockchain companies received a total of $365 billion in funding in 2019.
Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.
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