FinTech - In-depth Market Insights & Data Analysis

In-depth Market Insights & Data Analysis

FinTech - In-depth Market Insights & Data Analysis The past decade has seen a significant disruption of the traditional banking industry, especially in the areas of payments, lending, wealth management, and retail banking. Interestingly, this change has not been limited to financial technology (FinTech) start-ups. Large technology and eCommerce companies such as Google, Amazon, Facebook, Apple, and Alibaba have managed to leverage their massive reach and technological capabilities to pose a stiff challenge to competitors.


What's included?

  • Introduction
  • Selected business & revenue models
  • Deep dives: blockchain
  • Women in Fintech
  • Case study: Ant Financial & Square
  • Consumer insights
  • Competitive landscape: Venmo, Stripe, OnDeck, LendingClub, Prosper, SoFi, Wealthfront
  • List of U.S. FinTech start-ups
  • U.S. banks with FinTech activities

 
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The past decade has seen a significant disruption of the traditional banking industry, especially in the areas of payments, lending, wealth management, and retail banking. Interestingly, this change has not been limited to financial technology (FinTech) start-ups. Large technology and eCommerce companies such as Google, Amazon, Facebook, Apple, and Alibaba have managed to leverage their massive reach and technological capabilities to pose a stiff challenge to competitors. The FinTech market as we consider it consists of five segments: Digital Payments, Digital Investment, Digital Capital Raising, Digital Assets, and Neobanking. Of these, Digital Payments has the largest transaction volume.

The digital payment and lending businesses, including mobile wallets, P2P payments, alternative lending, cryptocurrencies, and robo-advisors are now finding mainstream acceptance in both developed and emerging countries. Broadly speaking, there are three types of players in the digital commerce payments market: providers with their own wallet such as Venmo and PayPal, online payment interface providers such as Stripe, and B2B offline payment providers such as Square. These providers make money by charging fees for each transaction, which is usually paid by the merchant.

Blockchain is a distributed ledger technology that can be used to execute, store, and verify transactions of every kind. It is mainly used for money transfers, buying and selling stocks, insurance contracts, and buying and selling physical goods and/or energy. Global investments in blockchain and cryptocurrency start-ups that included VC, PE, and M&A increased in 2021 after the first wave of the COVID-19 pandemic, reaching US$32.1 billion, as compared to US$5.7 billion in 2020. The deal counts also witnessed a record growth from 660 in 2020 to 1,583 in 2021.

Cryptocurrencies are probably the most well-known adoption of blockchain technology. Bitcoin, which was created in 2009, is the original and the most widely used cryptocurrency in the world.

Throughout history, women have had to overcome many challenges and stereotypes to establish themselves in leadership positions. However, as has been the general trend across industries over the past decade or so, women have not only started to assume more leadership positions in established companies but have also founded more start-ups that offer innovative products borne mainly out of their own frustrating experiences. Ellevest, CNote, Omnius, and Penta are a few examples of FinTech start-ups founded and led by women.

Ant Financial, the most highly valued FinTech company in the world, is the holding company of Alibaba’s financial products. It operates in various business areas, including digital payments (Alipay), business finance (Ant Micro Loan), marketplace lending (Ant Check Later), wealth management (Ant Fortune), online banking (Mybank), and insurance and credit reference (Sesame Credit).

Block (formerly Square) started out in 2009 as a platform that offered a dongle so that businesses could accept card payments. The company has since evolved to become a provider of end-to-end solutions such as software, hardware, and financial services for sellers. It also provides a parallel financial services ecosystem that enables people to store, send, receive, and invest their money.

Online payment methods (e.g., PayPal, Amazon Payments) have the highest use in Germany, India, and the UK, whereas credit cards are the most popular form of payments in the U.S. PayPal is the most-favored brand in terms of online payment among those surveyed in the U.S., the UK, and Germany. In Mainland China, the story is completely different with Alipay, WeChat Pay, and UnionPay taking the top three spots.

Cash still dominates financial POS transactions in the U.S. and Germany, but in Mainland China, mobile payments have already taken the lead. While the most widely-used mobile payment provider in Mainland China is Alipay, Apple Pay takes the lead in the UK and the U.S., and PayPal leads in Germany.

The U.S. leads in the number of FinTech companies globally. Specifically, most of the prominent U.S. FinTech companies are located in California and New York. We provide a closer look at some of those prominent U.S. FinTech start-ups: Venmo, Stripe, Ondeck, Lending Club, Prosper, SoFi, Betterment, and Wealthfront. Although they offer services in the same segments, their specific conditions and features vary a lot. For example, in the Marketplace Lending (Consumer) sub-segment, SoFi offers personal loans with no origination fees, whereas it’s 1-6% for LendingClub and Prosper.

Robinhood and SoFi are the two most-funded FinTech start-ups in the U.S., with fundings of US$6.2 billion and US$3 billion, respectively. Robinhood is backed by key investors such as Frontier Tech Ventures, Index Ventures, Ribbit Capital, and Social Leverage. SoFi is backed by Baseline Ventures, DCM Ventures, and Discovery Capital, among others. Kabbage and Stripe fall next in line, with a funding of US$2.5 billion and US$2.3 billion, respectively.

A number of U.S. banks have made FinTech investments, with Goldman Sachs leading the pack with 20, followed by CapitalOne with 13 and Citigroup with 12.

Additionally, banks have also established innovation hubs focusing on various areas such as mobile banking, blockchain and cryptocurrencies, wearables, the Internet of Things, next-generation commerce, authentication, biometrics integration, augmented reality, and big data.

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