In-depth: FinTech 2020

Statista Digital Market Outlook

In-depth: FinTech 2020 The last decade has seen considerable disruption in 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?

  • Global market size, forecasts, selected business & revenue models
  • Deep dives: Digital Remittances, blockchain, and Ant Financial
  • Consumer insights
  • Competitive landscape: Venmo, Stripe, OnDeck, LendingClub, Prosper, SoFi, Wealthfront
  • List of U.S. FinTech start-ups and U.S. banks with FinTech activities

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The last decade has seen a considerable 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 industry as we consider it consists of four segments: Digital Payments, Alternative Financing, Alternative Lending, and Personal Finance. Of those four, Digital Payments has by far the largest transaction volume.

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.

Alternative lenders and robo-advisors make their money by either charging service fees from borrowers and investors or transaction fees from the bank. Blockchain is a distributed ledger technology that can be used to execute, store, and verify transactions of every kind. Its main uses are in money transfer, buying and selling stocks, insurance contracts, and buying and selling physical goods or energy. After exhibiting strong growth in 2018, blockchain funding fell in 2019 and in the first half of 2020. The COVID-19 pandemic has contributed to this decline with cryptocurrency markets freefalling amid a global sell-off in equities. Cryptocurrencies are probably the most well-known adoption of blockchain technology. Bitcoin, which emerged in 2009, is by far the oldest and the most widely used cryptocurrency in the world.

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). Key factors behind Ant Financial’s success include diversified businesses, robust government support, and a strong international presence.

When it comes to online payment methods (e.g. credit card, prepaid cards, invoice, online payment) online payment (e.g., PayPal, Amazon Payments) are used more frequently in Germany, the UK, Mainland China, and the U.S. than any other form of payment, such as credit/debit cards, and prepaid cards. PayPal is the most favored brand in terms of online payment in the eyes of the surveyed population in the U.S., the UK, and Germany, whereas Mainland China has a completely different story, with Alipay, Wechat Pay, and UnionPay taking the first three spots in the chart.

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

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 have 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. In the marketplace lending segment, for example, SoFi offers personal loans with no origination fees, whereas LendingClub and Prosper charge a fee of 1–6%.

SoFi and Kabbage are the two most well-funded FinTech start-ups in the U.S. Each of the companies has raised around US$2.5 billion in funding since 2011. SoFi is backed by key investors such as SoftBank, Silver Lake Partners, Peter Thiel, and others and was last valued at US$4.5bn in Q1 2017. Similarly, Kabbage is backed by BlueRun Ventures, Guggenheim Securities, ING Group, Lumia Capital, and others. Avant and CommonBond are two other key FinTech start-ups that managed to get more than US$1.5bn each in funding.

A number of U.S. banks have made FinTech investments, with Goldman Sachs leading the pack with 20, followed by CapitalOne (13) and Citigroup (12). Additionally, the banks have also started innovation hubs focused on various areas such as mobile banking, blockchain and cryptocurrencies, wearables, Internet of Things, next-generation commerce, authentication, biometrics integration, augmented reality, and big data.

Even though the COVID-19 pandemic has affected many FinTech companies adversely, their smaller size as compared to legacy financial institutions gives them the flexibility to adapt to new market dynamics. Also, their already advanced technology platforms save them the hassle of migrating from legacy systems, thereby giving them a technological edge to attract a younger digital-first audience.

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