In-depth Report: FinTech 2021

Statista Digital Market Outlook

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The past 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 five segments: Digital Payments, Neobanking, Alternative Financing, Alternative Lending, and Digital Investment. Of those five, 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 investment in blockchain and cryptocurrency start-ups that included VC, PE, and M&A fell marginally in 2020 due to the COVID-19 pandemic to US$4.3 billion, as compared to US$5 billion in 2019. However, investments have grown exponentially in the first half of 2021 and were valued at US$8.7 billion by the end of June.

Cryptocurrencies are probably the most well-known adoption of blockchain technology. Bitcoin, which appeared in 2009, is by far the oldest 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).

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, the UK, and Mainland China, 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 first three spots.

Cash still dominates financial transactions at the POS in the U.S. 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. 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 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. For example, in the marketplace lending segment, SoFi offers personal loans with no origination fees whereas its 1-6% for LendingClub and Prosper.

Robinhood and SoFi are the two most well-funded FinTech start-ups in the U.S., with fundings of US$5.6 billion and US$3 billion respectively. Robinhood is backed by key investors such as Frontier Tech Ventures, Index Ventures, Ribbit Capital, and Social Leverage whilst SoFi is backed by Baseline Ventures, DCM Ventures, and Discovery Capital. Kabbage and Stripe are next in line, with a funding of US2.5 billion and US$2.2 billion, respectively.

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, banks have also established innovation hubs focusing 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.

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