Investment Fund

Fintech

Find out what Fintech is and how it is being implemented in the modern world

Why invest in Fintech?

Investopedia defines Fintech as firms that use technology to improve and automate financial services delivery and use. Traditional financial systems are slow, complex to understand and tardy to adapt to new technologies.

Additionally, mobile banking is replacing brick-and-mortar for consumers, which is a trend we are seeing.

Because of this, traditional financial systems are being transformed by fintech companies, creating great investment opportunities.

In addition, fintech companies are believed to be more agile, serving an underserved segment of the population or providing faster and better service.

For example, Affirm seeks to cut credit card companies out of the online shopping process by offering a way for consumers to secure immediate, short term loans for purchases for people with poor or no credit history.

In the coming years, Internet adoption is expected to increase, leading to the growth of technologies such as artificial intelligence, blockchain technology, digital wallets, cloud computing, and big data analysis. Because technological advancements have changed how we do nearly everything in our day-to-day lives. 

Fintech adoption is accelerating in emerging markets. In particular, China is at the forefront of consumer adoption of fintech. It was estimated that 92% of Chinese citizens used fintech banking or payment services in 2019. 

Fintech

In the future fintech companies are working toward making financial services more affordable and accessible to the majority of people. With the leverage of technology such as (AI) to engage and simplify customers’ specific needs and serve them. Since the pandemic many companies have adjusted to conduct business virtually and financial transactions digitally. 

Blockchain technology with the advancement of artificial intelligence (AI), predictive behavioural analysis and data driven marketing is predicted to change the world and enable everyone with a smartphone to conduct digital transactions securely instantly, transforming the commercial and financial experience.

The growth of decentralised finance (DeFi) on the blockchain revolutionises centralised finance and eliminates the need for intermediaries such as brokers, exchanges, or banks to handle the settlement of transactions by using smart contracts on the blockchain.

For example, traditional exchanges are, mostly, matching engines. The rest of the infrastructure brokers, margin, risk, clearing, custody GUIs, APIs fall on other companies in the pipeline. 

When you buy stock on AJ Bell or Hargreaves Lansdown a lot of different companies are involved. However, in crypto exchange there are full stack products, building the entire experience. 

When you buy Bitcoin on Coinbase, there are only three companies involved: the buyer, the seller, and the exchange. This means that crypto exchanges build much more of the stack, have a much higher take up rate on trades because they have much less loss on fees to other middlemen.

This disintermediation of traditional structures saves costs and increases execution speed for all parties. Savings are passed down to users, but also give Coinbase space to have higher aggregate take up rates (across both exchange and brokerage services).

In addition, using Distributed Ledger Technology (DLT), data can be stored, shared, and synchronised across multiple stores, and transactions can be posted, shared, and synchronised simultaneously across a distributed network.

The total global fintech market was valued at around $7.3 trillion in 2020. It is expected to grow at an annual rate of 26.87% annually. 

According to McKinsey, artificial intelligence (AI) can add up to $1 trillion a year to the global banking sector.

By 2030, cloud technology will account for profit (EBITDA) of $1 trillion across the world’s top 500 companies.

Globally, 64% of consumers use a fintech platform, according to Ernst & Young (EY), and $210 billion has been invested according to KPMG in 2021.

Hyper-automation will replace manual work such as repetitive tasks using artificial intelligence (AI), deep learning, event–driven software, and robotics, which will reduce human errors for companies and improve efficiencies. 

In the future, AI-powered finance assistants such as buy now, pay later and embedded fintech will play a significant role.

Big tech companies are also moving into finance, such as Apple Pay. Apple officially announced its buy now pay later service. The company’s competitors like Google Pay, Use Buy Now with Amazon Prime and Facebook’s Libra are also moving into fintech. Because it’s expected that financial services will be integrated into other products’ user interfaces. 

Over 80% of central banks are researching central bank digital currency (CBDCs), with roughly 40% experimenting with them.

The Chinese government is now testing cross-border transactions of the digital Yuan.

SaaS is becoming increasingly important for traditional financial institutions launching fintech businesses. It allows companies to use software as needed without owning or maintaining it themselves.  

A wide range of cutting edge technologies are impacting every aspect of our day-to-day commerce, including mobile device payments and cardless ATM withdrawals.

We are living in a digitalised world where the internet has become a crucial infrastructure for accelerating online shopping, especially after mobile devices were introduced along with the pandemic triggering the use of digital payments and how businesses operate from home.

The growth of sustainable fintech is expected to bring financial access to people previously excluded from it.

As part of its investment strategy, the YFS Intelligent Wealth Fund will seek to capitalise on opportunities that will shape our financial payment ecosystem, which is critical for the growth of any future company.

As a result, Minerva Money Management believes that the combination of mobile, digital money, machine learning, and new data sources offers businesses an opportunity to leapfrog outdated infrastructure and compete with incumbent financial institutions like banks.

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