FinTech Revolution transforms Financial Services through Technology

refers to firms using new technology to compete with traditional financial methods in the delivery of financial services such as payments, trasfers, withdrawals and many more. Artificial intelligence, blockchain, cloud computing, and big data are regarded as the "A B C D" (four key areas) of fintech.

After decades of hypergrowth, fintechs have entered a new era of value creation, where the focus is on sustainable and profitable growth. Fintech startups can get funded and pitch investors. The most common method is through venture capital firms. These firms invest in high-growth startups that own a website with productivity and provide them with the capital they need to scale and expand their businesses. Another way that fintech startups can get funded is through angel investors.

The rise of FinTech presents both opportunities and challenges for established financial institutions. Those who adapt and embrace technology will be well-positioned to thrive in the new landscape. However, some challenges need to be addressed, such as data privacy concerns, cybersecurity threats, and regulatory hurdles.

As of July 2023, publicly traded FinTech companies represented a market capitalization of $550 billion, which is a 2x increase versus 2019. In addition, as of the same period, there were more than 272 fintech unicorns with a combined valuation of $936 billion, a sevenfold increase from 39 firms valued at $1 billion or more five years ago.

• Stripe slashes valuation to $50 billion in new $6.5 billion funding round ( More details )
• Paymob raises $50 million Series B round ( More details )
• YC-backed Ziina raises $7.5M seed led by Avenir Growth Capital and Class 5 Global ( More details )
• Fintech Startup Ramp Raises $300M At Slashed Valuation ( More details )
• Fintech Startups Hit $121.7B In Total Funding, A $20B Increase In A Year ( More details )
• NEXT Insurance secures $265m partnership deal with Allstate and Allianz X ( More details )
• QI Tech secures $200m Series B funding led by General Atlantic ( More details )
• Saudi FinTech Tabby achieves $1.5bn valuation after latest fundraising ( More details )
• UK’s premier app-based bank Atom clinches £100m ($123m) injection ( More details )
• AgentSync bags $50m to bring funding total to an impressive $161m ( More details )
• And much more

Emerging markets will fuel much of this revenue growth. Fintech revenues in Africa, Asia–Pacific (excluding China), Latin America, and the Middle East represented 15% of fintech’s global revenues last year. We estimate that they will increase to 29% in aggregate by 2028. On the other hand, North America, currently accounting for 48%  of worldwide fintech revenues, is expected to decrease its share to 41% by 2028.

A report from FinTech Global earlier this year found that cryptocurrency has experienced a lot of support in the UAE this year. Of the 24 deals to close in H1 2023, 42$ of these were for companies operating in the blockchain and crypto sector. Like many countries, the FinTech space in the UAE has seen a drop in deal activity, with there being a 54% decline YoY during the first half of 2023. An even bigger drop was seen in the investment volume, with the country’s FinTech sector experiencing a 72% decline in capital invested.

The fintech industry is undergoing a sea change, so players will have to evolve to survive. Approaches will vary, depending on each fintech’s maturity level and its vertical and geographic focus.

The framework for sustainable growth provides a strong foundation:

1. Measured growth based on a stable core: Ensure there is a strong and stable core business with a targeted and proven market fit before expanding, rather than trying to grow while strengthening the core.
2. Programmatic M&A (Mergers and Acquisitions): Pursue M&A strategically and establish mutually beneficial partnerships based on a programmatic strategy rooted in value sharing (with incumbents and other fintechs), as opposed to pursuing M&A only as a response to a low-valuation environment.
3. Cost discipline: Control costs to withstand the new funding environment while remaining flexible, nimble, and compliant.
4. Keep the culture alive: Maintain the agility, innovation, and culture that have been the bedrock of disruption so far.

Decisions taken today will likely set the pace for FinTechs over the mid to long term. The present conditions therefore call for a careful evaluation and focused implementation.

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