As technology continues to play an increasingly dominant role in daily life, FinTech has followed suit, equipping the banking industry with tools that makes it more efficient and customer-oriented than ever before, according to Don Garner, CEO of Alliance Bank of Arizona. “Although nothing can replace an expert banker who has a close relationship with a customer and understands their business, FinTech tools have certainly improved the banking experience,” he says, “especially as banks harness customized solutions that increase both the speed and responsiveness at which we can help customers.”
In the FinTech industry, itself, recent years have witnessed a surge in the number of FinTech investments, with record funding levels and rising valuations. However, the coronavirus outbreak altered that, causing a significant decrease in the overall venture capital deals, changing funding conditions, and creating uncertainty for many FinTechs.
According to data gathered by AksjeBloggen, projections in June showed the global FinTech lending market set to reach $291.4 billion transaction value this year, growing by 9.1 percent year-on-year. The rising trend was forecast to continue in the following years, with the market reaching $396.8 billion value by 2024. However, according to data presented more recently by ForexSchoolOnline.com, FinTech startups raised $8.8 billion in the first half of 2020, a 20 percent fall year-on-year.
Cumulative Funding Reached $114.7 Billion in Q3 2020
Even before the COVID-19 pandemic, access to funding was already becoming difficult for some FinTechs. Many investors focused on established companies with clear business models instead of investing in early-stage businesses.
In 2015, FinTech companies raised $9.5 billion, with the cumulative funding reaching $13.2 billion at the end of that year, revealed the CrunchBase data. In the next 12 months, this figure doubled and jumped over $27 billion. In 2017, FinTech raised another $17.2 billion in funding rounds, with the combined value of investments reaching $44.3 billion in the fourth quarter of that year.
Statistics show that 2018 delivered a record number of investments in the FinTech industry, with the cumulative funding raised over time reaching $77.9 billion, a $33.6 billion increase in a year. The increasing trend continued in 2019, with another $25.4 billion worth funding rounds.
The CrunchBase data revealed that by the end of the first quarter of 2020, the cumulative value of investments in the FinTech industry reached $107.9 billion. During the first three months of the year, FinTech s raised $4.6 billion, the same amount as in the first quarter of 2019.
However, due to the coronavirus crisis effects, the second quarter of the year witnessed a negative trend. Statistics indicate that between March and June, FinTech companies raised $4.3 billion in funding rounds, a 36 percent plunge year-on-year. In the third quarter of the year, the cumulative funding amount reached $114.7 billion value.
Techstars, Y Combinator and 500 Startups as the Leading Investors
Analyzed by geography, North America represents the leading region with $44.1 billion worth investments in FinTech startups. Statistics show the U.S. FinTechs raised 95% of that value. Asia ranked as the second-leading region with $51.3 billion of investments. European FinTech startups follow, with $15.1 billion, respectively.
The CrunchBase data also revealed that Techstars represents the most active investor in the FinTech market. The Colorado-based global platform for investment and innovation took part in 183 funding rounds so far.
Another US-based seed money startup accelerator, Y Combinator, ranked second on this list with 164 funding rounds. Statistics show that 500 Startups represents the third most active investor in the FinTech market. The San Francisco-based global venture capital firm participated in 140 funding rounds, so far. Plug and Play, QED Investors and Anthemis Group follow with 81, 60 and 59 funding rounds, respectively.
FinTech Services Banking
Regarding FinTech’s impact on banks’ offerings to customers, Garner says, “At Alliance Bank of Arizona, we have seen a marked shift in how companies are doing business, and have worked hard to implement countless 24/7 tools, including online business banking, secure mobile business banking apps, fraud protection, remote deposit resources and more to serve businesses.”
Garner credits FinTech with helping the financial industry make incredible strides in enhancing the speed, accuracy and responsiveness of banks. “We see that trend continuing, especially as the FinTech community continues to push the envelope building increasingly efficient financial platforms and more enhanced tailored banking solutions,” he says.
“As well, we anticipate FinTech will place an even greater focus on developing technologies that more directly affect the customer,” Garner says. “Two specific areas include cybersecurity, especially when it comes to fraud, identifying theft and money laundering, as well as using big data to enhance customer segmentation and using predictive analytics to better manage risk.”
