Business & Leadership

Rise of Technology in the World of Finance

The birth of the Fintech sector – defined as a line of business that uses software to provide financial services – following the global financial crisis of 2008 has sparked a start-up scene that has witnessed phenomenal growth. Some examples of successful start-ups include Prosper (peer-to-peer lending), FinMobile (mobile phone usage based credit scoring), and mPaisa (digital mobile wallet). In the last two years alone, worldwide investment in the sector has almost tripled from US$ 7 billion in 2013 to US$ 20 billion in 2015, and is poised to grow to US$ 46 billion by 2020. Investment in private Fintech firms have grown at an even more rapid pace, from US$ 4 billion in 2013 to US$ 19 billion in 2015. The average size of investment in a Fintech firm that has proven its concept and is on track to maturity, ranges between US$ 40 and 92 million, as per data from statista.


In 2014, over half of the investment in Fintech was attracted by start-ups in the online lending/scoring and digital mobile wallet space. Fintech solutions for personal financial management have also been gaining traction with start-ups in this category having a 14% share in the total investment pie.

In an industry which is worth circa US$ 4.7 trillion according to Goldman Sachs, the US is undoubtedly the leader with Fintech transaction value clocking up US$ 769 billion in 2016. US$ 116 billion of this relates to consumer finance transactions – i.e. 15.1%. The picture is bleaker in European countries where consumer finance has a share of only 4.4% and 2.4% in the UK and Germany, respectively, and indicates ample opportunity for growth.


According to The Finanser, the potential of Fintech has been well-noticed by the conventional banking sector, and 43% of banks around the globe are planning their own start-up programs to incubate Fintech companies. Another 40% are either setting up venture funds to finance such companies or simply partnering up with leading firms in this space. Acquisition as an option of already established Fintech players is on the cards at only 10% of global banks.

The low operating cost structure resulting from a branchless network is the key to success of Fintech firms operating in the peer-to-peer/online lending and mobile wallet space. However, loaning money and access to financial services at leaner terms to those who would otherwise not be eligible poses a risk of default. This, however, is in no way an impediment to the growth of Fintech. Not lending is not the solution, but establishing adequate lending and investment limits as well as sticking to those in boom times is.


A. M.


This is part of our series articles in the International Corporate Finance Report.


Accenture's CEO and CFO interview by Leaders League Group

About us