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Keeping up with a competitive market requires FinTech collaborations

By Puja Sharma

May 17, 2022

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FinTech future

The FinTech market is predicted to grow at a CAGR of roughly 19.8% during the forecast period. The Fintech market was estimated to be worth roughly $112.5b in 2021 and is expected to reach $332.5b by 2028. Based on region, Asia Pacific is projected to dominate the worldwide Fintech market.

How big is FinTech?

There is no doubt that the FinTech sector is still growing and is likely to undergo rapid change in the next few years, no matter how you assess its size. Investments in total startup funding have been growing consistently over the past few years. It hit an all-time high of 13.5% in 2019. As of Q1 2022, FinTech startups raised $32.4b globally. And they operate in different segments and provide different types of financial solutions. Types of FinTech Solutions

The three major types of FinTech services available:

Software-enabled services — this type of FinTech service focuses on creating innovative products and solutions for the customers. Firms like Stripe, Paypal, and Amazon Web Services are good examples of software-enabled services;

Financial services — the main distinctive feature of this type of FinTech solution is that they reinvent a business model. For example, a retail bank could decide to use its products to offer financial services that were not typically available to the bank’s clients;

Platform providers — these firms act as a layer to connect consumers to other services on the market. They provide the software that enables financial companies to build their products. Good examples of financial platform providers are Braintree, Stripe, and PayPal.

These three categories are not mutually exclusive. However, some firms are using combinations of all three to create a unique product on the market.

Market Drivers

FinTech’s growth is driven by several factors. The following are a few of the primary industry drivers for financial software:

  • An increase in the number of people using fintech to handle their finances;
  • Increasing use of FinTech to manage finances;
  • An increase in the use of technology and digitisation;
  • The emergence of new types of businesses;
  • The growth of the Internet and digital financial services.

In developing countries, FinTech has also had a big impact. Due to the rapid and sustained economic development in emerging countries, the market has grown. In 2016, the number of Internet users in emerging markets increased by 6%. The number of people who will use fintech solutions will surpass 2 billion by 2022.

The way forward

With digital adoption and the need for contactless services, different generations have embraced and become more comfortable with eBanking and mobile payments over the last two years. In India, mobile payments surpassed credit cards in 2021, suggesting that mobile payments are increasing in popularity. As the younger generation grows and builds its financial power, this trend will continue. The concept of cash, physical cards, etc. would turn completely foreign to most of the population in the coming year, thereby accentuating the demand for diversifying and expanding the current mobile payments platform into a powerful one.

FinTech, earlier perceived as a competition to the established financial systems, has now become a potential partner and enabler for banks and other financial institutions to address the evolving financial service needs, both at the consumer and commercial level. Moreover, the blending of traditional institutions with FinTech has led to the emergence of different hybrids, including RegTech, InsurTech, etc. to improvise their infrastructure.

To carve out an edge in the FinTech sector, it must utilise partnerships to meet its strategic objectives. Be it to serve new customers or access top talent, industry collaboration has become critical to staying ahead in a crowded market. With market fluidity and increased emphasis on technology, this trend is expected to be driven further in this sector.

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