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Looking ahead, the global fintech market is expected to grow at a compound annual growth rate (CAGR) of around 19.8 percent between 2022 and 2028, according to Vantage Markets Research, with a market value of around $332.5 billion US dollars will reach time.

Growth in venture capital (VC) investments, investor interest, and private equity investments have all helped drive innovation and investment in fintech. Read on to learn more about this thriving market.

Investing in Fintech: Global Market Breakdown

Since 2018, investment in fintech has skyrocketed, helped by a series of large fintech deals that have stood out for their scale and geographic diversity.

Many private equity firms have become aware of this emerging technology in recent years and have invested their money in fintech. Among other things, Blackstone invested $17 billion in Refinitiv, while P2 Partners and Silver Lake, a global financial technology company, acquired Blackhawk Network for $3.5 billion.

In 2021, venture capital investments in fintech have been strong despite global uncertainty. In fact, KPMG reported that fintech investments from venture capital sources hit a record $115 billion, far surpassing the previous record high of $53.2 billion in venture capital investments set in 2018.

The crypto, blockchain and buy-now-pay-later (BNPL) sectors saw the most venture capital investments in 2021. Investments in crypto and blockchain-based fintech grew from $5.4 billion in 2020 to over $30 billion last year. BNPL companies have attracted big deals in all jurisdictions. Some of those highlighted by KPMG include Klarna’s $1.2 billion VC raise, PayPal’s (NASDAQ:PYPL)$2.7 billion acquisition of Japan-based Paidy and Block’s (formerly Square) (NYSE:SQ) $29 billion acquisition of Australian company Afterpay.

Corporate participation in venture investments remained high in 2021, partly due to the strategic nature of these investments. Business investment in fintech was $50 billion globally during the period.

In terms of jurisdictions, America attracted the most fintech investment, accounting for half of the global total, or $105 billion. In terms of venture capital investments, seven funding rounds surpassed $1 billion in 2021, all in America. These include a $2 billion raise from US-based Generate and a $1.1 billion raise from US-based Chime.

US companies are also investing more in fintech capabilities to support their business strategies. KPMG notes that the sector is characterized by a “growing number of companies and fintechs looking to leverage AI and machine learning across all fintech subsectors, including B2B, cybersecurity and insurtech.”

In the Asia-Pacific region, fintech investments reached $27.5 billion – nearly double 2020’s levels – on a record 1,165 transactions. KPMG notes that in this region, “banks are increasingly looking for support to improve their embedded finance, digital wallet and supply chain finance capabilities.” The backend-as-a-solution technology is also attracting increasing interest from banks and startups.

In Europe, fintech investment also hit a record high at $77 billion for 2021. That number was driven in large part by merger and acquisition activity, such as the London Stock Exchange’s $14.8 billion acquisition of Refinitiv and US $1 billion funding round from BNPL specialist Klarna.

Investing in Fintech: Current Market Status

As the sector continues to mature, a number of trends are shaping the fintech industry.

The FinTech sector is evolving in a variety of ways, both locally and internationally, in areas such as real estate, peer-to-peer lending, auto finance, and general lending. Both the wealth management industry and portfolio companies recognize the benefits of fintech.

Forbes recently identified several key trends shaping the infrastructure side of fintech: embedded finance, blockchain technology, cross-border e-commerce, super app platforms, artificial intelligence (AI), and machine learning.

BNPL options are a growing part of embedded finance; Companies mostly allow consumers buying through merchants in four small payments instead of one large instant payment. Transactions in this sector of the fintech market are expected to reach $680 billion by 2025.

More and more financial institutions rely on the efficiency and security of blockchain-as-a-service solutions. A number of companies, including Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS), are employing cryptocurrency and blockchain technology in their operations.

Cross-border e-commerce is cross-border sales via an online platform between a retailer and a consumer (B2C), between companies (B2B) or between two individuals (C2C).

Vantage Market Research has forecast that the cross-border B2C market has the potential to grow at a CAGR of 25.1 percent between 2022 and 2028, reaching a value of US$3.4 billion. The Asia-Pacific region is expected to dominate in this segment.

Super apps are another emerging fintech sector. Forbes notes that super apps “offer a vast and diverse array of services and products from one platform.” Like the brick-and-mortar superstores that have retail, grocery, hair salons, restaurants, banks, and cellphone services all under one roof, super apps aim to keep customers loyal to their platform by offering to meet as many consumer needs as possible. Examples of super apps are WeChat and AliPay.

Fintech companies are harnessing the power of AI and machine learning to analyze data and deliver insights that benefit both businesses and consumers.

“AI and machine learning have helped banks and fintechs because they can process massive amounts of information about customers,” according to a report by Mordor Intelligence. “This data and information is then compared to obtain results about appropriate services/products that customers want, which has primarily contributed to the development of customer relationships.” The market research firm predicts that the AI ​​in the fintech market will be between 2021 and 2026 could grow by a CAGR of 23.17 percent to over $26.67 billion.

Investing in Fintech: How to get started

If you’re serious about investing in fintech, there are a number of ways to get into the sector, including exchange-traded funds (ETFs) and stocks.

Fintech ETFs

ETFs provide exposure to multiple companies at the same time. Fintech-focused options include:

Thematic Global X FinTech ETF (NASDAQ:FINX) was launched in September 2016; contrary to its name, 65 percent of its holdings are US companies.

The ARK Fintech Innovation ETF (ARCA:ARKF) Launched early 2019. The fund’s stated goal is to “capture the introduction of a technologically-enabled new product or service that potentially transforms the way the financial sector works.”

ETFMG Prime Mobile Payments ETF (ARCA:IPAY) was launched in 2015 and focuses exclusively on stocks for mobile payments.

The Ecofin Digital Payments Infrastructure Fund (ARCA:TPAY) began trading in February 2019 and includes companies focused on the digital payments space. It maps the Ecofin Global Digital Payments Infrastructure Index.

fintech stocks

Fintech companies are popping up left, right and center, and it might be overwhelming for some investors. Check out our list of Canadian fintech stocks to get you started, learn more about what Australia has to offer and see which US fintech stocks deserve investors’ attention.

Whichever investment path you choose, it is clear that the fintech sector has grown significantly in recent years as more private equity and fintech investors enter the space. Businesses continue to innovate in finance and ultimately in the capital markets. The industry is likely to continue to expand in the future.

This is an updated version of an article originally published by Investing News Network in 2016.

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Securities Disclosures: I, Melissa Pistilli, do not hold a direct interest in any of the companies mentioned in this article.

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