Fintech is one of the fastest growing markets of its type, with the global marketplace worth $112.5 billion at the end of 2021. It’s also expected to grow at a CAGR of 19.8% through 2028, at which point the market will peak at $332.5 billion.
In the UK, fintech investment increased sevenfold last year, rising from $37.3 billion in 2021 from just $5.2 billion the previous year.
But what exactly do we mean by Fintech, and how has this concept and its associated market evolved over the course of the last decade?
What is Fintech?
The term ‘fintech’ is a ‘portmanteau’ word, which combines ‘financial’ and ‘technology’ to describe innovations and advancements that are changing the fiscal landscape.
Fintech is inherently disruptive by nature, as its technologies are usually highly scalable and designed to improve the processes or products offered by traditional banks, lenders and similar institutions.
As a result of this, it continues to drive greater levels of financial inclusion across the globe, especially in Africa where an estimated 97 million people currently don’t have access to bank accounts.
This partially explains why fintech has become such a high-growth entity over the course of the last decade, while the increasingly sophisticated nature of financial tech and its ability to decentralise banking has also helped to create significant momentum in the market.
The fintech revolution has been borne out by the rise of lucrative startups in the UK, with Revolut offering a relevant case in point.
Founded in 2015, this digital banking service provider has raised £1.3 billion-worth of capital to date and now employs more than 5,000 people globally. It also offers products such as prepaid debit cards to customers who may otherwise struggle to acquire a bank account.
Monzo is similar venture that operates in the same space, although it offers a digital-only banking solution that now boasts more than five million users.
How Has Fintech Evolved in the Last Decade?
Fintech is currently in its third iteration, having experienced exponential growth since the financial crash of 2008.
Two significant things happened around this time. While the financial markets collapsed and paved the way for much-needed regulatory changes, Bitcoin and blockchain technology also emerged to establish decentralised financial services on a global scale.
These trends also coincided with the rise and sophistication of the smartphone, which also created opportunities for mobile banking and similar practices across the board.
Unsurprisingly, the last decade has become the era of the startup, as the demand for fintech products has soared while various technological concepts have also become more accessible. We’ve even seen the rise of fintech law firms during this time, as startups look to protect themselves and the regulatory landscape also continues to evolve.
Interestingly, we’re now also seeing traditional banks and lenders embrace fintech innovations such as blockchain, in order to streamline their operations and deliver more tech-led products to their customers.