Now that we've reached the mid-point of 2023, a year marked by a range of uncertainties in the financial marketplace, one issue is abundantly clear: it's a great time to be a fintech.
It wasn't all that long ago when the majority of fintechs were small, startup companies offering new out-of-the-box technologies to change how people purchase, save, and invest. Formed in reaction to the financial meltdown of 2008, fintechs aimed to challenge an entrenched banking and financial system that caused carnage on Main Street. Cryptocurrencies emerged during this time and capital raised for fintechs came from friends, family, crowdsourcing, and small fintech events where entrepreneurs solicited funds from anyone with a wallet and a few dollars to spare.
Fast forward to 2023 and the dynamics have seriously changed. Fintechs are no longer just alternatives, offering ways to buck the financial system. They are disrupting it. With more agile technologies and greater responsiveness to market needs, fintechs are leading the digital transformation that is reshaping the financial services industry.
The fintech market is growing at a compound annual growth rate (CAGR) of 26% and is estimated to reach a market value of $324 billion by 2026. No longer a fringe component of the financial industry, fintechs are attracting serious players addressing serious issues. More importantly, its growth is being fueled by a number of trends including:
- Artificial Intelligence: Arguably the most powerful force for change (and stock market growth) this year, artificial intelligence is altering the overall business landscape, including the financial world. According to the AI Index Report, fintech investments are projected to total more than $5.5 billion in 2023. From automating customer service tasks to detecting and preventing fraud, financial institutions are incorporating AI into their operations to remain competitive and to realize cost savings of approximately $440 billion in 2023.
- Consumer preferences: A major catalyst driving fintech growth is the consumer preference for convenience that digital solutions offer. From user-friendly mobile apps and online payment platforms to peer-to-peer lending and robo-advisors, fintechs provide consumers with solutions that are faster, more accessible, and more cost-effective than traditional financial services.
- Investments and expanded platforms: Institutional players now dominate fintech investing with funding from venture capital and private equity firms. More significantly, traditional financial institutions are actively pursuing fintech partnerships and acquisitions. This provides fintechs with immediate platforms to scale operations, expand into new markets, and further develop cutting-edge technologies, while giving established financial institutions the digital solutions they need.
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Building on the blockchain: Long a backbone of financial technology, blockchain technology is one of the fastest-growing segments of the fintech industry. Regardless, its importance has not always been front and center, as it took a back seat to the clamor over crypto assets that rely on it. However, with a number of crypto bankruptcies and the FTX fraud casting a negative pale on the crypto space, the conversation has shifted. Blockchain technology is now getting the attention it deserves, particularly in its support of a variety of digital assets including the expected growth in tokenized securities
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Regulatory support: Many governments and regulatory authorities recognize the potential of fintech to drive innovation and competition. As a result, new policies are being introduced to support fintech companies and foster collaboration with traditional financial institutions. For example, open banking initiatives encourage data sharing and integration between banks and fintechs, enabling the development of new products and services.
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Financial inclusion: A geopolitical and financial trend has been the focus on expanding financial access and inclusion, particularly for underserved and unbanked populations. Fintechs answer this call. Through digital platforms and innovative solutions, they provide financial services to individuals and businesses previously excluded from the traditional banking system, helping to create a more equitable financial marketplace.
So, what does this all mean for go-to-market specialists and communications pros?
It’s a bonanza. There are a wide variety of ways in which to support the growth and evolving nature of the fintech landscape, as well as address its challenges and risks. For example, working with fintechs requires:
- Messaging and positioning to articulate competitive strengths across the marketing spectrum
- Operational playbooks to help employees at financial firms understand change and the value of moving to digital technologies
- Lead-generation campaigns to promote product adoption and ongoing usage with both B2B and B2C customers
- Educational programs to teach customers about evolving financial technology and related cybersecurity concerns, and
- Public affairs initiatives to support fintechs’ concerns and requests for clear regulatory policy.
As the fintech industry continues to expand and opens up a large swath of opportunities for the greater financial world, the fun times for fintechs will only continue. Let the games begin.
This Insight was prepared by
Maria Lilly. As always, comments and feedback are welcomed.
