Fintech, a portmanteau of "financial technology", refers to firms using new technology to compete with traditional financial methods in the delivery of financial services. Artificial intelligence, blockchain, cloud computing, and big data are regarded as the "ABCD" (four key areas) of fintech. The use of smartphones for mobile banking, investing, borrowing services, and cryptocurrency are examples of technologies designed to make financial services more accessible to the general public. Fintech companies consist of both startups and established financial institutions and technology companies trying to replace or enhance the usage of financial services provided by existing financial companies.
Key areas
Academics
Artificial intelligence (AI), blockchain, cloud computing, and big data are considered the four key areas of fintech. Artificial intelligence refers to the intelligence demonstrated by machines, in contrast with “natural intelligence” displayed by humans and animals. AI is assuming an increasingly important role in traditional banking and finance as it provides technologies such as voice recognition, natural language processing, and computer vision for user-account management and fraud detection, machine learning methods, and deep learning networks for anti-money laundering and credit modeling. Mobile and internet payment systems are closely connected to cloud computing. The past ten years have witnessed increasing adoption of cloud computing by financial institutions around the globe.
Industry
Financial technology has been used to automate investments, insurance, trading, banking services and risk management.
Robo-advisers are a class of automated financial adviser that provide financial advice or investment management online with moderate to very little human intervention. They provide digital financial advice based on mathematical rules or algorithms and thus can provide a low-cost alternative to a human adviser.
Global investment in financial technology increased more than 12,000% from $930 million in 2008 to $121.6 billion in 2020. 2019 saw a record high with the total global investment in financial technology being $215.3 billion, of which Q3 alone accounted for $144.7 billion in investment.
In H1 2021, fintech deal volume hit 2,456 deals accounting for $98 billion in investment. Global VC investment was higher than $52 billion in H1’21, close to the annual record of $54 billion seen in 2018.
H1’21 saw $21 billion in corporate-affiliated VC investment. CVC deal volume reached a high of 284 in Q1’21, and then grew further to 312 in Q2’21.
The Americas saw about $51.4 billion of fintech investment in H1’21, with the US alone accounting for $42.1 billion. In the EMEA region, investment in fintech was very robust at $39.1 billion. In Asia-Pacific, fintech investment grew between H2’20 and H1’21—rising from $4.5 billion to $7.5 billion, although it was subdued in comparison with previous record highs.
The nascent financial technology industry in London has seen rapid growth over the last few years, according to the office of the Mayor of London. Forty percent of the City of London's workforce is employed in financial and technology services. As of April 2019, about 76,500 people form the UK-wide FinTech workforce, and this number is projected to rise to 105,500 by 2030. Of the current fintech workforce in the UK, 42% of workers are from overseas.
In Europe, $1.5 billion was invested in financial technology companies in 2014, with London-based companies receiving $539 million, Amsterdam-based companies $306 million, and Stockholm-based companies receiving $266 million in investment. After London, Stockholm is the second highest funded city in Europe in the past 10 years. Europe's fintech deals reached a five-quarter high, rising from 37 in Q4 2015 to 47 in Q1 2016. Lithuania is starting to become a northern European hub for financial technology companies since the news in 2016 about the exit of Britain from the European Union. Lithuania has issued 51 fintech licenses since 2016, 32 of those in 2017.
Fintech companies in the United States raised $12.4 billion in 2018, a 43% increase over 2017 figures.