Fintech companies have recently been on the rise. And the entire sector market size is expected to reach $324bn by 2026, achieving a compounded annual growth rate of 23.41%. Needless to say, this could be quite a lucrative investment opportunity.

But what exactly is fintech? And why is it suddenly becoming so popular? Let’s take a closer look at this high-growth industry.

What are fintech companies?

Fintech is, as the name suggests, is any technology that is applied to assist the financial sector, both on the business and consumer side of things. Most people are already been using it. Credit & debit cards, online payment platforms like PayPal, merchant solution platforms like Fiserv, and international money transfers are all examples of fintech solutions. 

Most of the innovations coming out of the financial sector are predominantly due to the rapid development provided by fintech companies. Today something as complex as sending money across international borders can be done in minutes versus traditional banking solutions that can take up to a week. 

The rise of the industry

Fintech often takes a customer-centric approach. It is flexible enough to accommodate various requirements of its users. Consumers today demand a higher level of personalisation and immediacy. That’s why the adoption of this technology has been so rapid by both individuals and businesses. 

What’s more, this finance-based technological transition continues to accelerate today. The proliferation and widespread use of mobile devices, the Internet of Things (IoT), artificial intelligence, and even robotics are being deployed to make the user experience even better and more secure. At the same time, it’s also lowering the barrier to entry for many financial services firms.

If it weren’t for the innovations from fintech companies, cryptocurrency exchanges like the one provided by Coinbase simply wouldn’t exist.  

The investment performance among fintech companies

US-based fintech companies raised $12.8 billion in the first quarter of 2021. That’s a 220% increase compared to a year ago! Moreover, the average valuation of the top 11 fintech companies has reached a massive $19.5 billion. To get an idea about what these firms are doing here are a few examples:

1. Stripe – With some tech giants like Microsoft and Zoom on its customer list, Stripe is one of the most valuable fintech companies in the US with a $95bn valuation.
2. Klarna – With the increase in buy now, pay later feature, Klarna provides financing for customers shopping at stores like IKEA, H&M and Etsy.
   
3. Robinhood – Robinhood pioneered commission-free trades of stocks, cryptocurrencies, ETFs and options. 

Wrapping up

I think it’s fair to say, fintech companies have helped to revolutionise the financial sector. And they continue to do so. Buy Now, Pay Later is just another example of recent fintech innovation, along with digital loans and mobile trading services.

Given the growth potential of this industry, I’m pretty excited to explore the various opportunities that fintech companies have to offer for my portfolio. 

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