What has Covid-19 meant for investment in the fintech industry? (Has it become easier or harder)
Overall, the pandemic has only accelerated fintech’s market growth, with the global fintech market investment skyrocketing to a record-breaking $210 billion in 2021. This is thanks to exponential rates of investment pouring in from all corners of the world; investors, particularly corporates and VC investors, made big bets on market leaders in many jurisdictions and across almost all subsectors.
If we are to focus on the UK market specifically, we saw a staggering $37.3 billion investment into fintech in 2021. UK fintechs accumulated more significant funding than their EMEA rivals combined. The UK’s reputation as a centre of global finance, with long-established trading exchanges and institutions, means that the UK’s capital is a hub for continual fintech investment. Ultimately, the pandemic has only increased investors’ interest in fintech, and the race to optimise and digitalise established UK financial services is only just getting started.
Investment in the industry has jumped since the outbreak. Is investment in the industry likely to slow down as we enter the end of the pandemic?
We expect fintech to play a crucial role in the post-Covid-19 world of finance. As the broader economy shifts from response to recovery, new opportunities for fintechs will surface. For example, as social distancing has taken hold worldwide (both ethically and politically), there has been tremendous growth in using digital financial services and e-commerce – contactless payments, such as Paypal, Deliveroo and Amazon, which have become part of our day-to-day lives. For this growth in investment to continue, fintechs will need to adapt to the world’s new normal to stay relevant.
This should start with traditional and established banking – fintech will continue to significantly shape many areas of conventional finance in 2022, whether that be investments, insurance or financial planning. As the world continues to become ever more digital, the reliance on seamless and real-time digital payments will only increase. Thus, investment in fintech will only continue.
What segments of the industry have benefited from the pandemic?
In recent years, the fintech sector has seen a massive incline in market growth, with record funding levels and rising valuations. In particular, digital payment volumes have soared since the onset of the pandemic, generating over ten years’ worth of market growth in a condensed period. This growth is largely due to payments industry players capitalising on the trillion-dollar cross-border payments segment, which is ripe for disruption due to changing customer demands, emerging market growth, and financial inclusion.
Why and how has this happened? Well, it all started with lockdowns. Citizens of the world were heavily reliant on digital payments for their door-to-door delivery service to obtain food, medication, clothing etc. The world has grown accustomed to easy digital payments and currencies, and there’s no turning back now.
