“Fintech” is simply captures the ideas behind the use of new technology, seeking to improve and automate the delivery and the use of financial services.
At its core, fintech is utilized to help companies, business owners, and consumers better manage their financial operations, processes, and lives. Hence, it is composed of specialized software and algorithms that are used on computers and smartphones.
Financial Technology emerged in the 21st century, which was initially applied to the technology employed at the backend systems of established financial institutions, such as banks.
However, from 2018 forward, there was a shift to consumer-oriented services. Fintech now includes different sectors and industries such as education, Retail Banking, Fundraising and nonprofit, and investment management, to name a few. Fintech also includes the development and use of cryptocurrencies, such as Bitcoin.
Fintech worldwide increased drastically between 2010 and 2019, when it reached 216.8 billion U.S. dollars.
In 2020, however, fintech companies saw investments decrease notably, dropping below 140 billion U.S. dollars. Investment value increased again in 2021 up to more than 247 billion U.S. dollars.
2022, however, was another slow year for fintech, as the value of investments decreased notably, although remained well above the value measured in 2020.
The downward investment trend continued in the first half of 2023, when global funding value stood at 52.4 billion U.S. dollars.
Fintech companies headquartered in the United States and China lead the ranking of the largest fintech companies worldwide by market capitalization.
As of January 2024, the two were the payment companies, the Visa and Mastercard, both headquartered in the United States, with a market capitalization of roughly 520 and 396 billion U.S. dollars, respectively.
Intuit, a company that develops financial, accounting, and tax preparation software, ranked third, and Chinese Tencent ranked fourth with a market capitalization of 146 billion U.S. dollars. European-headquartered companies, such as Stripe, Adyen, and Revolut, were also among the top fintech companies by market capitalization.
The growth of the Fintech industry is due, in part to the increasing use of mobile devices and the internet. In addition, there has been a growing interest in the Fintech industry due to the increasing demand for financial products and services that are convenient and easy to use.
No matter how well defined and laid out the industry is, there are still major misconceptions surrounding it.
That’s why we felt it was on us to clear the air around the industry and bring to light some clarity on what fintech is all about and leave you make the conclusion.
Some are of the opinion that the Fintech Sector is a Bubble. That is, it will fade out soon would fade out. Cut to 2020, fintech has been nothing less than a life-saver in our lives. Especially with the pandemic, the fintech industry has been influential in keeping several businesses and family afloat.
To throw in some numbers, the fintech sector is worth $4.7tn. With the incorporation of data analytics, the fintech industry is further growing by leaps and bounds.
Over 12,000 fintech startups operate around the world and about 46% of consumers today use a digital medium for personal banking.
Of course, there are still some who are of the opinion that Fintech is only a Credit Market and susceptible to the target of Cyber Attacks.
In Nigeria, examples of Fintech include; Flutterwave, PalmPay, Kudas, Paga, OPay, PiggyVest. While in Kenya, Pezesha, Abacus, Tala. Direct Pay online, FlexPay among others.
Again, some are of the opinion that the Fintech is ideal for large markets, companies and businesses in developed countries like Japan, Hong Kong, U.S., the UK, Australia and more.
But in reality, the scenario is completely different. One of the most beneficial markets and countries to have been influenced by the fintech industry has been third-world and developing countries like India.
It is interesting to note that 7% of Africa’s GDP result from technological innovation. But according to Pwc, Nigeria, South Africa, Kenya, and Egypt are currently the central focus of the African tech-ecosystem.
These four nations, referred to as the “big four” markets, have received about 73% of the financing in Africa.
Over the years, half of these financing have been in Nigerian start-ups, many of which operate within the fintech sub-sector in a bid to take advantage of the inadequate banking services in the country. Despite this, many other countries like Tunisia and Ghana, are experiencing increased activity and acquisitions are becoming more common
But a peep into the Nigeria’s space revealed that between January and August 2022, fintech startups in Nigeria registered a total funding value of 507 million U.S. dollars, significantly increasing from amounts received from 2015 to 2020.
There were over 140 fintech startups in the country as at 2021. Also consider the fact that about 51% Nigerians use Internet compared to African average of 34%.
According to Statista, the largest market will be Digital Investment with a market capitalization of US$328.30m in 2024.
The average AUM per user in the Digital Investment market is projected to amount to US$26.73 in 2024.While the Digital Investment market is expected to show a revenue growth of 31.6% in 2025.
In the Digital Payments market, the number of users is expected to amount to 146.10m users by 2027, with total AUM in the Digital Investment market is projected to US$328.30m in 2024. The distinctive characteristics of KPIs within the FinTech sector preclude their combination and presentation as a singular number representative of the whole FinTech industry.
Meanwhile, there is also the unsettled claim and misconception that the Fintech will end Banking, this may sound ahistorical, because when Tally was introduced, people thought it would kill the livelihood of accountants.
When spreadsheets were introduced, people thought clerks would go jobless. When automation was introduced, people felt workers would lose their job.
When scare tactics are being implemented across the globe as propaganda, there is a distinct need for clarity on these topics. What we have failed to see is that when something new arrives, people face difficulty in the beginning but soon, they coexist without dominating each other.
But can we deny the fact that Fintech has come to stay and ease affairs of the financially excluded in the society its attendant challenges notwithstanding?
Think about this, the fintech solutions provide unparalleled convenience for both retailers and consumers. Mobile payment apps, digital wallets, and contactless payments have rendered physical currency or cards almost obsolete. Customers may pay quickly and easily with a few touches on their cellphones, shortening checkout times and improving the whole shopping experience.
The Fintech, heralded inclusivity and accessibility, lower Transaction Costs, provide Inventory Management Efficiency and enhanced security especially for the Youth and the Genz.
The Africa’s largest economy and with a population of 200 million, about 40 percent of adult is financially excluded, Nigeria offers significant opportunities for fintechs across the consumer spectrum, notably within the small and medium-sized enterprise (SME) and affluent segments and, increasingly, in the mass-market segment.
In the information presented above, we have tried to help you understand the pro/ cons of the Fintech industry, leaving you to decide its effects/ truism in across the financial landscape.
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