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WHY IS IT WORTH INVESTING IN FINTECH?  /
September 17, 2018
Viktoriya Polyarush Social Media Coordinator, an avid reader with the passion for technology.

When compared to other aspects of the financial industry, Fintech is relatively new and aims to revolutionize all that has come before it. This is the reason why investors and venture capital firms are excited about it. Fintech is something fresh and innovative, rather than just using technology to update current financial methods.The landscape is rich in opportunity for both investors and startups, from new lending, crowdfunding, and financial management platforms to novel payment, insurance, and investing services.

One of the most interesting things about the financial services industry is that large areas of it remain untouched by digital technology. Less than one percent of loans, for example, originate online. This means there’s a lot of demand for new digital products to transform existing financial services. Besides, the fact that Fintech is mentored by both the technology and financial industries opens the door for endless opportunities. This is why big-money investments and venture capital firms are especially interested in Fintech. It’s safe to say that this technology will attract lots of attention for a long time. Moreover, for entrepreneurs and early-stage investors, financial technology is an opportunity to roll out new platforms and service models ahead of established players, mrching into a market with trillions of dollars in revenue. Yet, whether newcomers will succeed at taking market share remains to be seen.

One of the biggest benefits of Fintech is the competition it has introduced into the financial industry. With access to this new technology, customers now have an alternative to large organizations and banks, which usually are more expensive options. This has meant that individuals and businesses on a tighter budget now have the platform they need to be more successful, whereas before they couldn’t attain the financial services they needed to expand and evolve as a company. Fintech, much like the internet, has introduced a sense of competition and provided a level playing field for the little players of the business world.

The investment, however, isn’t so much in the creation of the technology; that job is already done. The focus is on the businesspeople who can implement fintech into the financial and business sectors to make money. Due to regulatory difficulties and uncertainty concerning blockchain and cryptocurrency, VC firms are more likely to back Fintech companies with a business model that meets regulatory approval and have suffice experience in the financial sector. For investors, this means that their best bet is to work with venture capital firms who have a strong success record as well as a portfolio of companies in the fintech sector.

In the five phases of the “hype cycle” invented by Gartner, the IT research group, blockchain has passed the peak of inflated expectations and entered the trough of disillusionment. Last year, everyone in finance wanted to boast about their blockchain experiments.Most big financial groups remain convinced of the potential for blockchain to revolutionise parts of their industry and several central banks are examining the potential for using the technology to create digital currencies. Venture capital investment in blockchain companies rose by a fifth to $544m last year, according to KPMG.

The insurance industry has been slower than other areas of finance to wake up to the digital disruption at its door. But recently start-ups such as So-sure, Friendsurance, Lemonade, Guevara and Brolly have emerged with plans to transform the sector. Venture capital investment in insurance technology companies doubled last year to almost $1.2bn, according to KPMG.

We shouldn’t forget that Millennials are a disruptive bunch embracing Fintch as well. The first generation to grow up with the internet, consumers born after 1980 are used to relying on technology and engineering to do almost everything—including shopping (Amazon), listening to music (Spotify), communicating with friends (social media), and hailing a cab (Uber).This cohort is ideal for the Fintech sevices—first and foremost, because they have faith in the power of technology to solve their problems. Moreover, millennials are heavy users of social media, and apt to recommend services they enjoy to their contacts. Studies also show millennials are financially responsible, with two-thirds of them putting more than 5 percent of their paychecks into savings, the highest rate of savings of any current generation.

As you see, Fintech is thriving and carries on being an innovative area, full of opportunities and profitable decisions.