Not too long ago, financial experts from across the industry continued to doubt whether the rise of financial technology, or fintech, would have staying power over the long-term.
After the rapid expansion of the industry in 2021, the time for naysaying about fintech is over.
Two major fintech companies went public recently, cryptocurrency exchange Coinbase and online lender Upstart Holdings. In just the last year, Coinbase reported a 12-fold increase in revenue to a total of $2.2 billion. Upstart Holdings reported nearly the same level of growth, with an 11-fold increase to $194 million in about the same time period.
CNBC said the “numbers are staggering.”
“For companies of this scale to even double annually requires being in the right place at the right time with the right team, and often means a hefty infusion of capital to acquire new customers,” CNBC reported. “The most successful tech companies of all time never saw growth rates in the quadruple digits while public.”
Despite the impressive growth, it’s not limited to these two companies. The reality is that fintech is growing exponentially nearly everywhere.
That’s the conclusion reached by research group KPMG’s latest Pulse of Fintech Report, which found that rapid fintech growth is global, and continuing to rise with the slow recovery from the Covid-19 pandemic.
In 2020, the report found that $121.5 billion was invested in fintech companies around the world, with the majority invested during the second half of the year. Types of investments include private equity, venture capital, and mergers and acquisitions.
“Overall investment in fintech surged to a record high in the first half of 2021 as investors, particularly corporates and venture capitalists, made big bets on market leaders in numerous jurisdictions and across almost all subsectors,” KPMG wrote in the Pulse of Fintech report. “Large funding rounds, high valuations and successful exits underscore the thesis that digital engagement of customers that accelerated during the pandemic is here to stay.”
Fintech investments reached $39 billion in Europe during the first six months of 2021. The United Kingdom alone brought in $26 billion. Scandinavian countries brought in $4.8 billion in investments. Germany saw investments totalling $2.5 billion and France with $2 billion.
“Fintech is an incredibly hot area of investment right now—and that’s not expected to change anytime soon given the increasing number of fintech hubs attracting investments and growing deal sizes and valuations,” Anton Ruddenklau, KPMG’s Global Fintech Co-Lead, said in the report. “As we head into H2’21, we anticipate more consolidation will occur, particularly in mature fintech areas as fintechs look to become the dominant market player either regionally or globally.”
Although many people might be surprised by fintech’s rapid growth, they shouldn’t be, said Bardya Ziaian, a Canadian entrepreneur within the fintech industry.
“This is such an exciting time to be part of fintech,” Bardya Ziaian said. “The growth we’re seeing is part of a massive restructuring of banking and finance that’s going to continue for years if not decades to come, and fintech companies are going to be at the center of that transformation.”
According to the KPMG report, 163 tech startups reached “unicorn status,” or valuations at $1 billion or more – within the first half of 2021.
“Overall investment in fintech surged to a record high in the first half of 2021 as investors, particularly corporates and VC investors, made big bets on market leaders in numerous jurisdictions and across almost all subsectors,” wrote Ian Pollari, KPMG’s Global Fintech Co-Lead. “Large funding rounds, high valuations and successful exits underscore the thesis that digital engagement of customers that accelerated during the pandemic is here to stay.”