Investing in the New Reality

EMERGING TECHNOLOGIES | BDO LLP

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19 EMERGING TECHNOLOGIES | BDO LLP

US-based SoFi , ‘a new kind of finance company’, offers a non-traditional approach to lending and wealth management. As well as offering student loan re-financing, mortgage loans, personal loans, wealth management and life insurance, in 2019 the company launched Stock Bits, which consumers can use to buy and sell fractional shares of 50 popular stocks for as little as $1. The business is now worth over $4.8 billion . The #1 ranking in 2019’s TechTrack 100 went to FinTech darling Revolut, boasting 6million customers, a $1.7 billion valuation and a European banking licence. An idea born from co-founder Nikolay Storonsky’s frustration at the transfer fees incurred by sending money home to his native Russia, Revolut offers a versatile debit card, allowing people to spend money abroad in 150 currencies; convert pounds or euros into cryptocurrencies such as bitcoin; and transfer money in 29 currencies at the interbank exchange rate.

NAMES AND NUMBERS The world’s biggest top FinTech companies include Ant Financial , a China-based company that was spun out of the Alibaba group in 2014 and valued at $150 billion in 2018 . As well as Alipay, one of the world’s biggest payment platforms, Ant Financial’s other offerings cover services in wealth management, credit reporting, private banking and cloud computing. Netherlands-based Adyen , established in 2006 and valued at $22 billion in 2019 , provides an all-in-one payment platform to businesses like Facebook, Uber, Netflix, Spotify and Microsoft. Qudian , a China-based micro-loan firm founded in 2019, targets Chinese consumers who do not own credit cards. And Xero , founded in New Zealand in 2006 and now one of the world’s fastest-growing SaaS businesses, offers easy-to-use online accounting software for small businesses. With over 1.8 million subscribers at the close of 2019, it reported an annual revenue of $718.2 million in March 2020.

CORONAVIRUS AND BEYOND Globally the FinTech market was valued at $127.66 billion in 2019 , and expected to grow to almost $310 billion at an annual growth rate of almost 25% through 2022. In the US alone, investment in FinTech rose to US$54.5 billion in 2018, a significant increase on the US$29 billion in 2017. In Europe, FinTech investment saw record growth in 2018, with US$34.2 billion invested in 536 deals. These projections will need to be adjusted for Coronavirus, but while the FinTech sector has seen dips in revenue and some notable casualties, there are signs that the sector may weather the pandemic better than others. In a time of high infectivity, the benefits of contactless payments and branchless banking became self-evident, with the additional benefits of accessibility to people in remote areas, cost-efficiencies and an appeal to younger generations.

Operationally, too, many FinTech businesses are already set up to work remotely so business continuity has been relatively straightforward. While Coronavirus brought the world’s longest-ever bull market to a crashing end and market uncertainty saw FinTech deals fall in early 2020, the stock markets revived on the prospect of Government stimulus packages, and overall in H1 2020 funds investing in the FinTech trend largely outperformed a market returning to positive territory . Writing in Forbes magazine , Ron Shevlin argues that the post- COVID-19 world is ushering in a new period of ‘FinTech realism’, focused more on delivery rather than experimentation. ‘The prospect for FinTech startups has never been better— especially for those looking for banks as customers,’ he writes. Where banks were once obsessed with FinTech partnerships as a way of convincing themselves that they were

IN A TIME OF HIGH INFECTIVITY , THE BENEFITS OF CONTACTLESS PAYMENTS AND BRANCHLESS BANKING BECAME SELF-EVIDENT , WITH THE ADDITIONAL BENEFITS OF ACCESSIBILITY TO PEOPLE IN REMOTE AREAS, COST- EFFICIENCIES AND AN APPEAL TO YOUNGER GENERATIONS.

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