By Laura Muñoz Tarrío
Fintech start-ups have received more than $420 billion (€397,800) in venture capital funding since 2016 globally, which has positioned them first in volume of investment received, ahead of those focused on health, business software, energy and transportation, as Dealroom reports. The term fintech, born from the combination of the words finance and technology, refers to companies that offer financial services through technological means in an accessible and agile way, according to Acelera Pyme.
Despite these positive figures, Dealroom reports that, during the second quarter of 2023, fintechs only took in $7.4 billion (€6.995 billion), the lowest figure recorded since 2018. In this regard, Boston Consulting Group’s (BCG) Global Fintech 2023 report explains that over the past 12 months the sector has experienced “a necessary short-term correction framed by a progressive growth story” mainly due to a dampening of enthusiasm for growth-stage companies (B-D series) that have weak products or markets. However, it stresses that annual fintech revenues are expected to reach $1.5 trillion (€1.4 trillion) by 2030.
Digital payments, the big attraction for fintechs
Today, nearly 80% of the global adult population remains unbanked or underbanked, according to BCG, meaning that they either do not have access to the conventional financial system or rely on alternative services, such as check cashing centers, money orders or pawnshops. In this context, fintechs are emerging as a solution to the “problems with innovation and customer experience” presented by traditional banks, as BCG explains. However, these start-ups, which could have become their competitors, have proven to be allies to this sector by “contributing new ideas that banks have the capacity to scale”, according to Acelera Pyme.
Dealroom looks at eight fintech business models: payments, financial management solutions, mortgages and loans, wealth management, insurance, regulation, banking and cryptocurrencies, and decentralized finance. Meanwhile, sources such as CB Insights also include others such as capital markets technology. However, both agree that the subsector dedicated to digital payments attracted the most investment during 2022, $20.8 trillion (€19.7 trillion) according to CB Insights’ State of Fintech 2022 report.
Photo: At the forefront of finance: fintech and the digital transaction revolution Credits: Unsplash.
Which fintech start-ups are at the forefront of innovation?
In Spain, start-ups such as Pagantis, a platform that allows consumers to pay for goods and services in monthly installments through an automated process on e-commerce portals, are noteworthy. Also, OpenPay (owned by BBVA since 2017), which uses biometrics to make transactions or money transfers between friends, and Fintonic, which offers users information about their personal finances, as well as investment insurance and specific loans.
The fintech sector is opening up new opportunities for accessibility and efficiency in the financial world thanks to its agility and user-centered innovation capacity. This new approach to finance became vital in the wake of the COVID-19 pandemic because of its ability to adapt to the digital environment. Now, these start-ups, far from becoming the new competitors of traditional banking, are for the most part working alongside it to co-lead the future of transactions.